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Present: Bertram C.J., Ennis J., and Jayewardeue A.J.NOORBHAI A CO- v. KARUPPEN CBETTY426—D. C. Colombo, 8,290
Contract of sale at a fixed price—After price of artiole had gone down,pretension by buyer that the contract price was less—After price ofarticle had gone up,repudiation ofcontractbyseller—Action for
The defendant agreed to deliver to plaintiffs 1,500 bags of sugarat Bs. 37.50 a bag. The price of sugar then went down, and theplaintiffs pretended that the contract price was Bs. 34 a bag* andnot Bs. 87.50. The defendant repudiated the suggestion, andheld the plaintiffs to the bargain. The price of sugar then wentup, and the defendant thereupon asserted that the contract nolonger subsisted, and, notwithstanding the protests of the plaintiffs,disposed of the goods.The plaintiffsclaimedBs.17,250 damages
for breach of contract.
The defendant set upthe defence that therewhsno contract, and
in the alternative thatif there werea contract that the plaintiffs
had repudiated it and were estopped from claiming the benefit of it.
EM (Per Esins J. and Jatbwardbnb AX, dissentiente BertramOX) that there was no binding contract, and even if there was suchs contract, it had been rescinded.
Bshxbah CJ1.—In spite of the fact that plaintiffs have sought torepudiate the contract, yet if they are held to it by the other party,they may insist on its performance.
T HE facts are set out in the judgment.
Dneberg, K.C. (with him Hayley and Choksy), for plaintiffs,appellants.
Elliott, K.C. (with him Samarawickreme), for defendant, respond-ent.
Cur. adv. wit.
July 15, 1924. Bertram C.J.—
In this case we have to determine the rights of the parties to asugar contract. The legal issues we have to determine are unfortu-nately clouded with moral considerations. The buyers, after the'contract had been, concluded, found that the plrice of sugar wasgoing down. They thereupon unscrupulously and dishonestly
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Noorbhai <fcCo. e.KaruppenCheUy
pretended that they had bought at a lower figure than the actualcontract price. The seller repudiated the suggestion, and held him tohis bargain. The price of sugar then went up. The seller thereupon,with equal unscrupulousness and dishonesty, pretended that the-contract no longer subsisted, and, notwithstanding the protests,of the buyers, disposed of the goods which he had already sold.These, as I see the case, are the simple facts. I cannot see thatthere can be any reasonable doubt as to the legal result of thesefacts. I think that the legal position is demonstrably clear, if thestory is considered in stages.
The first stage relates to the original negotiations, and the con-tract said to have been concluded. The first question is, was acontract concluded ? The facts are as follows: The first plaintiff,who was the managing partner of the firm of T. A. J. Noorbhai & Co.,in February, 1928, wanted to buy about 2,000 bags of sugar, andasked a broker, Candappa, to arrange about it. Candappa wentto the defendant, and after some negotiations obtained the offer of1,500 'bags (or 150 tons) at Bs. 37.50 per bag. The broker, as Iunderstand the facts, reported this offer to his principal (whom Iwill refer to as the buyers). The latter approved of the proposal,and gave the broker a cheque for Bs. 7,500, which was an advance-or part payment at the rate of Bs. 5 per bag, and instructed him toconclude the bargain.
It is not definitely stated that the cheque was written out afterthe offer was reported. The seller speaks in one place as thoughthe broker had the cheque with him while they were negotiating,but I think it is clear that the cheque was written out after, the offerwas reported, as,till this wasdone,the buyers didnot know how
many bags theycouldsecure.Butnothing seemsto meto turn
on this point.
On receipt of the cheque the seller drew up a formal contract note,,setting out the termsof thebargain, and gave itto thebroker.
The broker tookit tohis principal,who instructedhim totake it
back and get a formal clause added that: “ Delivery will be givenby weighing without slackage and moisture as usual.” This wasdone. The contract note was dated February 16,1923. The
additional clause appears to have been added on February 19.Taking these to be the facts so far, the question arises, was there aconcluded contract ? I do not see how there can be any doubt.There is not only a contract, but a mutually enforceable contract.There is no question that the broker had authority to conclude thecontract and to bind his principal, the buyers. There is no questionthat a part payment was made on account of the contract. Thereis no question that the seller handed to the broker, on behalf of thelatter's principal, a signed memorandum of all the material terms ofthe contract. The only suggestion to the contrary which can ariseat this stage is based upon the fact that the,buyers never themselves
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signed a contract note although they were requested so to do bytheir broker, and although such a contract note was expected by theseller. But this point appears to me to be unsubstantial. It wasnot suggested that there was any mercantile custom under which nobargain was deemed to be concluded until the parties had exchangedwritten notes. All that the seller says is: “ That it is custom toexpect another similar document from the other side when a sale iseffected/’ The broker says: ** Some firms give a written contract,•and some do not. Plaintiffs have been giving a return contract tosome people. Defendant wanted a written contract." But thelaw on the subject is (dear. See the judgment of Lord Westbury inChinnock v. Marchioness of Ely 1: "I entirely accept the doctrinethat if there had been a final agreement, and the terms of it areevidenced in a manner to satisfy the Statute of Frauds, the agree-ment shall be binding, although the parties may have declared thatthe writing is to serve only as instructions for a formal agreement, dtalthough it may be an express term that a formal agreement shall be■prepared and signed by the parties. As soon as the fact is establishedof the final mutual assent of the parties to certain terms, and thoseterms are evidenced by any writing signed by the party to be-charged, or his agent lawfully authorized, there exist all the materialswhich this Court requires to make a legally binding contract. Butif to a proposal or offer an assent be given, subject to a provision asto a contract, then the stipulation as to the contract is a term of theassent, and there is no agreement independent of that stipulation."It appears to me clear that the facts in this case cannot- be broughtwithin the exception of the final sentence. This is merely a casein which, when the contract has been concluded, one of the partiesasks for a formal note of it. See on this question Winn v. Bull * ;Rossiter v. Miller 3 ; the principle is conveniently stated in the articleon Contract in Halsbury’s Laws of England, VII.t p. 722: “ Wherethere is a definite acceptance of an offer, the fact that it is accom-panied by a statement that the acceptor desires that the arrange-ment should be put into a more formal shape does not relieveeither party from his liability under the contract." It must betaken then that, at this point in the facts so far disclosed, therewas a concluded contract. This, brings us to the second stage ofthe story.
