1-949Present: 'Windham J. and Gratiaen J.
ATTORNEY-GENERAD, Appellant, and JUNAID, RespondentS. C, 364—D. G. Tangalle, 5,407.
Contract—Commercial contract—Implied obligation—Circumstances when it will beinferred—Business efficacy.
Plain tiff entered into a contract with the Assistant Government Agent,Hambantota, for the transport and storage of salt collected in the HambantotaDistrict during the year 1945. He agreed inter alia that the transport of bagsof salt from the collection centres and emptying the salt from the hags intoheap spaces on the platform should be at the rale of not less than 2,875 hagsof salt per diem. Payment was to be made by the Assistant GovernmentAgent at the rate of Rs. 182.75 per 1,000- bags. Plaintiff made all the neces-sary arrangements and placed himself in a position to handle the prescribedminimum quantity of bags each day, but, after a certain date, the quantitiesof salt made available to the plaintiff for transport and storage fell far shortof the daily minimum of 2,375 bags. In the circumstances, plaintiff claimedfrom the Crown damages on the ground that the Crown had failed to fulfilits alleged obligation to supply him daily with at least 2,875 bags of salt to behandled under the contract.
Held, that the Crown was under an implied obligation to make available tothe plaintiff a minimum quantity of 2,375 bags of salt a day for transport andstorage to the same extent as the plaintiff was under a duty to handle thatquantity if supplied. The Crown’s default in supplying this minimum quantityon any day constituted a breach of contract entitling the plaintiff to claimdamages to comp’ensate him for the consequent loss sustained by him.
PPEAX. from a judgment of the District Court, Tangalle..
H. R. Cross ette-Thambiah, Solicitor-General, -with G. P. A. de Silva-,Crown Counsel, for *he defendant appellant.
N. E. Weerasooria, .K.G., with Vernon Wijetunge, for the plaintiffrespondent.
C-ur. adv. vult.
October 26, 1949. Gratiaen J.—
This is an action against the Grown for damages for breach of contract.On 1st November, 1944, the Assistant Government Agent, Hambantota,invited tenders from private contractors for the transport and storageof salt collected in the Hambantota District during the calendar year.
1 (1915) 1 C. W. R. 46.2 (1912) 15 N. L. R. 154.
The notice specified the nature of the services to be performed, and stipu-lated inter alia that ‘ * the transport of bags of salt from collectioncentres and emptying the salt from the bags into heap spaces on theplatform should be at the rate of not less than 2,375 bags of salt per diem .Tenderers were required to submit their quotations at “a rate per 1,000bags”.
The plaintiff’s tender was accepted by the Tender Board and in duecourse on 26th January, 1945, a formal agreement was signed by theplaintiff on his own account and -* by the Assistant Government Agent,Hambantota, on behalf of the Crown. The relevant terms of thedocument read as follows: —
“2. The Contractor agrees to the transport and storage of saltcollected at Maha and Kohalankala Lewayas during the year 1945at the rate given below.
Rs. 182.75 per 1,000 bags (Rupees one hundred and eighty-twoand cents seventy-five per one thousand bags.)
The services include—
Furnishing vehicles for transport of salt, stitching bagsfilled with salt, loading stitched bags of salt into vehicles (carts andlorries) at collection sites, transporting such salt to platform sites,unloading bags of salt into trollies at platforms, pushing trollies,unloading bags of salt, emptying the bags of salt into heap spaceson platform stacking salt, and shaping heaped salt, pegging, ropingand covering salt heaps with cadjans, as directed by the officer incharge. (Materials necessary for the service will be supplied by theSalt Department).
(1>) The transport of bags of salt from the collection centres ofeach lewaya and emptying the salt from the bags into heap spacesof the platforms should be at a rate of not less than 2,375 bags ofsalt per diem. Payment will be made by the Assistant Govern-ment Agent on the production of a voucher certified by the SaltSuperintendent.
The Contractor is required to employ a sufficient number ofboth labourers and vehicles in the service as at (a) above to enabletransport of the necessary amount of bags per diem (in all otherdetails connected with the services the instructions of the officer incharge should be followed).
” 7. The Contractor hereby agrees to carry out the work to theentire satisfaction of the Assistant Government 'Agent, Hambantota.If it is found that the vehicles and the labour provided by the Contractorat any one centre or at any one time are insufficient to execute theservices in Clause 2 above, the Assistant Government Agent shallnotice the Contractor to provide the additional vehicles and labourforthwith. Should the Contractor fail to provide the additionalvehicles and labour demanded of him,, the 'Assistant Government-Agent shall be at liberty to engage the additional labour and vehiclesat any rate of pay. Should the cost of such vehicles and labour so
engaged be more than the amount agreed to be paid to the Contractor,the Contractor hereby agrees to pay to the Assistant GovernmentAgent the excess of such costs together with damages at the rate of Rupeesten (Rs. 10) only for each day or any part thereof.
