NEW LAW REPORTS OF CEYLONDODWELL & CO. v. UNITED STATES SHIPPING BOARDMERCHANT AND FLEET CORPORATION.
Shipping contract—Offer by defendants to take cargo at certain rates— Agree-ment to ship definite amount of cargo each month—Acceptance of offer—Binding contract—Measure of damages.
Where the agents of the defendants made an offer through a brokerto carry cargo between certain ports during a stated period at certainrates and the plaintiffs agreed to ship two hundred tons of cargo eachmonth during the said period at the rates offered,—
Held, that there was a binding contract entered into between theparties.„
Held further, that (on a breach of the contract by the defendants)the measure of damages was the difference between the contract ratesand the rates paid by the plaintiffs to other shippers for the amount ofcargo actually shipped by them to the said ports during the period.
HE plaintiff company sued the defendants to recover damages for
breach of a contract to carry tea and general cargo from Colomboto New York and other American ports between April and December,
The defendants denied that any contract as alleged was madeby them and stated that what was made was only an offer. The learnedDistrict Judge gave judgment in favour of the plaintiff and awardedthem damages in the sum of Rs. 19,843 and costs.
V. Perera (with him N. K. Choksy and D. W. Fernando), fordefendants, appellants.—Lionel Edwards, Ltd., sent the plaintiff twoshipping orders on June 19. On April 21, 1928, Lionel Edwards, Ltd.,intimated to Dodwells that forward bookings were cancelled on instruc-tions (P 1) from America. P. 2 is a similar intimation to the brokers,Messrs. Keell & Waldock. The plaintiff declined to accept the cancella-tion (P 3), and sued for the breach of contract.
The sailings were usually fortnightly. The first shipment on the basisof the cut rate was on April 11, 1928, by the ss. “ Algic ” : Eighty-onetons were shipped through the defendants. Was there a legal obligationon the defendants to carry at fixed rates throughout the whole period,or was it an offer or unilateral promise not valid for failure of consider-ation by the other side ? Each acceptance of cargo would constitutea separate and new contract.
No corresponding obligation on the other side to ship 200 tons a month.Lionel Edwards, Ltd., acted as the second defendant’s agent in Colombo.There was, in fact, no legal contract between the parties. In April,36/4
Present: Dalton A.C.J. and Koch A.J.
111—D. C. Colombo, 30,616.
INCLUDEPICTURE “D:\FINAL DONE ABBY\WORD\done\NEW LAW REPORT\NLR V 36\media\image1.png” * MERGEFORMATINET
Dodwell & Co. v. U. S. Shipping Board Merchant & Fleet Corpn.
May, and June there were shipments o£ less than 200 tons by the KooseveldtLine. On June 14, by P 5 the plaintiff wrote to Lionel Edwards, Ltd.,offering 150 tons. The latter answered by P 6 that a guarantee ofrebate could not be given.
On the plaint itself there is no contract. With the delivery of cargoin each month a binding contract arises (Burton v. The Great NorthernRailway1). Under the English law valuable consideration must begiven (The Queen v. Demers *; Anson on Contracts (13th ed.), p. 39;Clifford v. Davies & Lloyd *). The alleged contract in paragraph 4 of theplaint is no contract at all. The plaintiffs did not actually ship 200 tonsa month. The forward contracts were satisfied by shipments in earliermonths. The loss of profits is due to plaintiff’s inaction and is too remote.
Judgment cannot be obtained against both defendants as the seconddefendant is an agent of the first. The plaintiff’s evidence does notprove any liability on defendant’s part. The freight notice (P 19) hasno meaning. No consideration given by the plaintiff. The contractpleaded in paragraph 4 of the plaint is not an enforceable one. On thequestion of damages, see Carver on Carriage of Goods by Sea (7th ed.),p. 996, s. 717.