The second stage of the story' is a dishonest attempt on the partof the buyers to evade the most important term of the contract,namely, the price agreed upon. On February 19 their brokerbrought back the contract note with, the clause, fully added. Thebroker requested them to make out a return contract to be takento the seller, and he was told to come back the following day. Hedid so, and he was then told that the price of sugar had gone down,
14 DeQ.J.dt Sm. 638.* (1877) 7 Ch. D. 28.
(1878) 3 A. C. 1124 ; 8 Ch D. 848.
Noorhhai 4sCo. v.
( 1«* )
and he was asked to go' bade to the seller and try to arrange a lowerprice. At the ga*n« time the buyers wrote the following letter to*tiie seller:—
S.P. L. B. Karuppen Chetty, Esq..Fctruwy SO, 1920
Dbab Sm,—With reference to the contract purchasing from yon 1,500*bags Java sugar (February. March, and April shipments of 600 bags*monthly) at Bs. 84 per bag ex bond through broker. Candappa, we haveto inform you that although we made an advance of Bs. 7.500 byC. B. cheque dated February 16, 1023, towards the contract, we have-not yet received the contract signed by yon.
We would, therefore, ask you to send the contract duly signed fayyou without any further delay to avoid unnecessary stops being taken-on the matter.
T. A J. Noorbhai A Co.
P.S.—We are daily inquiring from broker re delay of the contract,,and in reply be says that he was told by your manager that you are-gone to estate and expected todfcy. Therefore we write you now this–letter.
There is no question that this letter is thoroughly dishonest. Itcontains an incidental suggestion that the price was not Bs. 87.S&per bag. but Bs. 84 per bag, and it pretends that no written contracthad ever been received. The statement in the postscript: ** Weare daily inquiring from broker re delay of the contract ” is a delib-erate falsehood. The seller replied immediately by a letter datedFebruary 21, saying that the contract had been duly signed andhanded over to the broker ; that a cheque for Bs. 7,500 had beenpaid in advance ; that it would be found on reference to the con-tract that the price was Bs. 87.50 per bag ; and that the writer wasexpecting a return contract duly signed.
It would appear that before this letter was received, the buyers,,in the hope of making their dishonest position more secure, hadconsulted a proctor and instructed that proctor to write a secondletter to the seller referring to the first, and demanding that thecontract should be returned forthwith. It will be observed thatit is not now stated that a contract had never been received, butthat the contract, which had been sent back for the insertion ofthe additional clause, had not been returned. This letter of theproctor was, apparently, sent on before the seller's letter of February21 had been communicated to him. The seller was not unnaturallyincensed by this second letter, and himself put the matter into thehands of his own proctor, who, on February 24, wrote a peremptoryletter to the buyers’ proctor repudiating the assertion that iheContract had never been received, and that the price agreed uponwas Bs. 84 per bag. He charged the buyers with attempting tocut down the price because the market had gone down, and formallyheld him to his bargain saying that: * * If the balance value is not paid
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and delivery taken of the goods by your clients as arranged, the samewill be sold at your clients’ risk, and the losses and damages, if any,will be recovered from your clients.” To this the buyers* solicitorreplied by a letter dated March 1. This letter does not challengethe statement twice repeated on behalf of the seller in the lettersof February 21 and February 24 that the contract price wasRs. 37.50 per bag, though it made no formal admission of this fact.It merely drew attention to the fact that sugar had gone high inprice, and that the day’s market price was Rs. 40 per bag. Thebuyers did in fact accept the situation, as is shown by the fact thatthey resold the sugar to a third parly by endorsing over the actualcontract note. I see no reason to question the hone fide of thistransaction.
The question arises, what was the effect of this correspondence 7The first suggestion made on behalf of the seller is that this corre-spondence shows that there had been no concluded contract at all,inasmuch as it disclosed that the parties had never been ad idemas to the price. I cannot see how this can possibly be maintained.It might, no doubt, have been maintained if the buyers* letter ofFebruary 20 had been honestly written, and if it appeared on investi-gation that there was any honest misunderstanding as to the price.But, on the facts above stated, this was not so. There is no misunder-standing. The parties had been ad idem. Reference to the priceas Rs. 34 was a mere subterfuge. It is, no doubt, a peculiar moralresults that the buyer should ultimately be in a better legal positionbecause his letter was a dishonest and not an h '.nest one, but whatwe have to determine is a legal issue. The second suggestion madeon this correspondence is that it shows that the negotiations hadnever reached finality. Reference is . made to the .doctrine ofHussey v. Home-Payne.1 I fail to see how that doctrine has any-thing to do with this case. That doctrine is that where a contractis concluded by correspondence, and a bargain seems to have beenconcluded at. a certain point, but the parties go on corresponding,and show by' their letters that neither understood that the bargainhad been finally concluded, but that negotiations are still continuing,then there was in fact no- concluded arrangement at the pointsupposed. I remember hearing Lord Esher once say of this proposi-tion: ” It is not an argument; it is an irresistible observation.**But this doctrine has nothing to do with the present case. Thefacts show that there was a concluded agreement, and that oneof the parties was dishonestly trying to get out of it. The thirdsuggestion made at. this stage is that the letter of February 20, inwhich the price was referred to as Rs. 34, was a repudiation of thecontract. I am not at all sure that it constituted any such repudi-ation. A mere dishonest incidental suggestion that one term in thecontract, however important that term, was not in. fact the actual
1 (1879) 4 A. C. $11.
( 166 )
1924. term agreed upon, is not itself a repudiation. If, when the matterawlii7xi_ *8 discussed, the. contention is insisted on, and if it is .stated eitherin express or implied terms that the persons raising it will not take
delivery, or will otherwise not fulfil his part of the contract unlessthe contract is modified in accordance with his contention, then,np doubt, there would be a repudiation, but this stage was neverreached. The other party at once in two letters denied the dishonestsuggestion, and held the buyers to his bargain on. the terms agreed.The buyers thereupon made no suggestion t of refusing to takedelivery, and no questionof repudiation arose.
