Contract-s-Construction of terms-Sale of crops agreement
Partnership-Breach of duty-Account

Appellant agreed with a partnership firm, consisting of respondent and
himself, to supply the firm with the yield of all his senna crops during
1928 and 1929 at a fixed price. He was then cultivating 50 feddans. Sub-
sequently the firm contracted to sell its whole cultivation of senna to the
Sudan-American' Produce Co. Ltd. at a higher price. Appellant then grew
senna on another 55 feddans on his own account, and entered into negotia-
tions to sell the same to Tsakiroglou, whereupon the Sudan-American Pro-

• Court: Owen C.J., David-Davis and Gorman JJ.

duce Co. Ltd. terminated the contract and recovered its deposit. Respond-
ent claimed from appellant damages for loss of profits on the contract with
the Sudan-American Produce Co. Ltd. and the return of £E.l00, being
respondent's contribution to the expenses of cultivation.

Held: (i) Respondent's claim was in effect a claim for a partnership ac-
count, and a declaration that lhe loss sustained by the firm through appel-
pellant's alleged breach of duty, together with the £E.I00 advanced by re-
spondent, should be debited against appellant as the defaulting partner.

(ii) The firm was not in breach of its contract with the Sudan-
American Produce Co. Ltd. because (a) appellant had not sold any senna
to Tsakiroglou Co. and (b) if he had, the firm had contracted to sell the
Sudan-American Produce Co. Ltd. the crop in which the partners were
jointly interested, and not a crop grown - by an individual member of the
firm; there was therefore no breach of faith by appellant or breach of con-
tract by the firm.

(iii) In any event, respondent could not claim both his profits ana
the return of the sum which he had advanced in order to obtain those
profits. The £E.I00 advanced was a matter to be considered, with others,
upon taking his partnership account.

Appeal

February 28, 1931. Owen C.J.:

On November 18, 1928 an agreement was entered into be-
tween the appellant (Krikor) and a partnership or joint adventure
'consisting of himself, the respondent (Sawiris Mahrous) and George
Carantinos (who subsequently assigned his interest to the respondent).
By this agreement the appellant undertook to supply to the company,
as it was called, the yield of all his senna crops during 1928 and 1929
at the rate of 40 PT. per kantar of 120 rotls. Contribution by
respondent and Carantinos was to be £ s.r 00 between them, and
the profits or losses resulting from the sale of the crops were to be
divided between the partners or co-adventurers equally.

On February 16, 1929 the partnership entered into a contract
with the Sudan-American Produce Co. Ltd. for the sale of the senna
which was cultivated by them at Darmali at a price of 70 PT. per
kantar of 120 rotls crude. The minimum quantity to be supplied
was 1000, and the maximum 1500 kantars. The proportion of the
impurities in the crude state was to be no greater than 30% (this
was afterwards modified by agreement to 35%), and the buyers agreed
to -take delivery at, any time the sellers should tender an amount of
not less than 50 kantars, and to pay after packing and weighing.
By clause 4 it -was stipulated that the contract was for the whole
cultivation, - and the sellers were not entitled to sell any quantity out '

of their cultivation before the minimum quantity of 1000, kantars had
been delivered. The period agreed for the performance of the con-
tract was set at one year, during which the whole quantity should be
supplied.

This contract, like the one of November 18, 1928, is clumsily
drawn and badly expressed, but it is not disputed that the undertaking
was an undertaking by the partnership to sell to the buyers (to whom
I shall refer as SAPCO hereafter) the senna which' the appellant in
his tum had undertaken to supply to the partnership under the
previous agreement. This contract was signed by the appellant and
witnessed by the respondent. Thus the appellant as cultivator, had
to supply senna to the partnership, of wliich he himself was a member,
and the partnership had in turn to sell to SAP CO what they received
from the appellant. It is common ground too, that the only cultivation
in which the partners as such were interested, was the cultivation
the subject of the November agree~ent.