You cannot obtain judgment against both principal and agent(Bulner v. Krelzheim *, Firm of R. M. K. R. M. v. Firm of M. R. M. V. L.’).In any case the damages awarded to the plaintiff are excessive. Themeasure of damages is the difference between the contract rates and therates that the plaintiff actually paid for on the amount of cargo theyactually shipped during the six months.
F. A. Hayley, K.C. (with him H. E. Garvin), for plaintiffs, respondent.—Admittedly Lionel Edwards, Ltd., were acting for undisclosed principals.In all their letters they said they were the agents of the RooseveldtSteamship Co. (P 19, P 20). In P 6 they refer to the United StatesShipping Board, and not the Corporation. The defendants filedseparate answers. Both made the same claim in reconvention: Eachclaimed £332. 10s. The defendants admitted that Lionel Edwards, Ltd.,were agents of the second defendant and that the second defendantmanaged vessels for and on behalf of the first defendant. LionelEdwards, Ltd., had authority to bind the first defendant—admitted bycounsel at the trial. These matters were wholly in the knowledge of thedefendants themselves. There is no evidence as to the position betweenthe two defendants. The admission of defendants’ counsel excludesthe question of sub-agency.
Lionel Edwards, Ltd., had nothing to do with the case. The proxiescame direct from the two defendants—Scrutton on Charter Parties (12thed.), Appendix 111., s. 59. Lionel Edwards, Ltd., bound both defendants bytheir contract. There is a contract to ship 200 tons of cargo at 20 or25 shillings according to the nature of the cargo. The contract wasfor the using of a certain amount of space on each ship. This was acontract entered into by a ships’ broker—Scrutton, p. 34, A broker’snote is practically complete evidence of a contract—it constitutes. a
* (1854) 9 Ex. 507.3 (1862) G L. T. R. 579.
2 (1900) A. C. 103.*23 .V. L. R. 408.
3 (1926) A. C. 761.
DALTON A.C.J.—Dodwell & Co. v. V. S. Shipping Board Merchant & Fleet Corpn. 3
memorandum under the Sale of Goods Act, No. 11 of 1896. Boustead onAgency (7th ed.) describes Brokers’ Notes, Article 94. P. 18 andD 1 constitute a memorandum of contract signed by .a mutualbroker. See Benjamin on Sale (6th ed.)—Chicago and G. E. R. R. v.Dane at p. 91. This is more a case of carriers.
On the question of damages, the contract is in the form of a hiring ofthe vessel. The general principle is that the person losing by the breachshould be put in the same position as if the contract has been carried out(Halsbury, pp. 341, 343).
The measure of damages is discussed in Rodocanachi Sons & Co. v.Milbum Bros. The defendants were responsible for making the contractnot a lucrative business (Stroms Bruks Aktie Bolag v. John & PeterHutchison*).
H. V. Perera, in reply.—The admission by defendants’ counsel does nottouch the right to get judgment against both defendants. A sub-agentcannot bind the principal—Boustead on Agency (7th ed.), p. 113, Article 41.The contract pleaded in the plaint is that the defendants agreed to carry200 tons in consideration of payment. The evidence does not bear outthis. If there was no obligation on plaintiffs to ship 200 tons, thenthere was no consideration for contract. On the facts Mr. Bostock isthe most competent person to speak of the arrangement. On themeasure of damages a person is entitled to get only the actual losssustained.
Cur. adv. vult.
August 4, 1933. Dalton A.C.J.—
The plaintiff company (respondent to the appeal) brought this actionto recover from the defendants (appellants) damages for an allegedbreach of a contract to carry tea and general cargo from Colombo toNew York and North American East Coast ports for the period Aprilto December, 1928.
The first question arising on the appeal for decision is whether therewas any binding contract between the parties; the second questionrelates to damages.
The defendants in their answers denied, inter alia, that any contractwas made as alleged by plaintiffs, it being urged that they had merelymade an offer. In the alternative they pleaded that, if there was avalid contract, the plaintiff company had committed a breach thereof forwhich they each claimed the sum of £332. 10s. On both questions thelearned trial Judge answered the issues framed in favour of tt ‘ plaintiffcompany, and has awarded them damages in the sum of £A,488. 5s.,equivalent to Rs. 19,843.33 and costs.
