021-NLR-NLR-V-37-ASSOCIATED-v.-NEWSPAPERS-OF-CEYLON-LTD.-v.-HENDRICK.pdf
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Associated Newspapers of Ceylon Ltd. v. Hendrick
1935Present: Macdonell C.J. and Poyser J.
ASSOCIATED NEWSPAPERS OF CEYLON LTD. v. HENDRICK.
314—D. C. Colombo, 46,067.
Liquidated damages—Contract for inserting advertisements—Agreement to payhigher rate if the space contracted for is not taken—Liquidated damagesand not a'penalty.
The plaintiff company, who are newspaper proprietors, contractedwith the defendant to insert advertisements on his account in theirnewspapers at a special rate, it being agreed that the defendant wouldinsert not less than a stated number of column inches of advertisingmatter during the period of agreement.
It was also provided in the agreement that “ when the space or numberof insertions under the contract is less than originally agreed upon thehigher rate for the lesser space must be paid ” The defendant sent inadvertisements during the period and paid for them at the specialcontract rate.
It was found at the end of the period, that the defendant had insertedmuch less than the space contracted for.
Held (in an action by the plaintiffs to recover the difference betweenthe contract rate and the. higher rate), that the provision for the paymentof a higher rate must be regarded as an agreement to pay liquidateddamages and not as a penalty.
PPEAL from a judgment of the District Judge of Colombo.
N. Nadarajah (with him H. N. G. Fernando), for defendant, appellant.
V. Perera (with him J. R. Jayewardene), for plaintiff, respondent.
Cvr- adv. wilt.
MACDONELL. C.J.—Associated Newspapers of Ceylon Ltd. v. Hendrick. 105
January 29, 1935. Macdonell C.J.—
In this case the plaintiffs are the proprietors of three newspapers,and they made with the defendant on February 5, 1929, three writtencontracts as to the insertion in each of their papers of advertisementsby the defendant in the following terms: —
“ Subject to your confirmation and to the tariff and terms andconditions overleaf, I have pleasure in requesting you to insert myadvertisements as per under-noted contract.
" Space ..1000 column inches minimum.
“ Price .. Re. 1 per column inch.
“ Period .. One year.
“ Position.. Unspecified.
“ Insertions as required, provided space is evenly distributed over thecontract period.
“ To commence in February 1929.
“ Remarks. .Deposit of Rs. 100 in advance as security for prompt pay-ment of accounts and for due fulfilment of terms and conditions.”
The two other contracts were identical in terms save that in one of themthe contract rate per column inch was 75 cents instead of Re. 1. Eachof the three written contracts is stated to be subject “ to the tariff andterms and conditions overleaf ”. The tariff overleaf specifies what theparticular paper charges per 100 column inches as its ordinary pricefor advertisements where there is no special contract as there was in thepresent case. The prices are on a sliding scale. Thus for one of thesethree newspapers the tariff names Rs. 4 per column inch if the advertisertakes, less than a 100 column inches, whereas if he takes between250 and 500 he gets each inch of advertisement at Re. 1.87J. But thetariff is quite definite, and if the advertiser knows what space his adver-tisements will take, he knows from the tariff exactly what he will haveto pay for them. The conditions referred to in the contract, also printedoverleaf, contain the following: No. 8, “ All the space contracted formust be used within the specified period, and excess space, whetherused during or after the specified period, must be paid for at the contractrate. When the space or the number of insertions under the contractis, less than originally agreed upon, the higher rate for the lesser spacemust be paid ”, the ‘ higher rate ’ clearly meaning the tariff rate asset out above.
It was argued that under such a contract the advertiser need not sendin any advertisements at all, but this argument fails to give effect to thephrase ‘ 1,000 column inches minimum. ’ or to the requirement of a depositof Rs. 100; if the advertiser sent in no advertisements at all, he wouldat any rate forfeit the Rs. 100 deposit.
The three contracts therefore said in effect this. If you the advertiserwill supply advertisements during the coming twelve months filling thespace of a 1,000 column inches in the particular newspaper for advertise-ments in which you are contracting, then you can have that service at
106 MACDONELL C.J.—Associated Newspapers of Ceylon Ltd. v. Hendrick.
the contract rate, but if during those twelve months you supply advertise-ments to that newspaper totalling less than a 1,000 column inches, youmust pay for those advertisements at the ordinary tariff rate set outat the back of the contract.