But even if it be accented the suggestion that the letter .ofFebruary 20 constituted a repudiation of the contract, the result isthe same. The contract still subsists. A one-sided repudiationdoes not destroy it. Lord Esher in Johnstone v. Milling 1 states thelaw to be As follows:—
* When one party assumes to renounce the contract, that is, byanticipation refuses to perform it, he thereby, so far ashe is concerned, declares his intention then and there torescind the contract. Such a renunciation does not, ofcourse, amount to a rescission of the contract, becauseone party to a contract* cannot by himself rescind it,* butby wrongfully making such a renunciation of the cootracthe entitles the other party, if he pleases, to. agree' to tbecontract being put,an end to, subject to the retention byhim of his right to bring an action in respect of suchwrongful rescission. Hie other party may adopt suchrenunciation of the contract by so acting upon it as ineffect to declare that he too treats the contract as atan end, except for the purpose of bringing an actionupon it for tbe damages sustained by him in consequenceof such renunciation. He cannot, however, * himselfproceed with the contract on the footing that it still■ exists for other purposes, and also treat such renunciationas an immediate breach. If he adopts the renunciation,the contract is at an end, except for the purposes of theaction for such wrongful renunciation. If he does not*wish tp do sp. he must wait for the arrival of the time whenin the . ordinary course a cause of action on the contractwould arise.. He must elect which course'he will pursue.”
See also Frost v. Knight
44 The law with reference to a contract to be performed at a futuretime, where the party bound to performance announcesprior to the time his intention not. to perform it, may bethus stated. The promisee, if he pleases, may trqat thenotice of intention as imperative and await the time wheni (188$) HQ. B.D. 480.* (1872) L.R.7 JM lit.
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the contract is to be executed, and then hold the other party i924iresponsible for all the consequences of non-performance; pbut in that case he keeps the contract alive for the benefit OJ*of the other party as well as his own; he remains subjectto all his obligations and liabilities under it, and enablesCo. 0..
the other party not only to complete the contract, if soadvised, notwithstanding his previous repudiation of it,but also to take advantage of any supervening circum-stance which would justify him in declining to complete it."
It seems clear, therefore, on the law so stated, that, at this pointof the correspondence, there was subsisting a contract betweenthe parties. This situation is clinched by the fact that the sellercontinued to keep the buyers* deposit of Bs. 7,500.
We now come to the third and final stage of the story. Threeweeks after the letter of the buyers’ proctor, which pointed outthat the price of sugar was now decidedly above the originalcontract rate, the seller appears ttf have become affected by thatconsideration. The price of sugar had in the interval risen toBs. 67 per bag. He realized that if the contract was to be per-formed, he would in fact suffer a loss, and that if the contract couldbe considered as out of the way, he could make a profit by disposingof the goods to someone else. He accordingly instructed hisproctor on March 22 to write a letter of that date, in which .thepretence was brought forward that the buyers had refused to payfor the goods at Bs. 37.50, and had already refused to take delivery.
It notified the buyers that the seller was disposing of the goods " asstated in my letter of February 24.” This statement ignores the factthat in the letter referred to the sale was threatened only in the eventof the balance value not being paid and delivery taken. The letterfurther intimated that the seller ” will dispose of the goods by privatesale,” and returned the deposit of Bs. 7,500. To this letter the-buyers through their proctor replied on the same day, returning thedeposit, declaring that they, had already accepted the contract,which was delivered to them, and denying that they had everrefused to take .delivery. They also announced that, they hadresold the sugar at a higher rate.
Let us examine the position at this point. The sugar, as a matterof fact, had not yet arrived. It had been sold for delivery in Feb-ruary, March, and April, but, as a matter of fact, did not arrive tillApril. There was nothing to prevent the contract being carried out.
It was perfectly clear that the letter from the seller’s proctor ofMarch 22 was as dishonest as the buyers* letter of February 20.
He desired now himself to repudiate the contract, and he soughtan excuse for doing so in the false statement that the buyers hadrefused to take delivery at the contract rate. The question,therefore, at this point is this : The contract still subsisting, was theseller entitled to repudiate the contract, and to treat it as at an end
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IMi without the consent of the buyer ? To that the answer is explicit.
Assuming that the letter of February 20 constituted a repudiationqj. of the contract by the buyers, the seller definitely refused to acceptftoorbhai <fc that, repudiation, and by so doing, to quote the words of. CochbumOo. v. C.J. in Frost v. Knight (supra), " he kept the contract alive for thebenefit of the other party as well as his own. He remained subject toall his Own obligations and liabilities under it, and enables the otherparty to complete the contract, if so advised." See also the judg-ment of Collins M.B. in Michael v, Hart <ft Co.1 If the letter ofFebruary 20 .does not constitute a repudiation, still less is the sellerhimself entitled to repudiate the contract.
In the course of the argument reliance was placed upon a seriesof cases, on the basis of which it was contended that the letter ofFebruary 20 constituted a 'definite refusal to. take delivery; thatthat refusal had never been retracted; and that consequently itremained open to the seller to treat that as a continuous refusal,and to accept it as putting an'end to the contract at any time con-venient to himself. It was pointed out that the buyers did not atany time withdraw their-dishonest suggestion that the price of thesugar was Bs. 34; that they left the seller down to the last in a stateof perplexity as to whether, if the sugar were delivered, more thanBs. 34 would be paid; it was even suggested that the letter writtenon behalf of the seller on March 24, if construed according to itsterms, implied that the price of Bs. 37 was still insisted on ; that,in view of the letter of Februaiy 20, the seller was entitled to adefinite declaration as to whether Bs. 37.50 would be paid or not,and that, in the absence of such a declaration, he was entitled totreat the contract as at an end.
I will deal, first, with the facts, and then with the cases. It is,I think, undoubtedly, the case that the buyers and their proctor,with an over-astuteness that has come near to overreaching itself,studiously avoided putting in writing an undertaking to pay theprice actually agreed upon. But too much importance need not beattached to this manoeuvre. There- was a document in existencewhich stated ^he actual terms of the bargain,'and though the sellerand his proctor had not that document in their possession, theywere fully cognizant of its terms, as appears from their lettersof February 21 and February 24. When the buyers* proctor onMarch -22 said that his clients had already accepted the contract,they knew perfectly well .what was meant, and the affectation ofignorance in their letter of March 23 is entirely disingenuous. Thesuggested interpretation of the letter of March 24 as still embodyinga contention that the price was Bs. 34 is merely interpretationby the card. All that the letter means is that the contract referredto is the contract asked for in the letter of February 23, which sincethat letter had now been received. It is as plain as it can be that the
1 (1902) 1K. B. m.