On the first question it is urged that the arrangement between theparties was merely an offer on the part of Lionel Edwards & Co., Ltd.,the agents of the defendants, to carry cargo up to 200 tons for the periodmentioned at the rate specified by the witnesses, which offer was accepted,but with no obligation at all on the part of the plaintiff company to shipanything at all by the defendants’ ships.
> (1886) 56 L. J. Q. B. 202.
a (1905) A. C. 515.
4 DALTON A.C.J.—Dodwell & Co, v. U. S. Shipping Board Merchant & Fleet Corpn.
The evidence shows that the Rooseveldt Line were, prior to aboutApril, 1928, getting no cargo from Colombo, their ships passing throughthe port practically empty. About that time the manager of LionelEdwards & Co., Ltd., approached the witness, Mr. Bostock, a partnerin a firm of freight brokers, asking him if he could get them businesson the basis of 30 shillings a ton for tea and 25 shillings for general cargo,stating that his firm was prepared to book cargo at these rates until theend of the year, or a lower rate if competition reduced their rates lower.At that time the standard rate between Ceylon and the United Statesof America was 60 shillings for tea and 50 shillings for general cargo,all the lines of steamers plying on this route working on the standardrates. Mr. Bostock approached the plaintiff company amongst otherswith this offer which, according to the evidence, seems to have caused agood deal of discussion in local shipping commercial circles. Havingregard to the prevailing standard rates, the cut in rates now offeredwould mean a very considerable advantage to anyone shipping at thelower rate. Mr. Dulling, one of the managers of the plaintiff firm, statesthat the offer was the talk of the office, and at first seems to have doubtedwhether it was genuine. Even Mr. Harger, Lionel Edwards’ managerin Colombo, speaks of it as a revolutionary thing for Colombo. Oninquiry, however, and after discussion with Mr. Bostock, Mr. Dullingstates he was satisfied it was a bona fide offer and he undertook to ship200 tons of cargo each month, from April to December at the ratesoffered. Notes thereafter of the agreement passed from the brokersto the plaintiff company and to Lionel Edwards & Co., Ltd. (exhibitsP 18 and D 2). They set out that they have booked cargo on behalf ofthe plaintiff company with Lionel Edwards & Co., Ltd., from Ceylon toBoston and/or New York. The cargo is stated to be 200 tons of tea orgeneral cargo a month from April to December at the rates of 30 shillingsand 25 shillings for tea and general cargo respectively, or lower ratesif available.
The forms used by the brokers were the ordinary forms used for bookingindividual shipments contracted for, Mr. Bostock saying that being theordinary contract entered into, this being the first instance he hadknown of forward booking beyond a month or six weeks, even the latterperiods being unusual. It is clear, however, to my mind from his evidenceand from the brokers notes what was the nature of the agreement made.There was considerable discussion as to the quantity of cargo, and as towhat amounts of tea and general cargo should be shipped before anyagreement was arrived at, and the final arrangement .made was thatthe figure should be fixed at 200 tons of cargo, without specifying howit was to be divided between tea and general cargo. This agreementwas concluded on March 19, 1928.
