003-NLR-NLR-V-15-CARUPPEN-CHETTY-et-al-v.-HABIBHOY.pdf
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Present: Lascelles C.J. arid Middleton J.
CABUPPEN CHETTY et al. v. HABIBHOY.
277—D. C. Colombo, 31,911.
Damages—Breachofcontract—Availablemarket—" Sale of Goods Ordi-
nance, 1896, ” s. 49.
The defendant contracted to sell to plaintiffs certain cotton goods,which were manufactured bythe defendant only, at a specified
. price, 'for one year. Subsequently the defendantrefused to supply
the goods at the contract price, and offered to sell the goods at Rs. 6a bale over the contract price.
Plaintiffs claimed Rs.25 abaleasloss of profitson eachbale. The
District Judgeawardedtheplaintiffsdamages at Rs. 6 a bale, as
they could have bought the goods for Rs. 6 over the contract pricefrom the defendant.
Held, thatthe measure of damages was theestimated loss
directly andnaturallyresultinginthe ordinarycourseof events
fromthe seller’s breach of contract, as there was no available
market for the goods in question.
” It cannotbe saidth^tthereisan ‘ availablemarket’open to a
plaintiff for a particular class of goods, when the only source fromwhich they are procurable is the defaulting contractor himself.”
T
HE facts are fully set out in the judgment of the AdditionalDistrict Judge of Colombo (L. Maartensz, Esq.): —
By a contract dated August 5, 1910, the defendant's agent agreed, tosupply the plaintiffs with saries and dhooties for a term of one year at therate of 30 bales a month at the prices specified in the contract. Sariesand dhooties were supplied inaccordance with the contract in the
months of September and October.
Subsequently the defendant, who is a resident of Bombay, objectedto thesaries and dhooties beingsuppliedatthe pricesagreedon, and
instructed his agent not to supply the goods at the contract rates, butto offer them to the plaintiffs at the rate of 3 cents over and above thecontract price foreach sarieand dhootie. 200 saries anddhooties
made up a bale, and accordingly the' price of each bale was inoreased byRs. 6.The plaintiffs insisted onhaving thesaries anddhooties at the
contract price, which was refused, , and there was a failure by thedefendant to supply the bales due for the months of November andDecember.
The plaintiffs allege that they used to make a profit of Rs. 25 or Rs. 35per bale, and claim a sum of Rs. J,j)00 as damages incurred by them byreason of the defendant's failure to supply the bales due in the months ofNovember and December.
Thedefendant in his answer repudiated,theauthorityof hisagent to
enter into the contract, but theobjectionwasnot pressed atthe trial,
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and. the only issue tried was as to the amount of damages, if any, plaintiffswere entitled to. The saries and dhooties ' which the defendant's agentagreed to supply were . of a peculiar kind, manufactured only at theSpinning and Weaving Mills belonging, to the defendant at Wellawatta,and the plaintiffs were in the habit of taking tho whole supply manufac-tured and re-selling it at a profit.
The plaintiffs contend that the market price is the price at which they*could, havesold thesaries and dhooties. Thedefendant, on the other
hand, contends . that the market price was the price at which he waswilling to .sell the saries and dhooties, and that the plaintiffs are onlyentitled to thedifferencebetween thecontractprice and the market
price, and . admits the claim to the extent of Bs. 360. He also contends,that the plaintiffs might have purchased the saries and dhooties at theincreased price of^. Bs. 6 per bale regardless of the contract, therebymitigating the damages as far as possible, and without prejudicing hisright to recover thedifference in price underthe contract. Towhich
the plaintiffs replied that the price at which the contractor was willing tosell could not beregardedas themarketprice, asit was not shownthat
there were any other purchases or sales; that the plaintiffs had a mono-poly with respect to saries and dhooties supplied under the contract;and that the plaintiffs were entitled to special damages.
The case is a peculiar one, arising from the fact that the defendant'sconduct didnot' amount to a complete breach ofthe contract, butwas a
breach of the contract as regards the price only; and although I devoteda considerable – amount of time, to the searoh, I was unable to' find anycase in which there, was a similar breach of contract.
The only case X could find which is in any way similar is the case ofMcNeill v.Richards,1in which the plaintiff, atimber merchant,bought
of the defendantgrowingtimber,which,as thedefendant knew atthe
time the contract was made, the plaintiff intended re-selling in theordinary course of business. The plaintiff, however, had not at -thetimeany particular sub-contract inview. Thedefendant refused to
allowtheplaintiff to take awaythe timber.It was provedthatthe
market forgrowing timber was alimited one;that therewasno possi-bilityonthe seller's breach of procuring suchtimber inthevicinityof
the defendant's residence; . and that the plaintiff had no reasonableopportunity of supplyinghimselfwithsimilartimber elsewhere.He
was held entitled to recover the difference between the contract price,added to the ' expenses of cutting, removing, and making the timbermarketable, and the sum for which he might, have re-sold it in the wayof his trade, • such difference being his expected profit (Benjamin onSales 986).