“8. The Contractor agrees that on his failure to deliver at theplatform centres the full quantity of calt as stipulated in Clause 2above, he shall be liable to a forfeiture at cents ten (-/10) per bagus liquidated damages on the deficit and further the said AssistantGovernment Agent shah hje at liberty after giving four days noticeto the Contractor in writing to arrange for the transport and storageof the said salt bags in respect of which he is in default from thecollection centres to the platform Centres.
‘ 16. In case the Contractor shall fail, neglect or refuse to do theaforesaid services within the time and in .the quantities stipulatedin Clause 2 of this agreement, the said Assistant Government Agentmay, if he thinks fit, after giving seven days notice to the Contractorin writing determine and terminate the contract created by these pre-sents and in the event of such determination, the Contractor shall for-feit to the said Assistant Government Agent on behalf of His Majestythe Ring, the sum of rupees two hundred only (Rs. 200) he has depositedas security with the Assistant Government Agent for the due perfor-mance and fulfilment of this contract in addition to the sums he mayhave become liable to pay under clauses 5, 6, 7, 8 and 9 of this contract.”
During the early period of the contract large quantities of salt requiredto be dealt with by the plaintiff, but for reasons apparently beyond hiscontrol (but nevertheless irrelevant on the question of his liability as-a defaulting party) he was unable to handle the prescribed minimumof 2,375 bags each day. For this failure the stipulated penalty wasduly exacted from him by the Crown. He was also warned by the Assis-tant Government Agent to engage more labour and to keep to the termsof the contract. Thereafter he placed himself in a position to handlethe prescribed minimum quantity of bags each day, but largely I thinkdue to a failure On the part of a collecting contractor and perhaps to other•circumstances as well, the quantities of salt made available to the plain–tiif for transporting and storage after 4th August fell far short of the-daily minimum of 2,375 bags.
In these circumstances the plaintiff claimed from the Crown a sumof Rs. 10,847 as damages on the ground that, the Crown had failed tofulfil its alleged obligations to supply him with at least 2,375 bags of saltto be handled under the contract. For a second Gause of action he claimeda refund of a sum of Rs. 983.20 representing the penalties exacted fromhim for his earlier defaults. This latter part of his claim was rejectedby the learned District Judge, and no appeal has been filed against hisfinding on the point. Only the question of the Crown’s liability on thefirst cause of action arises for our consideration.
’The view taken by the learned District Judge was that “ the plaintiffhad no right to demand that by necessary implication the defendant-should supply him with 2,375 bags a day. In terms of the contract
however the plaintiff was entitled to employ labourers and vehiclessufficient to carry 2,375 bags a day, and if he employs labourers andvehicles sufficient to carry that number and was not given work forthem or insufficient work for them he was entitled to recover that lossfrom the defendant '". After a very careful analysis of the evidenceof this later basis of liability, he entered judgment in favour of theplaintiff for a sum of Rs. 5,794.73. The present appeal is from thisjudgment.
X am in agreement with the learned Solicitor-General that the Growncannot be held liable in damages on the grounds indicated by the learnedJudge. The plaintiff’s claim must clearly stand or fall on the questionwhether, upon a proper interpretation of the agreement dated 26thJanuary, 1945, the Crown was under an implied contractual obligationto supply him with 2,375 bags a- day for transport and storage to the sameextent as the plaintiff was admittedly under a duty to handle that quantityif supplied. I shall therefore proceed to examine the terms of theagreement.
The formal document nowhere explicitly imposes obligations of anykind upon the Crown. The language employed does not even state inso many terms that the Crown was under a duty to pay the plaintiffat the stipulated rate for services actually and properly performed.There can be little doubt, however, that such an obligation does arise ■by necessary implication. Is it also unreasonable to hold that, correspon-ding to the plaintiff’s explicit obligation on pain of a stipulated penaltyto be ready to handle a minimum quantity of 2,375 bags of salt eachday, there was an implied duty cast on the Crown to supply the plaintiffwith that minim run quantity ?