The defendant sent in certain advertisements and made certain pay-ments under' these contracts during the twelve months following February5, 1929, the date when they were entered into, but at the end of thatyear he had supplied advertisements totalling very much less than the1,000 column inches for each paper which he had undertaken by hiscontract to supply. Thus to one paper he had supplied advertisementstotalling only 250 inches, to another 280 inches, and to the third of them288. As each of these totals fell very far short of the 1,000 columninches that he had undertaken to supply to each of these papers, theplaintiffs while crediting him under each contract with the sums thatthey had received from him from time to time in payment for advertise-ments sent by him for insertion in the newspaper named in that contract,debited him with the difference between the contract price and theordinary tariff, for advertising space in column inches which he hadactually taken, and sued him for that difference. The learned DistrictJudge gave judgment for the plaintiffs as prayed, and it is from thatjudgment that the present appeal is brought.
Two points were raised to us in argument. It was urged—and I hopeI understood the .argument put to us—that as the plaintiffs had receivedmonies from time to time from the defendant in payment of the adver-tisements actually sent in by him and actually published in each of thethree papers, these monies were payments in full to the plaintiffs forsuch advertisements, that their acknowledgment of them was final aseffecting the particular advertisement or advertisements covered by thosepayments at contract rates, and that the plaintiffs could not now saythat there was still due to them something more for these advertisementsinserted and paid for. The fallacy of this argument seems to me soobvious that I hope I have grasped it properly. The payments made-from time to time by the defendant were payments under his contractsof February 5, 1929, and could not be payments under anything else;indeed it was not suggested that they were. Then each one of thosepayments was conditioned by the contract under which it was madeand was subject to its terms. For the defendant to say, I am entitledto pay at the lower rates which the contract gave me and at the sametime to break the contract with impunity, retaining the benefits it confersbut claiming to be free from the obligations it imposes, would be a verj ’good instance of approbation and reprobation in regard to the sameagreement. If one wish to put it in common parlance, it is an argument* heads I win, tails you lose ’. I do not think that this objection can besustained.
It was also urged to us that this claim of the plaintiffs to charge theordinary tariff rates for the advertisements which the defendant hadsupplied because the amount of space taken by him for advertisementswas less than the amount which he had contracted to supply, was in■effect enforcing a penalty, and it was urged to us that this case was
MACDONELL CJ.—Associated Newspapers of Ceylon Ltd. v. Hendrick. 10T
governed, by Wijewardene v. Noorbhai '. That also was an action broughtby newspapers on a contract very similar to the present one. They hadagreed with a would-be advertiser that if he had supplied so manyadvertisements within a certain time they would charge him at a lowerrate, but that if within that time he had supplied a similar number ofadvertisements occupying a smaller space in their columns they hadthe right to charge for the advertisements actually inserted at a higherrate. In that case the charge made by the plaintiff newspaper was heldto be a penalty and the case was sent back to the Court below for the actualdamage to be assessed.
I think however that that case can easily be distinguished on the facts.There the contract stated that if advertisements totalling a smallerspace were sent in by the defendant within the time given him, then thenewspaper was to be entitled to charge for all advertisements publishedunder the contract “ at the casual rates, which should not exceed Rs. 2.50per column inch ”. In other words the amount which the plaintiffnewspaper could charge under that contract was not a fixed andascertained sum. It was left to it to charge what it pleased, provided thesum charged did not exceed Rs. 2.50 per column inch. The facts ofthe present case are different. The contracts which the defendant signedmake perfectly clear what plaintiffs’ tariff was, a definite sum, and intheir plaint they have claimed under each of the three contracts thatdefinite sum, no more no less. The event in which the tariff price wouldbecome payable 'in place of the contract one, was a single event, thefailure to take a 1,000 column inches of advertising space. Then therule applicable will be found in Law v. Local Board of Redditch % whereLord Esher M.R. says, as follows: —
“ One rule which appears to be recognised in the cases as a canonof construction with regard to agreements of this kind is that,where the parties to a contract have agreed that, in case of oneof the parties doing or omitting to do some one thing, he shallpay a specific sum to the other as damages, as a general rulesuch sum is to be regarded by the Court as liquidated damages andnot a penalty . …”
The present is a case where one of the parties has omitted to do, notseveral things or one of several things (Dunlop &c. Co. v. New Garage &c.Co.s), but some one thing, namely, to supply advertisements to the amountof a 1,000 column inches within one year, and the contract says that ifhe omits to do that some one thing he shall pay a specific sum to theother as damages. This case then seems to be one where the parties to thecontract have definitely assessed beforehand the damage which shall bepayable if the contract is broken, and there is only one way in whichit can be broken. The sum named then is liquidated damages and not apenalty. This rule however would not apply, if it could be shown thatthe sum agreed on was ‘ingens’—see Pless Pol v. de Soysa ‘ and theRoman-Dutch authorities there cited—but it is difficult to see that thesum fixed in the present case could be called ‘ ingens ’. It is the ordinary
* 28 N. L. R. 430.3 83 L. J. K. B. 1574.