The case of McNeill v. Richards, ' however, • differs from the presentcase in this very material respect, namely, that the defendant absolutelyrefused to deliver the timber. I am of opinion that if the defendant had,as in this'case, only claimed a higher price, he would not have been heldliable'forthe difference betweenthe contractprice andthesumfor
which the plaintiff might have re-sold the timber, but for the differencebetween the contract price and the price at which the defendant was-willing to allow the removal of the timber.
1911,
Carupjm
HtAMw
‘ (1899) 1 It. R. 79=
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i*li.
CatitppenOheOy v.Btbibkoy
Benjamin on Salet 987and 988 lays 'down thefollowingproposi-tions regarding the measure ofdamagesfor non delivery: —
Proposition! 8.—Where thegoodsat thetimewhenthe contract is
made haive been sub-sold,or are houghtforsub-sale, thefollowing
rules apply:—
A.—Where there is a market—
When there is a sub-sale (and whether the seller when he made thecontract did or did not know, of' it, or of the buyer's intentionto re-sell), it is the buyer's duty, as between himself and theseller, to buy the goods in the market to supply the sub-buyer,and the seller is liable(in the absence of special
damage) only for the difference in price as general damages.
B.—Where there is no market—
(1) When the seller at the time he made the contract knew that thegoods hadbeen sub-sold, orwereboughtfor sub-sale,then
on his failure to deliver—
The buyer may buythe best substitute procurable for
the goods, and if the sub-buyer accepts them, chargethe seller the difference in price as general damages; or
The buyer may recover as special damages the loss of his
actual oranticipated profits, together ,witha reason-ableindemnity againstthebuyer's liability tothe
sub-buyer, and costs reasonably incurred.
. I cannot accede to the plaintiffs' contention that the market value ofthe dhooties and series were the price at which they might have sold them.The market value of an article, in my opinion, means the average rulingprice of an article, and not the price at which the article might havebeen sold if it was available.
In orderto recover thedifference between the contractpriceandthe
anticipatedprofits, the plaintiffs must therefore provethattheyare
entitled to do so under rule B (1) *(6). But this rule requires (1) that' thearticle which the defendant failed to deliver ' should not be procurable atall, and (2)thatthelossof profits should be claimed as specialdamages
in thestatement ofclaim.Buie B(1)(b)therefore cannot apply, as
admittedlythe article wasprocurable, and the loss of profitswasnot
claimed as special damages in the statement of claim.
The claim must, I think, be governed by rule A. If the plaintiffs wereclaimingas ..damages the lossof profitonaccount of their having failed to
fulfil a sub-contract by reason of the defendant's default, they could nothave been able to resist the plea that they might have bought the goodsfrom ' thedefendant andfulfilled their sub-contract, andtherefore,only
entitled to recover the difference between the contract price and theprice at which they bought the goods from the defendant.
I seeno differencebetweena claimforlossof profits on a sub-contract
and a claimforlossofprofits on an anticipatedre-sale. Theplaintiffs
are, inmy opinion,therefore entitledonly tothe difference between the
contract priceandthepriceat which the defendantwas willing to supply
the goods. I
I give plaintiffsjudgmentfor Bs. 360, with costsin that class.In the
circumstances of this case I see no reason ~ to order them to pay the excesscosts incurred by the defendant by reason of the action being instituted
1M*.
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in a higher class. If the plaintiffs were entitled to the loss of profits, Ishould have given them judgment for the amount claimed, as the evidenceled by him as to the loss of profits was not. rebutted by the defendant.
Hie plaintiffs appealed.
Bawa (with him F. M. de Saram), for the plaintiffs, appellants.—The goods were manufactured by the defendant only, and could not^have been bought elsewhere. There was, therefore, no market wherethe plaintiffs could have bought the goods when the defendantrefused to sell the goods at the contract price. The refusal to sellthe goods at' the fixed price amounts to a breach of contract in toto,and not, as the District Judge says, to a breach of contract asregards the price only. The price was the essence of the contract.The measure of damages in a case like this is the loss of profits.See Sale of Goods Ordinance, section 49.
Counsel cited Benjamin on Sales (5 ed.) 985; Blackburn on Sales519 and 526; Encyclopedia of the Laws of England, vol. IV., p. 320.