Subsequent events showed that all went well until April 21st. What■ had happened was that other shipping lines had heard of the cut in ratesby Lionel Edwards & Co., Ltd., and the standard rate was thereuponsimilarly reduced. On April 21st, Lionel Edwards & Co., Ltd., wroteto the plaintiff company and to the brokers (letters P 1 and P 2) statingthey had received cabled instructions to cancel all forward bookingswith immediate effect, and that they were unable to take the cargo
DALTON A.C.J.—DodweU & Co. v. V. S. Shipping Board Merchant & Fleet Corpn. 5
tendered for shipment except at the former standard rates. Theplaintiff company protested against what they called “this unreasonableand arbitrary cancelment of your forward fixtures with us*’, and statedthat they had, under the recommendation of the brokers of LionelEdwards Co., Ltd., covered elsewhere the balance of their April com-mitment without loss, since the standard rate had been reducedduring April. They forwarded, however, a debit note for £2,100 coveringthe freight differences over the period May to December and asked foran early settlement. There can, I think, be no doubt that LionelEdwards & Co., Ltd., consented to the plaintiff company skipping aportion of trie 200 tons of cargo in April by a ship not of the defendants’line. Mr. Karger says he has no recollection of this, but he admittedat one point in the course of his evidence that he had spoken to thebrokers and had instructed them to advise the plaintiffs to ship theirgoods elsewhere without loss. Mr. Dulling is clear on the point andthis letter corroborates him.
As a result of this protest, for May and June, shipments continued bythe defendants on behalf of the plaintiff company ostensibly at the oldrates but in fact at the rates contracted for, Lionel Edwards & Co., Ltd.,on behalf of the defendants, making* a refund to the plaintiff companyfrom time to time of the difference between the contract rate and the oldstandard rate. There seems, however, to have been some delay in makingthese refunds, for on June 14 (letter P 5) in tendering cargo for ss. Jalapa,the plaintiff company asked for a prompt refund of the difference betweenthe standard rate and the contract rate. It is to be noted that thisletter, as does other correspondence between the parties, speaks of theforward contract and contract rates. The reply of Lionel Edwards &Co., Ltd., is the letter P 6, which also refers to the contract rate. Theysay they are unable to guarantee a prompt refund but state the claimshould be sent to them as agents for the Rooseveldt Steamship Co. Inc.,Managing operators for the United States Shipping Board, and thatit would be put before the Board for their immediate attention. On afurther communication, by letter P 8 of June 26, they assured theplaintiff company that a prompt refund of the difference would be made.This was followed up by a letter P 9 of July 2 saying “ we wish to assureyou that refund of freight between contract and current rates will beimmediately made on all steamers up to the end of the year on yourcontract, dated’ 19th March, 1928 M.
Coming to July, a steamer of the defendants, the West Honaker,was due towards the end of that month. Defendants’ agents by letter(P 10, July 18) notified the plaintiff company of this and they tendered150 tons of cargo for shipment (P 11, July 23). On the same day, however,the agents by letter (P 12, July 23) notified the plaintiff company thatthey had been instructed by their New York principals hot to promisefurther refund of the difference between the contract and current ratespending further instructions, and that they could only accept the cargonow tendered at current standard rates. It is admitted that the standardrates from July to December remained at the figure 60 shillings for teaand 50 shillings for other cargo. The plaintiff company informed them(P 13 of July 24 and P 14 of July 25) that they had in consequence
6 DALTON A.C.J.—Dodwell & Co. v. U. S. Shipping Board Merchant & Fleet Corpn.
shipped the cargo by another steamer, and forwarded a debit note forthe difference between current and contract rates. Thereafter 200 tonsof cargo was tendered each month by the plaintiff company to defendants’agents, the latter replying that on instructions of their principals theycould only accept the cargo at the current rates. Mr. Harger admitshe never at any time repudiated his liability to pay to the plaintiffthe difference in the rates claimed by them, whilst the correspondenceof the defendants’ agents clearly admits the existence of the contract.Their local manager was obviously in a very difficult position, havingbeen asked as he says to enter into the contract and then told tocancel it.