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seller's proctor wrote bis letter o£ March 22, not because his clientwas in a condition of perplexity, but because the price of sugar hadgone up to Rs. 67 per bag.
The cases referred to are Withers v. Reynolds,■ Ripley v. M* Clure,2Byrne & Co. v. Van Tienhoven & Co.,3 Cort v. Ambergate RailwayCo.4 None of these cases seem to me in point. Withers t>. Reynolds(supra) simply decided that where a buyer had intimated that hewould not pay for goods on delivery in accordance with his contract,the seller was entitled to recover damages without previous tender ofthe goods.- Cort v. Ambergate Railway Co. (supra) was, in effect,a further affirmation of the same principle. Byrne V. Van Tienhovenft Co. (supra)—in the latter part of the judgment—contains a passage 'which bears upon the subject, but that passage does not apply tothe present Jacts. That passage is as follows:—
4 4 It was contended that by pressing the defendants to performtheir contract, the plaintiffs treated it as still subsisting, andcould not treat the defendants as having broken it ….
But, when the plaintiffs found that the defendants wereinflexible, and would not perform the contract at all, theyhad in my opinion, a right to treat it as at an end, and tobring an action for its breach. It would, indeed, be strangeif the plaintiffs by trying to persuade the„ defendants toperform their contract were to lose their right to sue forits non-performance when their patience was exhausted…. I have found no authority to show that a continued
refusal by the defendants to perform the contract cannotbe treated by the plaintiffs as a breach of it by the defen-dants.’*
The principal case, however, is Ripley v. M’Glure (supra)t whichwas a case in which a seller of a cargo of tea was entitled to sue fordamages for refusal to receive it without having actually tendered*tiie cargo. The material part of the decision in this case is thusformulated in Cort v. Ambergate Railway Co. (supra):-—
44 It was held that a refusal by-the defendant before the arrivalof the cargo to perform the contract was not of itselfnecessarily a breach of it, but that such refusal, .unretracted down* to and inclusive of the time when thedefendant was bound to ‘receive the cargo, was evidence ofa continuing refusal and a waiver of the condition precedentof delivery, so as to render the defendant liable for thebreach of contract.”
With regard to Ripley v. M’Glure (supra) my'observation is this:that it does not apply to the present state of facts,. * In this case therewas no continuous refusal down to the time (for the performance ofthe contract. Some time before the sugar had arrived at Colombo*
1 (UZl) 2B.& Ad. 882.
* (1849) 4 Exch. 345.
(1880) 5 G. P. D. 344.
(1851) 17 Q. B. 127.
( MO )JWH.
flooiMai drCo• vt
that is to say, by their letter of Maroh 22, the buyers had insistedthat they had already accepted the contract which was delivered tothem, and denied that they had ever refused to take delivery. Inview of that letter, it is impossible to say in this case that there hadbeen “ a continuous refusal down to and inclusive of the time whenthe buyers were bound to receive the cargo.*’ The buyers were notbound to quote the terms of the contract which they declared that'they had accepted. It was sufficient for them to identify it as thewritten oontraot which had been delivered to them. Moreover, thecase of Ripley v. M'GVure (supra) must surely be read as subject to thedoctrine developed in Frost v. Knight .(supra) and subsequent cases,namely, that, where one party to a contract refuses to accepta repudiation from the other, and holds that other to his bargain, hekeeps the contract alive for the benefit of both, and enables the otherparty to insist on the performance of the contract if he thinks fit*
So also the passage I have quoted from the judgment in Byrne kGo. v. Van Tienhoven A Co. (supra) must ata) be read subject to thedoctrine of Frost v. Knight (supra). It is a question of fact in anycase, whether a party to a contract elected to insist on the contractwhen he might have treated it as repudiated, and so kept it alive, orwhether he merely pressed the other party to perform his contract,but found him continuously inflexible down to the time for its*performance.
With regard to the suggestion that, owing to the uncertaintycreated in the mind' of the seller, the buyers were bound to state /explicitly whether they wpuld pay Bs. 37.50 or not, I have no doubtthat as between merchants this ought to have been done, but thereis no legal authority for such a proposition. On the contrary,Ripley v. M*Clure (supra) is ah express authority the other way.* Itis there stated * that if the Judge at the trial had laid downsuch a proposition as law, it would certainly 'not have beencorrect.„
The learned District Judge decided .this case on the view that ,there never had been at any tim.e a concluded contract. For thereasons I have given above, I must hold that he was wrong. Hepbserves: “Plaintiff cannot approbate the contract when it suitshim, and reprobate, it when it suits him.’1 Frost v. Knight (supra)shows that in the circumstances there considered this is exactly whathe can do. That is to say, that in spite of the faot that .he has soughtto repudiate the contract, yet, if he is held to it by the other party,he may afterwards insist on its performance. I am further ofopinion that nothing had happened to put an end to the contractwhich was, in fact, concluded.
I am therefore* of opinion that the "appeal should be allowed, withcosts, and as there has been no finding as to the damages, the caseshould go back for inquiry oh that point.
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This is an appeal from a decree dismissing the plaintiffs’ action.The plaintiffs claimed Bs: 17,250 damages for breach of contractand Bs. 7,500 refund of advance on the contract. The defendantbrought the sum of Bs. 7,500 into Court, and the contest was on thequestion of damages. The plaintiffs assented in their plaint that thedefendant in a writing dated February 16, 1923, agreed to deliver150 tons of sugar at Es. 37.50 per bag, or Es. 375 per ton, in threeshipments, in February, March, and April. The defendant in answersaid that the plaintiffs, when the market price had fallen, pretendedthat he had not received the writing of February 16, 1923, and haiasserted that the price agreed upon was Bs. 34 per bag, which wasthe price to be inserted in the contract yet to be signed. Thedefendant, therefore, set up in defence that there was no contract,and, in the alternative, that if there were a contract, the plaintiffshad repudiated it and were estopped from claiming the benefit of it.