About 300 kantars were duly delivered under the contract to'
SAPCO. About the beginning of December however, an interview
took place between the appellant, the respondent and the manager
of SAPCO. What exactly happened at that interview it is impossible
to say, but there is little doubt that the manager referred to the
fact that the appellant had been . negotiating with, a firm called
'Tsakiroglou and Company. He complained that the negotiations were
a breach of the partners' contract with SAPCO, and, pursuing that
complaint wrote the appellant on December 18 a letter in the following
terms: (It was in reply to a letter by the appellant dated December 8,
offering to make delivery of the balance undelivered.)

"Your letter December the 8th, has surprised us, since on
the 7th December, when the writer paid you a visit at your
farm Darmali with the respondent and explained to you the
damages we have sustained because you have entered into a
contract with Messrs Tsakiroglou & CQ. Ltd. contrary to the
terms and understanding of our contract with you, you have
given us the option to terminate the contract with you and to
refund the money due to us out of the £E.I00, earnest money,
we have paid you on the contract in question.

Your letter December the 8th is all contrary to what passed
between us during the writer's visit at Darmali. We inform you

 herewith that, as agreed upon, we consider our contract February

of16th as terminated, and by return please remit the balance of
cash due to us, otherwise we shall claim of the damages incurred
to us because of your contract with Messrs Tsakiroglou and Co ..
Ltd., and take the necessary steps, without prejudice to the offer
aforementioned of termininating the contract only by your paying
us back the money due out of the earnest money."

Shortly, he accepted an option to rescind on the ground that
the appellant had entered into a contract with Tsakiroglou in breach
. of clause 4 of the. agreement of February 16th.

What the appellant had done was this: apart from the 50 feddans
the subject of the partnership contract, he had started to cultivate on
his own account another plot of land of about 55 feddans in extent,
and had entered into negotiations with Tsakiroglou & Co. to sell to
them the proceeds. In addition to this he had, on November 29, .
1929 granted to the same firm the proceeds of the partnership cultiva-
tion after the expiration of 'the SAPCO contract in or about the middle
of February, 1930;

A few months after the rescission of the contract by SAPCO,

. the respondent cOmlnenced an action against his fellow partner claim-
ing (a) three hundred pounds damages representing ¥.3 of the profit"
which the partnership hoped to make on the SAPCO contract; and
(b) one hundred pounds being his. contribution to the expenses of

-cultivation. The learned Judge 'has given him the fuiI amount claimed,
together with his costs, and the result gives food' for reflection on the
remarkable profits to be obtained from the loan of £E,100 to a culti-
vator of senna pods in the Province of Berber. It is held by the
Judge that the negotiations with Tsakiroglou amounted to a breach
of his duty to his partners, and that such negotiations amounted to a
breach of clause 4 in SAPCO's contract' thereby causing SAPCO to

           cancel the contract.                              "

The appellant has appealed, saying in effect that, the learned
Judge has misdirected himself both in law and' in fact, and that .the
respondent is not entitled to recover any sum by way of damages
or return of deposit. The action was treated in -the court. 'below
as a claim partly for damages and partly (as to the sum of £E.l(0)
for the repayment of money lent. That it took !his fomi is no doubt ~
due to the way in which the respondent submitted' his, plaint; but it

,is abundantly clear that the real subject matter' of his claim was one
of account. It was in effect a claim for an account and a declaration

that the damages sustained by the partnership by the. alleged breach
of contract, together with the £E.100 advanced, should be brought
into that account, and that those two sums should be debited against .
the appellant as the defaulting partner. The point has not been
raised specially by the parties, but none the less this appeal will be"
treated as though the claim for account had been made, either origi-
nally or in the alternative, and the issues between the parties decided'
accordingly. The point for decision is: if the partnership has suffered
damage by reason of the defendant's default, can the respondent
recover his share by way of an action for damages, or by way of
account by debiting the defaulting partner with the total amount of
loss suffered?

