Agency~Discretion of agent-Extention of credit

Contract-Formation-Necessity of notifying of acceptance-Effect of notification
sent to sellers agent

Damages-Sale of goods-Measure of damages

The appellant, a Khartoum agent of an English firm, received from
the respondents, an order for goods to be supplied by the English firm.
The order form stated that it was subject to approval by the sellers and
gave the respondents six months credit. When the goods 'arrived in
Khartoum the appellant refused to deliver them to the respondents except
against cash on the ground that their financial position was not sound. .

Held: (i) That the appellant was 'not the agent of the respondents.
(ti) That no contract between the respondents and the English firm
was -":concluded until the invoices were posted to the respondents. Mere
confirmation or notification of approval to the appellant cannot be con-
sidered communication of acceptance to the respondents.

(iii) That the appellant in refusing credit was merely carrying out
the instructions of his principal and reasonably exercising his discretion.

Dictum: "The measure of damages is not to be found by adding any
percentage to. the prime cost, but according to the well known rule in
the case of Hadley v. Baxendale, viz., by ascertaining the excess of the
market price of the goods at the time of breach over the contract price."

Hadley v. Baxendale ( 1854) 9 Ex. 341, approved.

Appeal

The facts of this case as they appear from the case records are
as follows:

The appellant was a Khartoum merchant and a commission agent
for a number of foreign firms marketing goods in the Sudan. One
of these foreign firms was Kannreuther & Co., of Birmingham,
England.

Early in 1910, the respondents approached the appellant and
put an order with him for some' goods to be supplied by Kannreuthe

·Court Wasey Sterry; Acting J.C.and Co. The form on which the· goods were ordered stated that
. the order was "subject to approval and confirmation by seller,"
and gave the respondents six months credit. The appellant forwarded
the respondents' order to Kannreuther and Co. On April 26, 1910,
he received a letter from Kannreuther and Co. telling him that two
of the respondents' bills payable to the company on February 28,
1-910 ,(apparently in respect of some earlier transactions), have
been returned unpaid by the bank. The letter then continued:

"Please obtain payment of these two bills immediately with
all expenses and overdue interest, also please make quite
sure of their position before delivering to them the goods for
which we are handing you the invoice today:

Value £.51.17.4."

On receipt of this letter the appellant started to investigate the
fl. ancial standing of the respondents, and very quickly came to, the
conclusion that it was not sound. He therefore decided not to
deliyer the goods to them except against. cash. The respondents
refused to pay in. cash and brought an action against the appellant
for breach of contract and for wrongfully and unjustifiably detaining
goods in respect of which they were granted credit. They alleged,
inter alia, that the appellant was acting as a commission agent both
for themselves and the sellers. That there was a binding contract
between them and the appellant under which he agreed to get the
goods from Kannreuther & Co. and give them to the respondents
on six months credit.

Morgan, J., Kartoum civil judge, Without dealing with the various
legal questions posed in any detail, came to the conclusion that the
appellant was the agent of both· seller and buyer (respondents)
and that although he was justified in refusing credit to the respondents,
he should have given them the alternative of producing guarantor for
the bills. He assessed the damages recoverable at 10% of the value
of the goods.

Against this decision the appellant appealed.

Advocate: Mr. George Frangoudis ... for respondents.
December 9, 1911. Wasey Sterry, Acting J .C. : This case

forms an admirable illustration of the fact that written pleadings
have their uses. Had it been tried on pleadings, the issues and the
evidence which it would be necessary to adduce to prove or disprove
them must have emerged more clearly from the clouds which sur- round them. As it is, a considerable burden is put on the COurt,
which more properly belongs to counsel, and a considerable .amount
of evidence which was very relevant to the issue was either not
adduced at all, or adduced' in such a way that its importance was

        obscured.                                                                                                .

The primary question however is-what was the contract between
the parties? This contract has to be extracted from what appears
on the order forms used by the appellant, and such mercantile

. custom in this country as may be supposed to have been within
the contemplation of the parties. The first thing is that the appellant
does not purport to act as anything but an agent to receive orders; .'
the orders are made out to a principal who is disclosed, and they are
"subject to approval and confirmation by the sellers."

. Now it appears to me that to make a complete contract of
sale the shipper' must not only approve and confirm but must
communicate that approval and confirmation to the buyers. I do
not consider that a letter stating approval and confirmation in so /
many words need be sent, to the buyers, it would certainly be suf-
ficient to send them the invoices or the shipping documents. of. the
executed order. But this was not the practice. ' The' invoices/ and,
shipping documents were sent to the appellant, . and in some cases
he appears to have been instructed by his principals that he Wall
not to deliver the goods except against cash, even though six 'months

          credit was entered on the order form.

I do not see how the -respondents can claim that the contract '
was completed until at all events the invoices were posted to the'
'agent. Up till then there was no notification of the shippers accept-
ance, and until then the term of credit could not be ascertained.
But in my opinion the fact that the appellant had, as agent of the
shipper, received the invoices was no notification to the respondents
of the acceptance, unless he was acting also as their agent. The' civil
judge has found that the 'appellant was, the agent of both parties.
I cannot agree he was the agent of the respondents; it is a position
he entirely repudiates and I see no evidence that he ever assumed
it. On the contrary, he has, it appeafs to me, acted' entirely on
behalf of the shippers. ,Now what was the object 01,sending the invoices and shipping
documents to the appellant? N0' doubt one reason might be to enable
him to know the amount ot.. -commissioa which, he had earned, but I cannot resist the conclusion that another reason was that before
parting with the goods he might satisfy himself as to the payment
of this price. This is the effect of the evidence of Mr. John
Evangalides, a commission agent, who says, "As owner or agent
I should be entitled to exercise my discretion in the matter. In the
case of our own firm goods, despatched under bills of lading which

_ we hold, we do not distribute till we are satisfied as to credit.
We claim this as . our right." I draw therefore the inference that
the custom is for the shipper to accept orders subject to the dis-
cretion of the agent in the Sudan to demand cash if be considers
that the position of the buyers at the time the goods arrive does
not warrant him in giving them credit.

It may be that the discretion reposed in the agent must be
exercised fairly, but when one finds, as in this case, that bills of
the buyers had been protested, that they had on several occasions
refused to take delivery of goods on apparently quite insufficient
gr<;,unds, that they ,were alleged to be selling goods at under values,
and putting shipping documents with other merchants at prices which
could hardly have been remunerative, it seems to me a perfectly fair
exercise of discretion to refuse credit.

As I understand the judgement of the civil judge, he agrees .
that it was fair and reasonable of the appellant to refuse credit
without some security, but he suggests that the appellant should have
given the respondents the option of producing a guarantor of their
bills. To that it seems to me a sufficient answer to say that the
respondents never asked to' be allowed to produce such a guarantor
and even if they had, to say' that they have a right to such an
option is to introduce a fresh term into the contract, not contemplated
by either party.

Taking the view I do, it is not necessary to discuss the question
of damages, but I think that I ought to say that in any case their
measure is not to be found by adding any percentage to the prime
cost, but according to the well known rule in the case of Hadley v.
Baxendale,' viz., by ascertaining the excess of the market price of
the goods at the time of breach over the contract price. As to
that no evidence appears to have been tendered.

1 (1854) L.R. 9 Ex. 341.