Samarawickrame, for the defendant, respondent.—The defendantoffered to sell the goods to any one who would buy them for Rs. 6over the contract price. The plaintiffs could have bought the goodsfrom the defendant if they wanted. A party complaining of acontract should do all he can to mitigate the damages. Counselcited Nickoll and Knight u. Ashton Edridge & Co.;1 Stroud's-Judicial Dictionary, “ Market Price. ”
Cur. adv. vult.
September 21, 1911. Lasceu.es C.J.—
entirely concur in the judgment of my brother Middleton.The principles on which damages are ascertainable for non-deliveryof goods are clearly laid down in section 49 of “ The Sale of GoodsOrdinance, 1896. ”
The measure of damages is the estimated loss directly and natural-ly resulting in the ordinary course of events from the seller’s breachof contract, but where there is an available market for the goods in^question, the measure of damages is, primd facie, to be ascertained bythe difference between the contract price and the market or currentprice of the goods.
It is admitted that in the ordinary sense of the expression themwas no available market for the goods of this particular type, butit has been found that the defendant was, at the time in question,offering these goods to the public at a price higher by Rs. 6 a balethan the price at which the defendant had agreed to supply them tothe plaintiffs. The plaintiffs, it is argued, and the learned District•Judge has held, are not entitled to recover as damages more thanthe difference between the contract- price and the price at which theycould have bought the goods from the defendant.
i (1900) 2 Q. B. 298, at page 305.
539?
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1911.
LiASCBLLES
’C.J.
CaruppenOhettyv. .Babibhoij
cannot concur in this view. In the first place, it seems to me tohe inconsistent with the natural meaning of section 49 (8) of “ The Saleof Goods Ordinance, 1896. ” For it cannot be said that there is an“ available market ’’ ope.n to a plaintiff for a particular class of goods,when the only source from which they are procurable is the default-ing contractor himself. Then, it is surely unreasonable to expect amerchant to have recourse to a manufacturer with whom the mer-chant has ceased to deal on account of a breach of contract, andagainst whom he is proposing to institute an action. No authorityhas been cited for construing the section in a manner so differentfrom its natural meaning, and so opposed to the principles uponwhich business men carry on their affairs.
In the circumstances of the present case; I think that there was noavailable* market for this particular class of goods, and that thedamages directly and naturally resulting from the defendant’s breachof contract should be ascertained in the manner indicated by mybrother Middleton, with whose ’ judgment I entirely concur.
Middleton J.—
This was an action for the recovery of Bs. 1,500 damages for thenon-delivery of certain goods contracted to be sold to the plaintiffsunder an agreement marked A in the case and dated August 24, 1910.
The claim was limited to damages for the non-delivery of twoparcels of 30 bales of goods each for the months of November andDecember, 1910.
The answer was that the goods could have been purchased inColombo for a sum not exceeding the contract price by Bs. 360, andit. admitted liability to that amount.
The District Judge held that inasmuch as the defendant hadoffered to sell the goods to any buyer at a price amounting to Bs. 6per bale exceeding the contract price, that there was an availablemarket open to the plaintiffs in which they might have bought atthat price, and that the measure of damages was therefore only thedifference between the contract price and such- market price, undersection 49 (3) of the Sale of Goods Ordinance.
In the absence of distinct authority, I do not think the learnedJudge was right in holding that the defendant himself consti-tuted an available market within the meaning of the Sale of GoodsOrdinance.
It is a well-known element in litigation that parties disputing asto their rights are wont and are expected to deal with each other atarm’s length, and the Courts look to this attitude as distinguishinga bona fide dispute as to legal rights. The contrary position mightwell give rise to doubts as to the possibility of the waiver of rightsand agreement between the parties. I do not think, therefore, thatin view of the complications likely to occur from holding that a
( )contractor violating his contract must be considered in the light of" available market ” in such a case as this, that we ought to do sowithout- clear and distinct authority to that effect. No such authoritycould be produced by the learned counsel for the respondent.
The case here, in'my opinion, is governed by section 49 (2) of our“ Sale of Goods Ordinance, 1896, ” which is borrowed from theEnglish Act of 1898, embodying all the decisions of the EnglishCourts on such questions up to its passage by the Legislature.
By the defendant’s action in refusing to deliver the goods in*question, the plaintiffs lost their profits on the re-sales to their retaiLcustomers. This is the measure of damages resulting in the ordinarycourse of events from the defendant’s breach of contract. This loss-has been estimated by the plaintiffs’ evidence at Rs. 25 at the least per*bale, and there is no evidence to the contrary given for the defendant.
In my opinion, therefore, the judgment of the District Judge must'be varied, and judgment entered for Rs. 1,500 with interest ae-claimed in the plaint, and costs in the class in which the action is*included. The plaintiffs will also have Hie costs of the appeal.
101f.
MtDDLBitoa
J.*
Garuppm
GkeUyv.
Habibho&
Appeal allowed-