Contract-Payment by promissory notes-Whether promissory notes are abso-
lute payment or only conditional payment for security of performance-
Whether stipulations in main contract are in force or only the promissory
notes when promisory notes given in a hire purchase agreement

Contract-s-Privity df contract-Plaintif! must be actual party to the contract to
sue on the contract

Negotiable Instruments Promissory note-Payment by-Whether promissory notes
are absolute payment or only conditional payment for security of perform-
ance-Whether stipulations in main contract are in force or only the promis-
sory notes when promissory notes given in a hire purchase agreement

In a true hire purchase agreement, the total of hire payments is less
than the purchase price, and the hirer has the right to purchase upon pay-
ment of the difference between the two amounts. When the hirer under
such an agreement gives the other party promissory notes for the hire pay-
ments, the presumption is that the notes are by way of conditional payment
only, so that the remedies on the hire purchase contract an, merely sus-
pended during such time as the successive notes are met, and are again
available if the hirer makes default on the notes.

The plaintiff, in order to sue under a contract must be the party with
whom the defendant made the contract, and cannot be the agent of the
party with whom the defendant made the contract.

* Court: Owen C. J., Gorman and David-Davis n.

Contomichalos, Darke & Co., Ltd. v. Hussein Mahmoud and Another

AC-APP-21-1929.

Burliner v. Royle (1880) 5 C.P.D. 354.

Cox v. Belsize Motor Supply Co. [1914] 1 K.B: 244.
Currie v. Misa (1875) L.R. 10 Ex. 153.

Gunn v. Bolckow, Vaughn & Co. [1875] 10 Ch. App, 491.
Lee v. Butler [1893] 2 Q.B. 318.

Re Debtor [1908] 1 K.B. 344.

Romer v. Haslam [1893] 2 Q.B. 286.

Appeal

November 12, 1930. Gorman I.: This is the judgement of the
court. . On May 1, 1928 the General Motors Corporation of Alexan-
dria, acting through their agents Contomichalos, Darke & Co. Ltd. of
Khartoum, entered into a written contract with the first defendant as
principal and the second defendant as guarantor. By this contract the
General Motors Corporation agreed to let out on hire to the first de-
fendant (hereinafter referred to as the hirer) a Chevrolet motor lorry
for a period of 12 months. By the terms of the agreement the hirer
was to pay a first instalment of hire amounting to £E.24 at the signing
of the agreement; and the balance of the hire by 12 monthly instal-
ments of £E.10.525 m/ms each, making £ 160.300 m/ms in all. In
addition a deposit of £E.16 was to be paid. At the end of 12 months,
assumingthe contract to have been properly carried out, the hirer had
two options; either he could return the car and reclaim his deposit, or
could purchase the car by making a further payment of £E.16, which
payment he could most conveniently make by appropriating £E.16,
hitherto held by General Motors Corporation as trustees to this pur-
pose. The hirer further obliged himself to make good any loss or
damage to the car howsoever caused, and to keep it in .good repair.
In the event of the hirer defaulting in any of his obligations, e.g., pay-
ment at the due dates, the General Motors Corporation might by
notice in writing to the hirer determine the agreement and take pos-
session of the car, the expenses of taking possession being payable by
the hirer.

The hirer and his guarantor signed this agreement, paid the de-
posit and the first instalment, and took delivery. On the same day
the hirer signed and the guarantor guaranteed 12 promissory notes,
each of £E.I0.525 m/ms, payable at monthly intervals beginning
June 1, 1928, and expressed to be each in considerationof one month's
hire of the Chevrolet motor lorry. These notes have been indorsed

by the General Motors Corporation to the present plaintiffs, their
Khartoum Agents, but whether as agents for collection or as holder
for value need not be considered, as they carried through the whole
. transaction for the General Motors Corporation, and themselves were
the instruments of the subsequent seizure of the lorry. The notes in
. their hands, therefore, are subject to the same restrictions as if they
were in the hands of the General Motors Corporation.