In The Attorney-General v. Abram. Saibo 1 a Divisional Bench of thisCourt was called upon to interpret an agreement between the GeneralManager of Railways and the defendant that the latter should supplyrice for one year at a specified price “ in such quantities as may from timeto time be required for the general service of the railway ”. The agree-ment did not explicitly state that the General Manager was under anobligation to order or to pay for any rice. It was decided however thatby necessary implication the Crown was obliged by the terms of thecontract to place all its requirements for rice with the defendant. TheCourt applied the rule laid down in The Moorcock – that it was necessary^to draw this inference “ from the presumed intention of both the parties•with the object of giving to the transaction such business efficacy as theyboth must have intended that it should have•
It is, I think, important to note that the contract which is now underconsideration is a bilateral contract the terms of which are expressedto have been agreed upon by both the plaintiff and the Assistant Govern-ment Agent, and that both parties signed the document as contractingparties. In Pordage v. Cole 3 A and B had mutually agreed that B shouldpay A a stipulated sum of money for his land. % The Court held that these
•words amounted to a corresponding implied covenant by A to conveythe lands. “ For agreed is the word of both ”. To my mind this line ofargument is appropriate to the present case.
Once the principle of interpretation has been elucidated, it is of courseof little assistance to examine a number of decided cases in which asubmission that an implied obligation should be read into the languageof a particular contract was either accepted or ruled out. Each trans-action must necessarily be considered in the light of the general rulethat an obligation imposed by necessary implication can only be admittedwhere it “ prevents such a failure of consideration as cannot have beenwithin the contemplation of either* party ”. (Hamlyn v. Wood1; TheTimes of Ceylon Co. Ltd. v. Tfie Attorney-General 2.)
In. this case the parties had agreed that the plaintifE should, in a dis-trict where man-power and transport facilities were admittedly scarce,provide each day an organisation sufficient to handle a minimumquantity of 2,375 bags of salt a day. In return for those services he wasto be paid not a lump sum calculated in a manner commensurate withthe cost of procuring such an organisation but merely to receive payment.at a rate calculated according to the actual number of bags handled.I fail to see how it would be possible to give “ business efficacy ’ ’ to sucha bargain unless there is read into the contract an obligation on the partof the Crown tQ supply the quantity of salt which the other contractingparty was under a duty to handle. . The contention for the Crown seemsto be that it was open to them, having put the plaintiff to all the expenseof employing labour and transport sufficient for 2,375 bags to give him,say, fifty bags (or perhaps no bags at all) on . any particular day and topay him only for the quantity actually handled at the stipulated rate(or nothing, as the case may be). With the greatest respect, I.shouldimagine that a reasonable and experienced man of business would regard•such a proposition as very strange indeed. It would certainly be im-possible as a business proposition for a contractor to submit: a tenderfor a transaction of this nature at an economic rate on this basis. Thiscase is concerned with a commercial contract and should, as far as thelanguage permits, be construed “ with reference to the commonplacetests which the ordinary business man conversant with such matters.should adopt ”. (per Macmillan J in Yorkshire Dale Co. v. Ministerof War Transport 3). When the Crown undertakes an incursion into thefields of commerce, the same test must serve as the standard. I observethat ip the following year the Crown called for tenders in respect ofsimilar services on the express understanding that the Crown was notcommitted to supply any daily specific quantity of salt per day. Inthat event the tenderer would have at least known exactly where hestood, and his quotation would no doubt have been prepared with specialreference to the risk involved.
In my opinion the Crown was under an implied obligation to makeavailable to the plaintiff a minimum quantity of 2,375 bags of salt. tobe handled by him und& the contract, and any other interpretation1 (1891) 2 Q. E. 488.2 (1936) 38 N. L. B. 430.
of the terms of this particular contract would result in “ such a failureof consideration as could not have been within the contemplation of eitherparty The Crown’s default in supplying this minimum • quantityon any day constituted a breach of contract entitling the plaintiff toclaim damages to compensate him for the consequent loss sustained byhim.
X agree with the learned Solicitor-General that it would normallyhave been desirable to send the case back for a reassessment of damageson the true basis of liability which is somewhat different from that onwhich the learned Judge had condemned the Crown to compensate theplaintiff. In the present case, however, this would involve both partiesin needless expense, because I am satisfied that the sum which shouldbe awarded to the plaintiff would, if correctly computed, have exceededthe amount for which judgment has been entered in his favour. Thelearned Judge in fixing damages has taken into account only the additionalexpenditure incurred by the plaintiff in fulfilling his part of the bargain.The other important item of loss of -profits resulting from the Crown’sdefault has not been considered. As the plaintiff has not .appealedagainst the inadequacy of the damages awarded him, I would dismissthe appeal with costs.
Windham J.—I agree.
ATTORNEY-GENERAL, Appellant, and JUNAID,Respondent
1-949Present: 'Windham J. and Gratiaen J.