Maclaine Watson and Co. Ltd v Shah (Civil Appeal No. 58 of 1956) [1950] EACA 366 (1 January 1950)

# H. M. COURT OF APPEAL FOR EASTERN AFRICA

Before SIR RONALD SINCLAIR (Vice-President), BRIGGS and BACON, Justices of Appeal

MACLAINE WATSON & CO. LTD., Appellant (Original Plaintiff)

### ν.

# KANJI MEGHJI SHAH, Respondent (Original Defendant)

# Civil Appeal No. 58 of 1956

(Appeal from the decision of H. M. Supreme Court of Kenya, MacDuff, J.)

Contract—Goods delivered at Mombasa--Government's refusal to issue import licence—Impossibility of performance—Indian Contract Act, section 56.

This appeal arose as the result of a contract between the parties whereby the respondent agreed to buy and the appellant to sell five long tons of Siam rice at £76 per long ton C. I. F. Mombasa, shipment being "guaranteed per s.s. Ronggeveen" from Singapore". The rice duly arrived at Mombasa and a proper set of shipping documents was presented to the respondent who refused to pay because the Kenya Government refused to issue an import licence. The trial Judge held that although it was for the defendant and not the plaintiff to obtain the import licence, as it had been refused by the Government the contract became void for impossibility of performance pursuant to section 56 of the Indian Contract Act, and entered judgment for the defendant.

Held (29-10-56).—The respondent might have disposed of the rice in other ways apart from importing it into Kenya; he was under no obligation other than to accept delivery of the rice at Mombasa and pay the contract price and there was nothing to prevent him from so doing.

Appeal allowed with costs. Judgment entered for the appellant for Sh. 4,801 and Supreme Court costs.

Case referred to: Kunvilal Monohar Das v. Durga Prasad, (1920) A. I. R. Cal. 1021.

#### Cleasby for appellant.

O. P. Sachdev for respondent.

JUDGMENT (prepared by Bacon, J. A.)—This was the original plaintiff's appeal from a decree of the Supreme Court of Kenya whereby a claim for damages for breach of contract was dismissed with one-third of the taxed costs. There was a cross-appeal for a variation of the order as to costs. We allowed the appeal and dismissed the cross-appeal, with costs in each instance, the parties leaving the quantum of damages to be dealt with by us. We now give our reasons for our decision and deal with the outstanding issue.

The dispute arose out of a contract in writing where the respondent (a firm) agreed to buy and the appellant to sell five long tons of Siam rice at £76 per long ton C. I. F. Mombasa, shipment being "guaranteed per s.s. Roggeveen from Singapore, scheduled to arrive at Mombasa during the second week of February, 1955". The other terms and conditions of the written contract are immaterial for present purposes. The respondent firm contracted through a company carrying on business in Mombasa which was and for this purpose acted as the appellant's agent.

The rice was duly shipped and duly arrived at Mombasa and a proper set of shipping documents was duly tendered to the respondent firm. The firm, however, declined to take up the documents or to pay the draft drawn to cover

the contract price of the consignment. The reason why in fact the firm so declined was the refusal by the Department of Trade and Supplies of the Government of Kenya to issue an import licence which by virtue of Government Notice No. 802 of 1943 was obligatory as regards any rice which it was sought to import into Kenya out of bond.

On three of the four issues which were framed at the trial the learned Judge reached the following decisions: First, that there was no express agreement (either in writing or oral) that the appellant company or its agent would obtain an import licence in respect of the consignment in question; secondly, that the respondent firm was bound in law to obtain such licence; thirdly, that when an import licence was refused "it then became impossible for the defendant (respondent) to import the rice into Kenya", and that consequently the contract then became void for impossibility of performance pursuant to section 56 of the Indian Contract Act. The fourth issue was as to damages, which was disregarded at the trial.

