(HIGH COURT)

DAOUD ADS AND SONS v. SAM DWEK

HC-CS-207-1958

 Principles

·  Sale of Goods—Frustration_Seller not supplied with goods he contracted to sell— Not frustration

·  Sale of Goods—Dam ages livery of goods—Foreseeable loss

In order for a contract to be frustrated, the frustrating event must be outside the contemplation of the panics. In a contract for sale of goods, the fact that ‘the seller could not obtain supplies of the necessary goods from a third party was not a frustrating event, because seller could have contacted his suppliers to make sure of the availability of the goods before entering into the contract of sale.

The measure of damages for non-delivery of goods under a contract for sale of goods is the “ estimated loss directly’ and naturally resulting, in the ordinary course of events, from the breach.” When there is an available market for the goods this is prima facie to be determined by the difference between the contract price and the market price or current price,
Obirer dictum : It might have been a frustrating event if impossibility of performance were due to Government prohibition of the export of the goods subsequent to the contract,

Judgment

T. Cotran D.J. January 27, 1960:—On March 12, 1957, the defendants agreed to purchase from the plaintiffs the following goods: twenty-five bales voile, ten bales “dabalan 22,” fifty bales “ dabalan Sayaf.”

This case only concerns the last two mentioned items, viz., the ten bales of “dabalan 22 “ and the fifty bales of “dabalan Savaf.” The plaintiffs are a firm in Cairo, Egypt, and the defendants are a firm in Khartoum. The negotiations between the two parties took place mostly over the telephone. These negotiations culminated in the plaintiffs’ telegram to the defendants which reads as follows: “We confirm your purchase twenty-five bales voile, fifty Sayaf, ten ‘dabalan 22 pieces respectively forty-one. sixty-eight and twenty.one half plus 3 percent. milliems yard cost freight Shellal or Port Sudan Contracts following.”

There was no agreement as to the date of delivery in Khartoum, but obviously it must be as soon as possible after delivery from the mills which were in March—April 1957. The plaintiffs duly’ delivered to the defendants the “dabalan 22” on or about May 1957. The defendants subscribed to plaintiffs a bill in payment of these goods for the sum of £S.68I. The bill is dated May 27, 1957 The date of maturity was August 15, 1957. The defendants on their own admission failed to honour the bill and it was duly protested. This is the subject of the plaintiffs’ claim against defendants. It is admitted by defendants.

The plaintiffs on their own admission completely- failed to deliver the fifty bales of “dabalan Sayaf” to the defendants. The defendants counter claim for damages for breach of contract which damages amounted to £S.787.500m/ms, being the profit which they would have made (calculated at 15 percent. of the c.i.f. price) had the plaintiffs supplied the goods as stipulated.

The plaintiffs’ answer to the counterclaim is that they contracted with the defendants on a condition, that the goods would be delivered “if available and accepted by the factory.” This alleged condition is nowhere to be found in the telegram. But it is printed in the document. Exhibit , however, was not part and parcel of the negotiations. This document is the memorandum which ‘the plaintiffs themselves have prepared for their own convenience. It may be that defendants subsequently received a copy of it. But defendants deny the allegation that their negotiations were subject to the condition alleged, and the defendants’ conduct throughout is consistent with their not having waived their rights. For example, in a letter written by the defendants to the plaintiffs on April 8, 1957 the defendants say: “You will appreciate therefore that we cannot possibly accept to take delivery of the goods which lose and forgo our rights in the case of other goods which have to be supplied by you as per the terms of our contract.” By September 1957 the defendants (who were still agreeable to receive the goods) threatened plaintiffs with legal action for damages. The plaintiffs themselves never once in their correspondence referred to the printed condition on Exhibit , “ . . if available and confirmed by the factory,” a condition which, as I have already explained, was not communicated to the defendants. The plaintiffs themselves, as is clear from para. 1 of p. 2 of Exhibit 12, have regarded themselves as in breach of their agreement with the defendants.