At the trial the plaintiffs did not give evidence, but called vthebroker. The broker and the defendant were the. only witnessesin the case.
The defendant’s story was that the broker came to him onFebruary 16 to buy sugar, and that he had with him the plaintiffs’cheque for Bs. 7,500 (being the customary advance of Bs. 5 per bagon 1,500 bags).. After some negotiation as to price, the defendantsigned the document of February 16, 1923, D 1, and took the cheque.The document P 1 is a receipt for Bs. 7,500, and it sets out the termsupon which the advance was received. The document clearlystates- that the price agreed upon between the broker and thedefendant was at the rate of Bs. 37.50 per bag.
The broker’s story^at this point was that he took D 1 to the.managing proprietor of the plaintiffs’ firm (referred to in the evidenceand hereafter as the plaintiff) the same day, and asked him for the.“ return contract.” He was told to come the next day. The nextday the plaintiff sent the broker back to arrange a lower price as,the market price had fallen.
On February 20 the plaintiff wrote the letter D 2 to the defendant.In it he stated that the agreed price was Bs. 34 per bag, and saidrthat he had not received the contract signed by the defendant, [which he asked the defendant to send without further delay.(
The broker’s evidence was that the plaintiff had instructed himto buy at Bs. 37.50, and that he had taken the document D 1 to theplaintiff on February 16.
At this point in the case we are faced with two alternatives,either the broker’s evidence that he was the plaintiff’s agent dulyauthorized to buy at the rate of Bs. 37.50 and that he took the-document D 1 to the plaintiff on February 16 is false; or, the-plaintiff was thoroughly dishonest in writing the document D 2..If the broker is not to be relied upon, then the parties were not1
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ad idem as to the price, and there was no contract. But the plaintiffgave no evidence, he does not explain how he came to write theletter D 2; there is, therefore, no reason to disbelieve the broker,
1 and we are forced to the conclusion that the plaintiff was thoroughlydishonest when writing D 2. Gan he claim to be in a better position ?The learned Judge has held not,—that he cannot both ” approbateand reprobate ” the contract, and must be bound by his letter D 2, andhence there was'no contract.
The case does not, however, rest he?e, for the defendant, onFebruary 21, wrote to the plaintiff D 3 pointing out that the agreed- price was Rs.v 37.50 ; and the plaintiff, through his legal adviser,wrote on February 24, D 4, and demanded a signed contract from thedefendant as stated in the plaintiff’s letter of February 20 (i.e., acontract specifying the rate* at Rs. 34). The letter D 4 of February24 was, presumably, from the time which had elapsed, an answer to. the defendant’s letter D 3 of February 21, but the point is not clear.The defendant then wrote, through his legal adviser, the letter D 5of February 24, in which he stated that the allegation that the pricewas Rs. 34 per bag was “ false,”, and the defendant further saidin effect that he would hold the plaintiff to the contract at Rs. 37.50.
It was contended on behalf of the defendant that the evidenceproved a custom of the trade, and that for a complete contract therewas to be a writing signed by the plaintiff,o i.e., the “ returncontract ”• referred to by the broker. This, however, was not theposition taken tip by the defendant himself in the letter D 5.
Shortly after the defendant wrote the letter D 5, the market priceof sugar began to rise owing to a strike, and the plaintiff, throughhis legal adviser, wrote the letter D 6 on March 1, drawing thedefendant’s attention to the fact that the market price of sugar‘that day was Rs. 40 per bag. '.Why such a letter should have beenwritten is a matter of conjecture, as the plaintiff had given no evi-dence. It could not have been merely to inform the defendantof a fact of which, he, as a trader, must have been well aware.It was suggested on behalf of the plaintiff that the plaintiff wasjeering at th6 defendant’s election to hold him to the contract. Butif the letter was to have any legal or commercial effect, it mayhave been an invitation to the defendant to take advantage of theprice and sell the sugar, so that .there would be no occasion to claimdamages from the plaintiff. In any event, it is significant that theletter is silent as to whether the plaintiff accepted the position thatthe agreed price per bag was Rs, 87.50,. and its silence in this respectwas as misleading and dishonest as the written statement in D 2.
The next letter was from the defendant on March 22, D 8, returningthe advance Rs. .7,500, and saying that as the plaintiff refused to payat the price of Rs. 37.50 and take delivery, the defendant was dis-posing of the sugar, and that there would be no likelihood of lossor occasion to claim damages.;
( 178 )
This was promptly followed by a letter D 8 from the plaintiff1984.
-written the same day, saying that the plaintiff had already acceptedthe contract “ which was delivered to them " and had resold the.*
goods at a higher price. The letter concluded with a statementCfe.-**
that owing to strikes the price of sugar was that day Bs. 67 per bag. K<*?PP**
It appears from an endorsement on the document of February 16which was filed with the plaint that this sale by the plaintiff was•effected on March 14, but the fact has not been proved.
On March 28 the defendant replied by D 9 to the plaintiff's letter,
D 8, again asking what the contract was which was referred to ashaving been delivered, and saying—'
. “I am not sure whether even now you admit that your statementthat you agreed to pay Bs. 84 only is false and that youdid agree to pay Bs. 87.50.”
To this the plaintiff replied by D 10 through his lawyers—
’* With reference to your letter of the 23rd instant, I would refer.you to* my first letter (D 4) dated February 23 last in respect,of the above, and in terms of that your client has returnedto my client the contract referred to therein."
An examination of this letter shows that the plaintiff was againevasive. It (1) refers the defendant to the plaintiff’s letter D 4,which in tom refers the plaintiff's dishonest letter D 2 ; and (2)suggests that the defendant has returned the contract ” referred totherein." Now the contract referred to in D 2 was one at Bs. 34per bag. But the contract which the plaintiff had in his possessionwas the document D 1 of February 16, which had been handed to thebroker on February 16 and delivered by the broker to the plaintiffthe same day, setting out that the price was Bs. 37.50. In other-words, the letter D 10 leads back to both D 1 and D 2.
Throughout the correspondence the plaintiff has nowhere acceptedthe defendant’s contention that the^ agreed price was Bs. 37.50.