» {1892) 1 Q. B. 127, at 130.* 12 N. L. R. 45.
108 POYSER, J.—Associated Newspapers of Ceylon Ltd. v. Hendrick.
tariff rate which the ordinary customer pays if he has not obtained aspecial contract, and if , it be argued that the tariff rate is nearly 90 percent, more than the contract rate, still this fact was perfectly clear toboth parties when they made the contract. The plaintiffs said in effect,that they would remit nearly half the tariff rate if the defendant wouldsupply a 1,000 column inches; if he did not, he would have to pay theordinary rate. The agreement is so clear that defendant could notpossibly have been misled, and this is a strong argument against the summade payable being ‘ ingens ’.
It was pointed out in argument that if the defendant supplied 990column inches of advertisements but failed to supply the remaining 10,he would then, on the plaintiffs’ argument, have to pay for each of those990 column inches at the rate of Re. 1.87&, which would mean that he wouldbe paying far in excess of the Rs. 1,000 payable by him under thecontract if he did supply the full 1,000 column inches. We were askedto say that this was a reductio ad absurdum of the plaintiffs’ case. Thedefendant can avoid these consequences without any cost to himselfby simply giving an order to the particular newspaper to insert 10 morecolumn inches of advertisement—a repetition of the advertisementswhich he had already sent in—to enable him to obtain the full benefit ofthe contract rate reserved thereunder.
For the foregoing reasons I am of opinion that this appealmust be dismissed with costs.
Foyser J.—
The case of Wijewardene v. Noorbhai1 was decided on the followingprinciples:—“What the criterion of whether a sum, be it called penaltyor damages, is truly liquidated damages, and as such not to be interferedwith by the Court, ox is truly a penalty which covers the damage ifproved, but does not assess it, is to be found in whether the sum stipu-lated for can or cannot be regarded as a ‘ genuine pre-estimate of thecreditor’s probable or possible interest in the due performance of theprincipal obligation ’….” and “ it is impossible to lay down anyabstract rule as to what it may or may not be extravagant or uncon-scionable to insist upon, without reference to the particular facts andcircumstances which are established in the individual case ” and(Clydebank Engineering and Shipping Company v. Don Jose RamosYzquierdo Y Castaneda
“ You are to consider whether it is extravagant, exorbitant, orunconscionable at the time when the stipulation is made, that is to say,in regard to any possible amount of damages which may be conceivedto have been within the contemplation of the parties when they madethe contract. ”(Webster v. Bosanquet “.)
Dalton J., in applying these principles, held that upon the facts theplaintiff’s claim was extravagant and unreasonable, having regard to thepossible damages which were in the contemplation of the parties, when
« us ,. I,. R. *30.2 (1905) .4. C. 6.
(1912) A. C. 39* and 15 N. L. R. 120.
KOCH J.—Piyaratne Unanse v. Nandina.
109
they made the contract and, further, that there was no genuine interestin the performance of the contract.
In this case the facts are very different, and there was, in my opinion,a genuine pre-estimate of the plaintiff’s probable or possible interest inthe due performance of the contract and that being so the plaintiff’sclaim was for liquidated damages which he is entitled to recover.
I agree that the appeal should be dismissed with costs.
Appeal dismissed.