I shall now examine the reasons why the plaintiffs were unable to deliver the goods and see if there are any legal grounds that exonerate them.

The plaintiffs were the clients of a certain firm called Messrs. Beida Dyers, who were the manufacturers of the “dabalan Sayaf.” The plaintiffs having committed themselves with the defendants then put an order to Messrs. Beida Dyers to supply the defendants direct with this order. This order was made on the same day, i.e., March 12, 1957, as is manifestly clear from the indent. The indent was followed by a telegram the next day (March 13, 1957) to the manufacturers (Messrs. Beida Dyers. Beida Dyers, however, replied by cable on the same day (March 13, 1957) refusing the plaintiffs’ order and confirmed that by two letters dated March 17, 1957, and March 20, 1957, respectively. On March 29, 1957, plaintiffs informed defendants that they would not be able to supply the “dabalan Sayaf.”

The plaintiffs’ defence to the counterclaim (apart from the ground that was discussed above) is that they are not liable because a third party (with whom the defendants have nothing to do) failed to honour their order. In my opinion this is no defence at all. It would be ridiculous to go through all the authorities on this point, but well-known examples are: Paradine v. Jane (1647) Aleyn 26; Taylor v. CaldwelI (1863) 3 B. & S. 826; Redmond v. Dainton [1920] 2 K.B. 256; Matthey v. Curling [1922] 2 A.C. 8o.

In order for the plaintiffs to succeed they must prove impossibility of performance of the contract due to agents and causes which were not in contemplation of the parties at the time of entering into a contract. If this impossibility is proved (and the onus is on plaintiffs), then the court of law may be prepared “. . . to examine the contract and the circumstances in which it was made, not of course to vary, but only to explain it, in order to see whether or not from the nature of it the parties must have made their bargain on the footing that a particular thing or state of things would continue to exist.” Lord Loreburn in F. A. Tamplin Steamship Co. Ltd. v.

Anglo-Mexican Petroleum Products Co. Ltd. [1916] 2 A.C. 397, 403. . I am sorry to say that in this case the plaintiffs proved no such impossibility. I think they could have made a reasonable case if they were able to prove that the impossibility of performance was due to the fact that the Egyptian Government had forbidden the export of this type of goods to the Sudan subsequently to the contract. I say this because it is clear from the letters Exhibit 11 and Exhibit 12 and Exhibit 13 that the subject of supplying “dabalan Sayaf” was a subject of extensive correspondence between the Egyptian Government’s departments concerned and the suppliers of this cloth. The representative of the plaintiffs has not alluded to this in this  examination-in-chief apart from producing the letters. He should, for example, have produced the Egyptian law or regulation forbidding export of this cloth. But even if I accept the contents of all the letters produced by the plaintiffs (defendant’s counsel did not object to their production) it is doubtful if I would have found for the plaintiffs. The reasons are:

first, because it does not seem to me that the Beida Dyers wanted to export the cotton at all (see their letter of February , 1958), in spite of the Minister of Supply’s recommendation to do so; and secondly, because it appears to me that the plaintiffs committed themselves before inquiring from the Beida Dyers if the latter were able to export the goods. It was elementary prudence on plaintiffs’ part. before they committed themselv with the defendants, to contact their suppliers to make sure of the avail ability of the goods. For these reasons I do not see that a case of impossibility has been proved by the plaintiffs.

We shall now come to the question of the measure of damages. The defendants have claimed damages which they have calculated in the following way: by virtue of the prices and Charges Order the maximum rate of profit on the dabalan cloth is 10 percent. from importer to whole saler, and 5 percent. from wholesaler to retailer on c.i.f. value. The defendants then say that they can sell directly to a retailer and therefore if the goods were delivered they would be entitled to 15 percent. profit on the c.i.f. price. There is no dispute that the c.i.f. price per yard would be .O70m/ms. (Advocate Mubarak did not cross-examine on the point that it costs 2 percent. per yard freight from Haifa to Khartoum.). The defendants therefore calculate their would-be profits as follows:

50 bales x 500 yards per bale = 75,000 yards.