It is not until we come to the plaint in the present action that this.position is accepted.
The correspondence shows that the plaintiff had denied in D 2■a material term of the contract, and had met the defendant's effortsto find out whether he agreed that the price was Bs. 37.50 by-.silence and the incomprehensible letter of March 1. The marketwas fluctuating, and at any moment before delivery the price might'have fallen through the abatement of the cause of the high price,
:and this may have been the reason for the plaintiff^ silence.
It was urged on behalf of the plaintiff that the defendant’s letterD 5 was an election not to rescind the contract, but to keep it open,and that it could be kept open only for the benefit of both parties.
This argument, it seems to me, would have been tenable, had ..thecontract been voidable rather than void. But the conduct of the^plaintiff in denying the most, material term of the contract1 was,
( 174 )
Noorbhai d>Co. dfKarppenChetty
in effect, an assertion that the contract was void. He did notretract from that position even after fhe defendant had written thathe would hold him to the contract; but wrote the extraordinaryletter of March 1.
I find a difficulty in applying any of the cases arising on the rightsof parties on the refusal of one to peiform, or, on some slight disputeas to the terms of a contract, because the facts in this case aredeferent. In Withers v. Reynolds,1 where one party to the contract,under which straw was to be delivered by instalments, refused to payfor the loads .of* straw on delivery, it was held that the other partywas not obliged to go on delivering. In Ripley v. M’ Clure (supra),.where the defendant agreed to buy, on the arrival of a certain ship,one-third of a cargo of tea, it was held that the refusal of thedefendant, before the arrival of (the ship, to perform the contractwas not a breach of it ; and that a mere refusal to perform, declaredbeforehand, may be retracted, but if it remains down to the time ofthe performance unretracted, the other party to the contract was-entitled to treat as a breach, as it was a continuing refusal and awaiver of the condition precedent of delivery.' In Withers v. Reynolds(supra) and in Ripley v. M’Clure (supra) the decision rested on thelight of one party to rescind > voidable contract, and this, it seems to-me, distinguishes the present case from a^ll such cases. In the presentcase the position taken up by the plaintiff was such that, if bona fide,the contract was void, and not merely voidable. It was not a mererefusal to pay, but a denial deliberately and dishonestly made thatthe price was at the rate of Rs. 37.50 per bag, and the evidenceshows that this position was persisted in even after the defendant'sletter I) 5 was written. The denial of the price evidenced by D 2*and P 4 was never retracted, and the plaintiff's silence on the pointin D 6 led the defendant to believe that the plaintiff still deniedthat the price agreed upon was Rs. 37.50. The denial was anassertion that there was no consensus ad idem, and hence no contract.On the evidence in the case, it is clear that there, was a contract as-stated by the defendant,* and that the plaintiff's conduct wasj adishonest attempt to obtain a reduction in price (the reductionthe plaintiff wished to secure was considerable, it works, oiit at9. per cent., or Rs. 5,250 on the whole contract). The plaintiff'sattitude in D 2 and P 4 leads to the inference that the broker Badno authority to contract at Rs. 37.50, and it was a denial of factwhich struck at the very existence of the contract. It was not amere declaration of intention not to pay on delivery. It was amisrepresentation of fact which would leave the defendant freeto avoid a loss when opportunity occurred, and give rise to anestoppel under section 114. of the Evidence Ordinance.'
In my opinion the learned Judge rightly dismissed the actionon the ground that' the plaintiff was precluded by his conduct fromsetting up the claim.
( 175 )
Looking at the ease with reference to the principles of the law ofcontract* “ the true question, " according to Lord Coleridge C.J.in Freeth v. Burr, 1 “ is whether the acts and conduct of the* partyevince an intention no longer to be bound by the contract. Now,non-payment on the one hand, and non-delivery on the other,may amount to such an act, or may be evidence for a jury of an.intention wholly to abandon the contract and' set the other free."In the present case we find that the acts and conduct of the plaintiffevinced a dishonest intention not to be bound by the contract,the defendant was therefore free, and, in my opinion, the defendantwas not bound even after his letter D 5, unless the plaintiff haddefinitely accepted the contract thereafter, or there were circum-stances from which the defendant might reasonably conclude thatthe plaintiff had accepted. The plaintiff had an opportunity to■accept on receipt of the defendant’s letter D 5. He did not do-so, but wrote the ambiguous letter D 6. From such a letter andin favour of such a man as the plaintiff there could be no presump-tion in the plaintiff’s favour. The letter can be read onlyJ as apersistence in his conduct of misrepresenting the real contract, andtherefore amounted to a fresh repudiation of the contract. Thatthe plaintiff sold the goods to a third party has not been proved..That he communicated the fact of sale to the defendant, or that thedefendant knew that the plaintiff sold the goods on the basis of thereal contract, has not been established in the evidence, so there isno circumstance from which a presumption in favour of the plaintiffcan be drawn. I am of opinion, therefore, that the defendant wasfree to treat the contract as abandoned, which he did.
Noorbhai <&Go* v.KaruppmGhitty
I would accordingly dismiss the appeal, with costs.
The facts leading up to this litigation have been fully set out inthe judgments of the other members of this Court, and it is unneces-sary tp repeat them here.
At the first argument of this appeal before my Lord the Chief•Justice and myself, the dishonesty of the plaintiffs in the transactionunder consideration appeared to me so gross and palpable that Ifelt it impossible to say that the claim of the plaintiffs had notbeen rightly dismissed by the learned District Judge.
The second argument before a fuller Court has not convincedme that the opinion that I then formed was wrong ; on the otherhand, it has provided further grounds for supporting the view I firstentertained.
Two questions arise for decision : First, was there a bindingcontract entered into between the plaintiffs and the defendant ? and.second, even if there had been'such a contract, has there been a
1 (1S74) 9 C. P. 20&.
( 176 )
1024. repudiation of it by the plaintiffs and an acceptance of such repu-Jayewak* diation by the defendant, with the result that the contract originallyxteNB A.J. entered into between the parties has been rescinded ?
itoorbhaidj In nay humble opinion the first question must be answered in theK^uppen ne6a^ve> an<i the second in the affirmative. It may be that in lawChetty a valid contract of the sale was constituted as soon as the defendant.