With regard to the facts therefore, the first question is: Was
the act of negotiation with Tsakiroglou a breach of Iaith by appellant
to his partners? And further, if it were a breach of faith, were those
negotiations such as to amount to a breach of clause 4 of the
contract of February 16 with SAPCO? Obviously if appellant had
not been guilty of breach of faith or any kind of default, vis a vis
the partnership, no action for damages for breach of that contract
or other cause can be maintained. Again, if there were a breach
of faith by respondent, the damages recoverable" if recoverable at all,
must be those that flow naturally from that breach, therefore we are
faced at once with the consideration of the second of the two questions
I have set out above, namely was there a breach of clause 4 of the
contract with. SAPCO? The respondent has not called the manager
of SAPCO, but there is before us the letter which presumably describes
correctly the reasons for his decision to rescind the contract.

Clause 4 reads: "This contract is for the whole cultivation and
the sellers are not entitled to sell any quantity out of their cultivation
before at least the minimum quantity stipulated for in clause 1 is
delivered jo the buyers .... " But, even assuming that which the
contra. Vdoes not say, and does not on face of it mean, namely that
"the' cultivation" means any cultivation by individual members of
th 'partnership, apart from that one alone in which they were as ~

artnership and as "sellers" interested; the important fact is that on

.;_ December 7 it is not proved that appellant had in fact 'sold' any senna
to Tsakiroglou at all. It is true that he was negotiating for the sale
of his crop in another plot of his, and it is also true that he .had
promised Tsakiroglou the.crop in the plot the partners wereinterested
in, if and when the contract with SAPCO was terminated. Had ~

committed thereby a breach of clause 4? I do not think: he had. He
had not sold at all, and, further, the expression "their cultivation"
must-mean the cultivation the partners were' interested in as such. It
is impossible' to resist the suspicion that the rescission of this contract
was agreed upon because each party was anxious to escape from it:

We are entitled to look upon the letter of December 18 as good evi-
dence of what happened at the interview. "You have given us the
option to terminate," and "As agreed we consider our contract termi-
nated," are the expressions used, and they were used at a ineeting
where both partners were present, and at a time when all parties
were aware of the facts. SAPCO coUId not have brought an action
for damages for breach of clause 4 after writing that letter. It is
possible that the respondent might have had cause for complaint, if
the appellant had secretly terminated the agreement with a view of
defrauding his fellow partners, but he did not, and there is ,no evidence
that the respondent did anything but acquiesce' in the agreement to
terminate. How can it be said in these circumstances that the partner-
ship is entitled tQ bring an action. for damages against one of its own
members? HQW can it be said that such damages flow naturally
from a breach of faith, even if there was one? We are of opinion
that there was nQ breach of faith by the appellant, and no breach
of 'the contract with SAPCO that could give rise tQ a claim for
damages or in account. The damages cannot be recovered as such;
nor can they be brought into account.

We now come to the question of the so called deposit of £E.l00.

This sum was a contribution by one partner to enable the other to
cultivate the plot of ground in which they were all interested. It was
expended in order to enable the partnership to. fulfil its obligations
and make its profits. The. learned Judge has given the frespondent
not only his profits but the sum that was expended to obtain those
profits. The respondent cannot have it both ways, and. the proper
way to consider that sum, if any, of the £E.l00 is due 16, be returned
to him must be arrived at by bringing the £E.l00 into account, 'when
the partnershij, accounts come to be made up in the ordinary way.

It JTlaY be that the respondent on taking the account is entitled
to recoyer some sum of money from the appellant.' It may be more,
and it'may be less than the £E.l00 which lie lent to the firm. There
is JtlO' evidence that the appellant has refused to render an accounl,
!3t that he has declined to include this sum in the account whic:h
ate to be made. The respondent's claim should be that this £.E.l00