The note of June 1, was paid at maturity, but the note payable on
July 1 was not met. On July 7 application was made to the guarantor,
who also failed to pay. On July 17, the hirer was arrested on a charge
of fraud (which has nothing to do with this case), was tried, convicted
and sentenced to six months imprisonJilent. Somewhere about the
middle of August and well on into the rains the lorry broke down on
the Gedaref-Medani road whilst in charge of the hirer's driver. At
this time both the July and August notes were unpaid. The present
plaintiffs were informed, and they communicated with the second de-
fendant, who refused to move in the matter. Therefore they took the
lorry to Medani and finding it, so they alleged, in a state of disrepair,
expended money in repairs and sold it. for £E.80.

The present action is brought by the agents of the General Motors ..

Corporation for the amount of the Unpaid hire plus the amount ex-
pended in bringing the lorry in and putting it into repair, less the
£E.80 got on resale. In dismissing the claim on all. heads the District
Judge' held that the case fell within the ambit of the decision in
Contomichalos, Darke & Co. Ltd v. Hussein Mahmoud and Another,
AC-APP-21-29 and that the effect of the promissory notes being. given
was' to preclude the plaintiffs from relying on any right of retaking
possession and/or charging the cost of retaking, and throwing the
plaintiffs back on their rights under the promissory notes only. But
inasmuch as by seizing and reselling the lorry was lost' to the hirer,
there was a total failure of consideration and the claim on that heading
failed likewise. Curiously enough the plaintiffs' counsel also placed
reliance on the above mentioned case as an authority in his favour
and as the justification for having brought his action in rhe present form.                                              

We agree with the trial Judge that the present plaintiffs are not

in a position torecover on any of the counts (not being in privity with
defendants), and that in the events that have happened no claim can
arise on the promissory notes, which must be delivered up for cancel- .
lation; put we disagree with him as to the effect of the decision in

Contomichalos v. Hussein in circumstances like the present. Inas-
much as the type of contract before us is of common use, we think it
desirable to adjourn the. case,. giving liberty to the General Motors
Corporation to apply to become plaintiffs' in order that the dispute
arising out of the present circumstances may be finally determined.

A bill of exchange or a promissory note can be given in three
ways: either as payment, or as conditional payment or as a mere col-
lateral security for payment. It is a matter of the intention of the
parties under which of these three categories a note falls, and what-
was the intention of the parties is a pure question of fact to be an-

. swered in each case according to the expressions of the parties or to
be inferred from all the surrounding circumstances of the case: Burliner
v. Royle. (1880) 5 C.P.D. 354. There is a strong presumption in
favour of conditional payment as against an absolute payment, and an
intention that a payment by note should take effect as an absolute
payment is only to be inferred from clear unambiguous evidence to
that effect. Currie. v. Misa (1875) L.R. 10 Ex. 153, 463, and Romer
v. Haslam' [1893] 2 Q.B. 286. The distinction between the two
types of payment is, of course, that in absolute payments the anteced-
ent debt is discharged, and no action can at any time be brought
thereon, but only on the bill or note; whereas in conditional payment
situations the remedies on the original cause of action, e.g.,-the claim
for the price of goods bargained and sold, or the right to exercise a "

. lien on such goods, is suspended only until maturity of the bill, but if
at maturity default is made, the lien can be exercised or action can be
brought for the price, GUM v. Bolckow, Vaughn & Co; (1875) 10
Ch. App. 491, 501,' provided always the plaintiff is ableto account for
th~ outstanding bill or note and show they are not in the hands 'of a
holder in due' course who could sue on them, a point which appears
rather to have been overlooked in the Contomichalos v. Hussein case.
See Fletcher-Moulton L.J. in Re Debtor [1908] 1 K.B. 344, 350.