. gave the writing D 1 and received the plaintiffs' cheque for Rs. 7,500sas an advance on the price, but it seems to me clear that the defend-ant did not consider the contract as concluded until he received*a writing from the plaintiffs agreeing to buy the sugar at Rs. 37.50.
In his evidence the defendant said:—" It is the custom to expectanother similar document, and I did not deliver the sugar becausethe broker did not bring back a contract from Noorbhai signed byNoorbhai."'.
“ Even after I made the endorsement I asked him (the broker)for the plaintiffs' document. I never got the document from theplaintiffs." And again.: *( It.is not the case that when I get anadvance I do not get a writing from the broker. I never dealwithout a written contract."
The broker, the plaintiffs' agent, himself says: "I asked the(first) plaintiff for a return contract to be given to the defendant, andhe asked me to come the next day. I went the next day and askedthe plaintiff for tbe return contract, and then he said the price isgone down and asked me to go back to the. Chetty (defendant) andtry to* arrange a lower price." And again: “ Some firms give awritten contract and some do not. Plaintiffs have been giving'a return contract to some people. Defendant wantedf a writtencontracts'
What the defendant got was, not a return contract agreeing to*buy at Rs. 37.50 a bag, but a letter (D 2) stating that the plaintiffshad agreed to buy the sugar at Rs. 34 .a bag. The broker in thistransaction was the agent of the plaintiffs.
He had agreed to pay at the rate of Rs. 37.50 a bag, but, on theother hand, the principal himself had intervened and had writtento say that the contract price was Rs. 34- a bag. This was aclear repudiation of the broker's agreement to buy at Rs. 37.50 abag, and according to the (first) plaintiff D '2 was written before hehad received D 1.
In these circumstances it would have been unwise and unsafefor the defendant to proceed upon the basis that the plaintiffs hadagreed to pay Rs. 37.50 a bag. The principal's distinct statementthat the price was Rs. 34 must xbe taken to override the agent'sstatement that the price was Rs. 37.50.
At that stage of the transaction could the defendant have insistedon the contract' being enforced on the basis that the price wasRs. 37.50? I think not. If the* defendant had carried out hispart of the agreement and insisted upon the payment of the price
( 177 )
at Rs. 87.50, the plaintiffs could easily have met his demand bysaying that the broker, their agent, had been labouring under apristake, and that they, the principals, had expressly stated thattiie price was Rs. 34 a bag. These facts show that there hadbeen no agreement between the parties as regards the price, one ofthe essential terms in a contract of'sale. It is impossible to drawa line at the stage at which the defendant gave D 1 and receivedthe cheque, but the subsequent letters relating to the transactionand the conduct of the plaintiffs must also be considered in decidingwhether a concluded contract had been entered into especially astiie defendant expected a .letter from the plaintiffs concerning the. sale.
In Hussey t>. Home-Payne (supra), the House of Lords laid downa principle which is applicable to contracts of all kinds, includingcontracts for the sale of goods, and therefore to the facts of this case.
There Earl Cairns, Lord Chancellor, said:—
“ Tou must take into consideration the whole of the corre-spondence which has passed. You must not at oneparticular time draw a line and say: * We will look at theletters up to this point and find in them a contract or not,but we will look at nothing beyond.’ In order fairly toestimate what was arranged and agreed, if anything wasagreed between the parties, you must look at the wholeof that which took place and passed between them.”
And Lord Selbome (p. 823) said:—
“ The observation has often been made that a'contract estab-lished by letters may sometimes bind parties who, whenthey wrote'those letters, did not imagine that they Werefilially settling the terms, of the agreement by which theywere to be bound; and it appears to me that no suchcontract ought to be held established even by letters whichwould otherwise be sufficient for the purpose, if it is clear, .upon the facts, that there were other conditions of theintended contract, beyond and besides thbse expressedin the letters, which were still in a state of negotiationonly, and without the settlement of which the parties hadno idea of concluding any agreement.”
In the present case the defendant did not consider the contract1as concluded until, he received a writing from the plaintiffs, andthe writing he received showed that the plaintiffs had not agreedto pay the price their agent had agreed to pay.
There was, therefore, in my opinion, no binding, contract enteredinto between the parties. Against this it is argued that at a. laterstage (vide D 5) the defendant treated the contract as binding, andthreatened to recover from the plaintiffs damages for breach ofcontract.
( 178 )
In many cases where parties have sued upon the basis of abinding contract, the Courts have held that there has been no validcontract between them. The fact that the defendant threatenedto recover from the plaintiffs damages for breach of contract cannotconstitute a contract if there was no contract in fact or in law.
There is no question of estoppel, and it is for .the Court to decide,on a consideration of all the facts, whether there was a contract ornot, independently of what the parties themselves might havethought. I have no doubt that if the defendant had instituted anaction for damages for breach of contract, the plaintiffs could havesuccessfully resisted bis claim. As I said, the first question mustbe answered in the negative.
Even assuming that there had been a valid contract, was thecontract repudiated by the plaintiffs, and was such repudiationaccepted by the defendant ? This question is involved in thesecond and fourth issues framed . at the trial. That * there was arepudiation is clear. The plaintiffs were not prepared to carry outone of the most important terms of the contract, that is, to pay theprice agreed upon.
The defendant accepted this repudiation by letter D 7. Butit is said that the repudiation came t<?o late, as by his letter D 5the defendant had treated the contract as subsisting after theplaintiffs’ repudiation of it. It is argued that as the defendantinstead of. accepting the repudiation had insisted on treating thecontract as binding, it /is hot. open to him to accept .the repudiationthereafter—even though the repudiation had remained unretracted.I am unable to accede to this contention. In my opinion, so longas the repudiation remained unretracted, it was'open to the otherparty to- accept it.
By D 2, which contains a string f>f calculated falsehoods deli-berately inserted to provide them with a defence if sued on thecontract, the plaintiffs stated that the contract was to buy at Bs. 84a bag. In D 8 the defendant pointed out that the price was Bs. 87.50a bag, and asked plaintiffs to pay the balance and takedelivery as arranged.