With reference to the part to be performed by the plaintiff company,there is no doubt in my mind on the evidence that there was an obligationon the part of the company to ship 200 tons of cargo during the periodagreed upon, by the defendants’ ships. The defendants were badly inwant of cargo to ship, and it is inconceivable to me that in the circum-stances they would have offered the very favourable terms to the plaintiffcompany without any obligation at all upon the part of the plaintiffcompany to ship by their line. At one point in his evidence Mr. Hargerstates he would have objected to their shipping by a boat of another line.Mr. Bostock, it is true, says he never gave his mind as to what theposition would be if the plaintiff company in any month shipped lessthan the amount stipulated. He conceded that in the ordinary way,under the usual contracts of which he was speaking, if a shipper did notship the full quantity, he was not sued by the ship owner, and if his cargowas partly shut out he would make no claim on the ship owner. This,however, did not include possible claims by consignees for late shipments.As Mr. Hayley points out, however, where rates are standardized andshipping is plentiful as in Colombo, no loss would as a rule be incurredwhere cargo is shut out from any one ship. The learned trial Judgehas, I think, although he is satisfied there was no want of mutuality inthe cpntract, misapplied Mr. Bostock’s evidence on what he calls thecourse of business in the event of a failure by the shipper to ship all he hadundertaken to ship. The witness in speaking of claims was not referringto the contract in question in this case, but to the bookings to whichhe had referred earlier, when he said it was the custom to book for onesteamer only. Mr. Dulling for the plaintiff company never at any timeseems to have had any doubt as to the liability of his company to ship200 tons a month. The inquiries he made to ascertain before the contractwas made whether his firm would have this amount of cargo availableand the care with which he formally tendered this amount each monthup to the end of December, and on one occasion, in May, obtained theconsent of the defendants’ agents to ship by another line, amply supporthis view of his position. I entirely agree with the learned trial Judgethat there was no want of mutuality.
On the first question then, I am satisfied that a binding contract wasentered into between the parties as claimed by the plaintiff company.If there is a binding contract it is not urged on appeal that there wasno breach of it on the part of the defendants, as found by the learnedtrial Judge.
DALTON A.C.J.—Dodwell & Co. v. U. S. Shipping Board Merchan & Fleet Corpn. 7
On the question of damages, the learned trial Judge has held that theplaintiff company is entitled to recover the difference between thecontract rate and the current rate on the quantity of cargo, the subjectof the contract, namely, 200 tons. On the footing that the tendersindicate that the plaintiff company proposed to ship 150 tons of generalcargo and 50 tons of tea per month, after deducting the cost of shipping69 tons of cargo carried in July by defendants’ ships, he has accordinglyawarded them the sum of £1,488. 5s. It was urged in the lower Court,however, and has been urged before us, that the damages should bemeasured by the difference between the contract rates and the ratesthat the plaintiff company have actually paid to other shippers for thegoods actually shipped to the United States during the six months.Although the plaintiff company tendered to the defendants againsteach of those months the full 200 tons, when the cargo was refusedthey did not in fact ship this full, amount every month, except in July,An error seems to have been made in the figures for November given inthe return P 53. The actual shipments, we were informed during theargument on the appeal, were as follows: —
There is no reason to doubt that the plaintiff company were in a positionto ship the 200 tons each month but in fact they have not done so. Thereason given is that they could not take advantage of the cut rates,but that is no reason, since they did ship considerable quantities at thestandard rate and claimed the difference from the defendants. It isurged, however, that even if they had shipped nothing at all during thesix months they could still recover the difference between the ratecontracted for and the standard rates.
The broad principle governing the question of measurement of damagesactually sustained is set out by Lord Haldane in British WestinghouseElectric Co. v. Underground Electric Co.1 One who has proved a breachof a bargain to supply what he contracted to get, is to be placed, as faras money can do it, in as good a situation as if the contract had beenperformed. If one party, who is legally bound to carry out a contract,fails to do so, the other party may do so for him, and charge him for thereasonable expense incurred in so doing. (Chitty on Contracts (18th ed.),p. 951.) This broad principle, I take it, applies equally to a contractfor the carriage of goods whether it be on land or sea. All that Mr.Hayley has cited from Scrutton on Charter ‘Parties seems to me toconform to this principle. If a charterer, for instance, is not furnishedwith a ship under a charter, and charters a vessel to replace her, the
1 (1912) A. C. 673, at p. 689.
