EL SAYED ALI GAD, Plaintiff v. P ANDELIS TIRlTAS AND OTHERS Defendants
Contract-Breach-Agreement for exclusive supply of meat to restaurant
Damages-Liquidated damages-Amounting to a penalty
Partnership-Dis.w/ution-Retiring partner's liability under continuing contract
1. Where three partners in the restaurant business agreed to buy all
their meat from the plaintiff for a six month period at a stipulated price.
and then after one month two of the partners notified the plaintiff of their
dissolution of partnership with the third partner, the mere fact that plaintiff
continued to deal with the third partner for the remaining five months does
not itself discharge the withdrawing partners from their continuing liability
under the contract.
2. 'Where a contract for the exclusive supply of meat at 25~ mlms
per oke provided liquidated damages in the event the buyer obtains meat
elsewhere at any time during the period, which damages are to be the
assessment of a total price of 40 mlms per oke for all meat supplied during
the period, both before and after the breach, the provision amounts to a
penalty and is invalid.
Action
July 6,1935. J. Handes P.J.: The plaintiff, who had the monop-
oly of the supply of meat in the Camp at Sileitat during the material
period, entered into a contract dated October 7, 1934, with the three
defendants, restaurant proprietors, for the supply of meat for a period
of six months at the rate of 251h m/ms per oke. The contract stipu-
lated that the defendants should not purchase meat from elsewhere
during the period and that in the event of their doing so the supply for
the whole period of six months should be charged at the rate of PT.4
per oke. The plaintiff alleges that at the end of February 1935 one
of the defendants purchased meat from an outside source, thereby
committing a breach of the contract, and claims liquidated damages at
the contract rate from that date until the termination of the agreement.
The breach and the damages are denied by all three defendants,
the first two of whom further plead that they notified the plaintiff of
their dissolution of partnership with the third defendant as from NO-
vember 10, 1934, and that he expressly and impliedly discharged
them from further liability under the agreement by subsequently deal-
ing solely with that defendant. In any event they daim that the stip-
ulation for a charge of PTA per oke is one in the nature of a penalty,
and that the plaintiff is entitled to no more than the actual damage
suffered, which they contend in effect has been none. .
Four matters are thus in issue. First whether the first and second
defendants were effectively discharged from further liability by the
plaintiff, secondly whether the stipulation is a penalty or liquidated
damages, thirdly whether there was a breach of contract and finally
the question of damages.
As regards the first point, 1 hold on the evidence that the first and
second defendants were not so discharged as alleged. The fact of their
dissolution of partnership with the third defendant was admittedly
communicated to the plaintiff, but there is no evidence so far as I can
see that thi~ plaintiff ever agreed to discharge them from further liabil-
ity. Had. the contract proceeded for a considerable period without
further demand being made upon them, a discharge might possibly
have beert1mplied, but I am unable to infer such a result from the
fact that. the plaintiff proceeded to make other arrangements for the
settlement of his accounts with the third defendant, without prejudicing
the position of the other defendants in any way. Moreover, any con-
sideraticn for such a discharge appears to be entirely lacking. A
great deal of importance has been attached to the fact that payment
for the .supply of meat for the first ten days in November 1934 was
made ry the first two defendants, but it should be noted that the actual
payment was not made until March 12, 1935.
As regards the second issue, there is I think ample authority for
the statement that where a stipulation occurring in a contract provides
for payment at an increased rate from the date of the contract, as op-
posed to the date of default, the stipulation is always held to be penal.
This is the case here, and in consequence the plaintiff is only entitled,
in my view, in the event of breach to such compensation as is under
the circumstances reasonable, subject to the maximum agreed upon.
The third issue is as to whether or not there was a breach of the
contract. In my view there was such a breach at the end of Febru-
ary 1935. I am not satisfied from the evidence I have heard that the
third defendant had sufficient cause to justify his admitted purchase of
120-130 okes of meat over a period of several days from an outside
source. The third defendant is unable to show just where the meat
of the plaintiff was inferior to that sold by the other butchers in the
suk. He can only describe it as inferior. From that date onwards,
however, I am unable to discover any further breach. During March
the third defendant continued to deal with the plaintiff until he went
out of business on the last day of that month. The contract does not
stipulate that the defendants should purchase any specified quantity
per month or per day, but merely binds the plaintiff to supply at a
fixed rate and the defendants to purchase from him and from him
alone. The failure, therefore, to purchase for the six days in April
1935 does not constitute a breach.
With regard to the question of damages the advocate for the
plaintiff has claimed at the penal rate on the basis of the average
quantity supplied to the third defendant for the period subsequent to
the breach. In my view, having decided that the stipulation is a pen-
alty, the plaintiff is only entitled to claim reasonable compensation for
the actual loss suffered by him as a result of the third defendant's pur-
chase of meat from outside. That sum will be arrived at by multiply-
ing the 120-130 (say 125) okes of meat by the difference between the
contract price of 25112 m/ms per oke and the cost price of 15 m/ms
per oke, and comes to £E.1.320. This represents the actual loss suf-
fered by the plaintiff.
There will be judgement for the plaintiff against all three defend-
ants for the sum of £E. I .320 together with court fees on that sum and
advocate's costs. In the exercise of my discretion I shall order that the
latter be taxed on the District Court scale.
Judgement for plaintiifs