Now in the Contomichalos v. Hussein case the agreement was
very different from the present one. It too was expressed to be a hire
purchase agreement, but the terms of it were" such that the hirer was
bound to pay under the denomination of hire the whole of the pur-
chase pri<y{ It was therefore not, properly speaking, a hire purchase
agreem~t at all. It fell within the ambit of Lee v. Butler .[1,893]
2 Q.B. 318, and was properly to be regarded as an agreement to sell.
It )V~s further specified that the hirer could make this executory con-
~ct of sale into an executed one at any time by payment of the total                                                                                                                                                                                                                                                                                                                                                                              

hire. When therefore notes are given under such circumstances for
the whole of the outstanding price, it is not unreasonable to assume
that the parties intended the property to pass and. the executory con-
tract to become wholly executed and discharged. As Judge Halford
said in his judgement "In subscribing the bills the defendant exercised
the option to purchase for £E.180 ... and therefore the property in
the car passed." Obviously when the property had passed the right
to retake was gone.

But in the present case the agreement is a true one of hire pur-
chase, and carefully drafted with a view to preventing the case falling
within Lee v. Butler, supra. It is indeed drafted on the same lines as,
and in nearly identical terms to, that investigated in Cox v. Belaize
Motor Supply Co. [1914) 1 K.B. 244. It is clear as to this type
of contract that the hirer is not under an obligation to pay, as hire,
the total amount of the purchase price. Thus it is he is frequently
obliged to deposit the difference, but the hirer can always at the expira-
tion of the hire period return the car and reclaim the deposit, nor
does payment in advance of the hire render the contract wholly exe-
cuted. The lessor has irrevocably bound himself to sell, but the hirer
has an option whether or not he will buy. Now when we have, as
here, a contract which has to remain open for some purposes and can-
not be treated as discharged; when moreover it is elaborately drafted to
give the General Motors Corporation valuable security and rights over
the car; and when the signing of this document and the making of the
notes were practically simultaneous, it is difficult to see any circum"
stances tending to displace the presumption that the notes at most
were conditional payment .only, and not an out and out payment;
particularly when on the second interpretation the General Motors
Corporation would lose the protections so carefully devised in the main
agreement.

It is therefore our view that the giving of the notes amounted to
conditional payment only and when the condition was broken in re-
spect of the July and August notes, the General Motors Corporation
were at liberty to enforce the stipulation in the main contract relative
to retaking the car and determining the contract. While there is no
specific evidence on the point, the circumstances all point to the in-
tention having been to determine the hire on re-taking the car; other-
wise the resale would have been tortious. There was indeed no written
notice, but again regard must be had to the surrounding circumstances
lex non cogit ad impossibilia; the hirer was in prison and the owners

did communicate with the second defendant, and also got the formal
assent of the District Commissioner.

Therefore in our view the position is as follows:

In August 1928 the General Motors Corporation were entitled to
determine the contract provided the notes were not outstanding in the
hands of anyone able to sue on them. The notes were in fact in the
hands of the very agents who re-took the car, and thereafter the notes
were held by them on trust, to deliver up for cancellation. The proviso
was therefore satisfied, and the General Motors Corporation might, and
did by their agents, determine the contract, and on the determination
might sue for the damage they had suffered by reason of the de-
fendant's breach. But, for the reasons stated, Contomichalos, Darke
and Co. Ltd. could not sue upon the notes or any of them, nor can
Contomichalos Darke & Co. Ltd. sue on the contract, for they are not
privies thereto.

But inasmuch as the present plaintiffs have produced the notes,
and that it is desirable to save costs so far as possible, we propose
to adjourn the case with a view to giving the General Motors Corpora-
tion an opportunity to apply, if so advised, to be added as plaintiffs
with a view to claiming such damages as they may be entitled to, in
which case the case will beremitted for determination of the quantum
of damages.

The costs will be reserved till after the adjournment.

December 24, 1930, Gorman J.: The General Motors Accep-
tance Corporation have applied to be added as plaintiffs. Their ap-
plication is allowed, and the judgement of the District Judge will be
set aside and an order made for the determination in the court
below of the amount of damages due to the plaintiffs, the General
Motors Acceptance Corporation. The measure of damages will be
the amounts found due under each of the following heads:

( a) The costs properly incurred in bringing the car from the place
where it was abandoned to Wad Medani.

(b) The reasonable costs of repairng the damage (if any) caused
or permitted to be done to the car by the hirer (other than
fair wear and tear).

(c) The loss inflicted by reason of the bargain going off; this will
be measured by the difference between the amount payable