Hfe also asked the plaintiffs to send him a contract duly signedby them without further delay. The' plaintiffs* replied by D 4through their lawyer. The points at issue were ignored, but atten-tion was drawn to D 2, and a contract signed by the defendant wasrequested. Long before this date the contract D 1 signed by thedefendant had been in their hands. . The defendant replied by D 5,and stated that the statement in D 2 that the price per bag wasBs. 34 was false, and that D 1 had been handed before the chequefor Bs. 7,500 was received, and that the plaintiffs were attempt-ing to cut down the price as the market fell after the contract. Itconcluded with a threat, that unless the balance was paid and deli-very taken as arranged, the goods would be sold at the plaintiffs’
( 179 )
risk, an<f 'the losses and damage, if any, recovered* This lettercontained a serious charge against the plaintiffs, but they, in then-reply, D 6, ignored the charges, and merely stated that the price ofsugar had gone up tQ Rs. 40.
By D 7, writen some days later, the defendant informed theplaintiffs that owing to their refusal to pay at the rate of Rs. 37.50a bag and take delivery he was disposing of the goods. He alsoadded that he was returning the plaintiffs1 advance of Rs. 7,500in view of the fact that no damages were likely to result, owing tothe rise in the price of sugar.
This is the letter by which the defendant accepted the plaintiffs’repudiation of the contract. It is clear that up to that point the plain-tiffs had not withdrawn their repudiation, and confirmed theirbroker’s agreement to pay at the rate of Rs. 87.50 a bag.
No doubt in D 5 the defendant had treated the contract as acompleted contract, but the plaintiffs had not withdrawn their re-pudiation. There was a continuing breach of the contract onthe part of the plaintiffs up to the time of the acceptance of therepudiation by the defendant by D 7.
I may here quote what Lord Campbell said in Cort v. Amber-gate Railway Go,1: —
“The most recent case cited by the defendant's counsel wasRipley v. M* Gluts (supra). This case is very complicatedin its circumstances; but the second point decided in it isthe only one applicable to the question which we have toconsider. There being an executory contract, whereby the
plaintiff agreed to sell and the defendant-to buy, on arrival, .
certain goods, to be delivered at Belfast at a certain price,,payable on delivery, it was held that a refusal by thedefendant before the arrival oj^the cargo to perform the con-tract was not of itself necessarily a breach of it, butthat such refusal, unretracted down to and inclusive ofthe time when the defendant was bound to receive thecargo, was evidence of a continuing refusal and a waiverof the condition precedent of delivery, so as to render thedefendant liable for the breach of contract. But, in the-case at Bar, the refusal was never retracted, and'thereforethere was a continuing breach down to the time when thisaction was commenced.'1
This statement of the law must be read with the modificationsubsequently introduced by Frost v. Knifjki,2 that upon repudiationan action may be brought at once as on a breach of .contract.
At the date this letter D 7 was written the defendant could, inmy opinion, have treated the plaintiffs' refusal to pay Rs. 37.50 abag as a breach of the contract by them and sued for damages. If
1 (18$1) 17 Q. B. 127 (147-148) ; 117 English Report*, 1,237.
* (1872) L. R. 7 Exch. 111.
Noorbhai <fr>Co. o.Karuppen.Ghetty
C 180 ) –
he could have done so, there is no reason why the defendant couldnot have treated'the breach as a repudiation and accepted it assuch. There has been no waiver of the breach by the defendant.
In Bryne & Co. v. Leon Van Tienhoven 4 Co. (eu-pra) LordLindley (then Lindley J.) said at p. 850: —
" But when the plaintiffs found that the defendants wereinflexible, and would not perform the contract at all, theyhad, in my opinion, a.right to treat it as at an end, and tobring an action for its breach. It would, indeed, be strangeif the plaintiffs by trying to persuade the defendants toperform their contract were to lose their right to sue forits non-performance when their patience was exhausted.The authorities referred to by Mr. Benjamin (viz.,Avery v. Bowden1 and others of that class) show that asthe plaintiffs did not, when the defendants first refused toperform the contract, treat that refusel as a breach, theplaintiffs cannot now treat the contract as broken at thetime of such refusal. But I have found no authority toshow that a continued refusal by the defendants toperform the contract cannot be treated by the plaintiffsas a breach of it by the defendants. On the contrary,'Ripley v. M’Gluret (supra) and Court v. Ambergate, 4c.(supra) show that the continued refusal by the defendantsoperated as a continued waiver of a tender of bankers’acceptances and enable the plaintiffs to sustain thisaction. In the present instance it is not necessary todetermine exactly when the contract can be treated by theplaintiffs as broken by the defendants. It is sufficient to saythat whilst the plaintiffs were always ready and .willing toperform the contract on their part, the defendants wrong-fully and persistently refused to perform the contract ontheir part; and before action there was a breach by thedefendants not waived by the plaintiffs.”,
There is no authority which exactly covers this case, nor is thereany authority opposed to the view I have expressed; on the otherhand, the principles laid down in the cases I have referred to, andothers dealing with the repudiation or abandonment of contracts,appear to support it.
There is,, however, another view to be taken of the rights of theparties. The goods had been imported by the defendant .on c.i.f.terms, and he could have disposed of the goods by selling thedocuments. The repudiation of one of the agreed terms of thecontract—an essential term of it—by the plaintiffs amounted to ananticipatory breach of the contract.
M1855) 5 E. & B 714.
( 181 )
On February 24, when the defendant wrote D 5 to the plaintiffs,he was entitled to, sue for and recover damages consequent on such Jayhwab-breach (Oggv. Shuter*).pkwbAJ.
But tiie law casts on the seller in such a case the duty of mini- Noorbhaimjmng the damages resulting from a breach of contract to purchase(Roth v. Tayson * and Jamal v. Moola Dawood Sons <fc Co.*).
The 'defendant was therefore justified in selling the sugar when'the market was favourable, and giving the defaulting purchaser thebenefit of such sale. If the market had subsequently dropped, the•defendant might have been held responsible for not selling whena favourable opportunity offered itself. This is exactly what thedefendant has done in this case. By his sale of the goods whenthe market had risen, he has freed the plaintiffs from their liabilityto pay any damages. He has also returned to them the deposit,which he need not have done.
In my opinion, therefore, the judgment appealed from must standtand I agree with my brother Ennis that this appeal should bedismissed, with costs.
NOORBHAI & CO. v. KARUPPEN CHETTY