The difference between an earnest money or deposit and an advance

In the decision reported in The Vijaya Foundry, Pappanaicken Palayam, Coimbatore by its Proprietor A. Ramaswami Naidu v. Gordon Woodroffe & Co., Madras Private Ltd., 1963 (2) MLJ 153 , the difference between an earnest money or deposit and an advance was discussed. The decision reported in Sabina D’Costa Vs. Joseph Antony Noronha, deals with the legal position on the subject and how the Court should deal-with the question of forfeiture of earnest money. In the said decision the following passage from Fateh Chand Vs. Balkishan Das, was quoted :

“Section 74 of the Indian ContractContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. Act is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common lawCommon law The legal system that originated in England and is now in use in the United States. It is based on court decisions rather than statutes passed by the legislature. in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual aggrement is regarded as a stipualtion naming liquidated damages and binding between the parties, a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce, it awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations, naming amounts to be paid in case of breach, and stipulations by way of penalty.”

Again in para 10 of the judgmentJudgment The statement given by the Judge on the grounds of a decree or order - CPC 2(9). It contains a concise statement of the case, points for determination, the decision thereon, and the reasons for such decision - Order 20 Rule 4(2).  Section 354 of CrPC requires that every judgment shall contain points for determination, the decision thereon and the reasons for the decision. Indian Supreme Court Decisions > Law declared by Supreme Court to be binding on all courts (Art 141 Indian Constitution) Civil and judicial authorities to act in aid of the Supreme Court (Art 144) Supreme Court Network On Judiciary – Portal > Denning: “Judges do not speak, as do actors, to please. They do not speak, as do advocates, to persuade. They do not speak, as do historians, to recount the past. They speak to give Judgment. And in their judgments, you will find passages, which are worthy to rank with the greatest literature….” Law Points on Judgment Writing > The judge must write to provide an easy-to-understand analysis of the issues of law and fact which arise for decision. Judgments are primarily meant for those whose cases are decided by judges (State Bank of India and Another Vs Ajay Kumar Sood SC 2022), the Supreme Court has observed :

“….. The measure of damages in the case of breach of a stipuation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing the damages the Court has, subject to the limit of the penalty stipulated, jurisdictionJurisdiction Authority by which courts receive and decide cases. Limited Jurisdiction: the authority over only particular types of cases, or cases under a prescribed amount in controversy, or seeking only certain types of relief, the District Court is a court of limited jurisdiction. Original Jurisdiction: Jurisdiction of the first court to hear a case. to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated, but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of actual loss or damage’ it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things or which the parties knew when they made the contract, to be likely to result from the breach.”