8 DALTON A.C.J.—Dodwell & Co. v. U. S. Shipping Board Merchant & Fleet Corpn.
excess freight he has to pay will be, prima. facie, the measure of damages.If the rate of freight demanded is unreasonable, he need not make asubstituted charter.
This appears to be supported by the view of Lord Macnaghton in acase cited during the argument (Stroms Brutes Atctie Bolag v. Hutchison*),an action for a breach of a contract of carriage. Owing to the failure ofthe ship owners to- fulfil their contract in respect of one shipment, theplaintiffs were unable to fulfil a contract to supply wood pulp whichthey had entered into with T. O. & Co. T. O. & Co. therefore had tobuy as best they could in the market, and made a claim against plaintiffswhich was duly paid, the plaintiffs then making a claim over againstthe ship owners. Included in their claim was the amount they hadhad to pay to T. O. & Co., and also a small sum for extra freight on thebalance of 33 tons which T. O. &’Co. accepted at a later date, makingup the full 400 tons to which they were entitled. Lord Macnaghtonstates that if the ship owners had given timely notice of their inabilityor unwillingness to perform their contract, the plaintiff might possiblyhave secured other means of transport. In that case he says the measureof damages would probably have been just what was claimed in thecase of the 33 tons, namely, the difference in freight. There is nosuggestion in the case before us that the plaintiff company were unableto obtain space in other ships for the whole of their 200 tons of cargoeach month after the defendants refused to carry it under the contract.They appear, however, to have preferred to ship only a portion of it.In the circumstances, the measure of damages appears to be the differencebetween the contract rates and the rates that the plaintiff actually paidfor on the amount of cargo they actually shipped during the six months.There is no suggestion of any damages flowing from any other cause,e.g., such as failure by the plaintiff company to fulfil any contract forthe sale and delivery of goods in America. The figures on this basiswork out as follows : —
Excess freight paid by plaintiff company for tea, 301.2 tonsat 30 shillings a ton
Excess freight on D/C nuts, 653.8 tons at 25 shillings a ton,less 69.4 tons shipped through defendants in July, i.e., 584.4 tons . .Excess freight for other cargo, 35 tons at 25 shillings
Less excess freight paid for 24 tons shipped in July, in excess of200 tons at 25 shillings
£ s. d.
451 16 0
730 10 0
43 15 0
1,226 1 0
30 0 0
1,196 1 0
The plaintiff company is therefore entitled to this sum of £1,196. Is.or in rupees at the exchange rate of Is. 6d. to the rupee. The amountawarded in the decree must therefore be reduced to this stun, with costsof the action.
There is one other point raised by Mr. Perera for the respondents,which he concedes is of practical concern only in so far as it might affectthe costs of the action. He urges that the plaintiff company is not
« (1905) A. C. 515.
DALTON A.C.J.—In re a Proctor.
entitled to judgment against both the defendants, suggesting that thesecond defendants are agents of the first defendants. At the openingof the trial in the lower Court counsel for defendants made certainadmissions on page 44 of the record.’ I take those admissions to meanthat Lionel Edwards & Co., Ltd., in their transactions with the plaintiffcompany were the agents of both Jthe defendants. The two defendants,it is to be noted, have filed separate answers and they have both madea claim against the plaintiff company for breach of contract. Underthe circumstances J cannot say that the learned Judge was wrong inentering judgment against both of them as he has done.
The appeal is for the above reasons dismissed, subject to an amendmentin the amount of damages awarded as I have denoted. The principalpoint argued on the appeal was no doubt the first point, but appellantshave been successful in obtaining an appreciable reduction in the damagesawarded. I would therefore make no order as to the costs of the appeal.
Koch A.J.—I agree.
DODWELL & CO. v. UNITED SATATES SHIPPING BOARD MERCHANT AND FLEET CORPORATION