 75,000 yards X 70m/ms            £S.250 c.i.f. value,

£S.5250 x 15 per cent.            = £S.787.500m/ms. net profits.

With all respect to the learned counsel for the defendants, this is not the way the courts award damages for breach of contract. The maximum rates of profits given under the Prices and Charges Order 1955 have nothing at all to do with the measure of damages for non-delivery of goods. The above law regulates amounts of profits on commodities importe The purpose thereof is to keep prices down generally. The rules relating to damages for breach of contract have been enunciated in Hadley v. Baxen dale (1854) Exch. , that may fairly and reasonably be considered either arising naturally, i.e.. according to the usual course of things, or such as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract. The Sale of Goods Act, 1893, contains statutory provisions for the assessment of damages for breach of a contract of sale founded on Hadley v. Baxendale. By Sale of Goods Act,- 1893, ss. 50 and 51. the measure of damages for non-acceptance or non-delivery is declared to be the estimated loss directly and naturally resulting, in the ordinary course of events, from the breachs When there is an available market for the goods in question this is prima  facie to be ascertained by the difference between the contract price and the market price or current price at the time when the goods ought to have been accepted or delivered, as the case may be.

When a contract to deliver goods is broken, the proper measure of damages in general is the difference between the contract price and the market price of such goods at the time when the contract was broken, because the purchaser. having the money in his hand, may go into the market and buy. So the measure of damages in the case before us is not the maximum rate of profit allowed under the Prices and Charges Order, but the difference between the purchase price and the market price had the goods been delivered. In other words, defendant is only entitled to damages calculated at the rate of the actual amount of profit he would have made on the goods had they been delivered. The rules of maximum rate of profit under the Prices and Charges Order come into play in the hypothetical case when a plaintiff claims and proves that the difference between the contract price and the market price exceeds the maximum percentage allowed under the law. In this case the defendant may plead the Prices and Charges Order. This does not arise in the case before us. Here the defendants in their counterclaim are asking the court to award them damages not calculated on the difference between the

contract price and the current market price, but on the maximum rate of profit. I am afraid this is a wrong principle to apply. Defendant is entitled only to the actual profits he would have made if plaintiffs delivered the goods, and this is only percent. on the c.i.f. value and not 10 per cent.+5 per cent. as per the Prices and Charges Order. The court has not arrived at this figure by mere guesswork, but by defendants’ own admission in their letter to the plaintiffs dated April 18, 1957, where defendants say:

“We confirm the telephone conversation etc.. . . We have actually purchased from you the following:

25  bales x 20 pieces voile El Saber

10 bales x 30 pieces ‘Dabalan 22

50 bales x 30 pieces ‘Dabalan 1700 (El Sayaf)

“In actual matter of fact you have dispatched to us only the voile Saber (the ten bales of ‘dabalan 22’ were delivered later and the price of these goods are the subject of the plaintiffs’ claim on the bill for £S.681.777m/ms

“As for the dabalan, both No. 22 and the dabalan 1700 we could easily make a profit of per cent, on them. In fact we had to purchase last week in the market a few bales of ‘dabalan El Sayaf 1700’ at 225 per piece.”

Those are the defendants’ own words, not mine. I therefore hold that defendants are only entitled to damages calculated at the difference between the contract price and the market price, i.e., percent. profit on the c.i.f. value, viz., 5 per cent. of £S.5,250=£S.262.500m/ms.

The result of this case is that I give judgment for the plaintiffs for the amount of the bill ( minus the sum of £S.262.500m/ms

‘ which I award to the defendants for breach of contract in their counter claim. The net result is that defendants pay plaintiffs £S.419.277m/ms with costs. Plaintiffs have not asked for interest.