It is to be observed that no issue was either raised by the pleadings or framed at the trial as to whether there was an *implied* term of the contract that the appellant was to be under an obligation to procure an import licence. There is, however, clear indication in the judgment that, had such an issue fallen to be specifically decided, the learned trial Judge would have found that no such term was to be implied. We saw no reason for taking the contrary view, and indeed every good reason for rejecting it; the nature of the contract and of its express terms and all the circumstances of the transaction point clearly to the absence of any such implied term.

The learned trial Judge's decision on the first issue was not challenged before us. Perusal of the evidence shows, incidentally, that any such challenge would have been bound to fail.

His decision on the second issue was not questioned either. We understood it to mean that, if the rice was ever to be imported into Kenya in the full sense, it would be for the respondent firm to obtain the licence without which the rice could not be so dealt with. But there was, of course, no obligation on the firm vis-à-vis the appellant company to obtain a licence, inasmuch as the latter could never have recovered damages from the former for its failure so to do.

But it is on the third issue that, with respect, we differed from the learned trial Judge. In our view it was erroneous to conclude, as appears in the judgment, that because when the licence was refused "it then became impossible for the defendant (respondent) to import the rice into Kenya", therefore the respondent was excused on account of impossibility of performance of the contract. It appeared to us that there was in that reasoning a false premise: for the contractual performance to which the respondent was bound did not consist of importing the rice into Kenya but merely of accepting the due and proper tender of shipping documents and of discharging the draft which was duly presented.

In reality what happened was that the respondent firm's prospective performance of its contractual obligations became unexpectedly onerous when it transpired that the licence, which no doubt the buyer, and perhaps both parties, had hopefully assumed would be forthcoming, was unprocurable; whereupon the respondent firm unwisely shouldered the still heavier burden of an unjustifiable refusal to honour its agreement and cut its loss. The case thus fell within the principle stated in Cunningham's Indian Contract Act, in the commentary on section 56 cited in the judgment herein at p. 20, lines 29 to 32, of the record: $-$

"It cannot, however, be intended that a contract should become void on the ground of impossibility merely because the promised act becomes more difficult or burdensome than was expected."

It behaves us to add a word as to the authority which the learned trial Judge prayed in aid, Kunvilal Monohar Das v. Durga Prasad, (1920) A. I. R. Cal., 1021. There the seller of a quantity of linseed contracted to dispatch it by rail for forward delivery; as both buyer and seller then knew, the forwarding of goods by rail was at that time prohibited save under a priority certificate and certificates were not being granted for the purpose of ordinary commercial contracts such as that; but they assumed (or at least hoped) that when the time for performance arrived the prohibition would have been removed; their assumption or hope proved to be ill-founded and the requisite certificate was not to be had. It was held that the contract thus became void for impossibility of performance before any breach occurred. In our view there is a vital distinction between that and the instant case; for in that case the defendant-seller was irremediably prevented from effecting due delivery of the goods, or, in other words, from performing a fundamental part of his contractual obligations, which failure was the subjectmatter of the claim against him, whereas the present respondent was under no obligation to the appellant beyond that of accepting delivery of the rice, and paying the contract price, C. I. F. Mombasa, which there was nothing to prevent him from doing. Finally, there was no real frustration of the contract, for, though the buyer could not import the goods into Kenya, he could have sold, and might indeed have wished to sell them, to a sub-buyer in another country.

There remains the *quantum* of damages, with which the trial Court did not deal *de bene esse*. We have examined the particulars of loss set out in the plaint and the evidence in support thereof. We have only two minor comments. First, the item "ocean freight and bill of lading" mentioned in evidence at p. 9, line 18 of the record seems to be somewhat obscure, but we accept that the charge of Sh. 33/60 was necessarily paid for some purpose connected with reshipping the goods at Mombasa (though not for ocean freight). Secondly, we feel unable to allow in full the item described in the particulars as "plus cable and incidental charges Sh. 200" and purportedly justified by this evidence; "spent sundry amounts" on cables to overseas buyer-amount would be about Sh. 200". In view of the vague terms there used we think the proper course is to protect the respondent to the extent of reducing that item to Sh. 100.

Accordingly it is ordered that, the appeal having been allowed with costs and the cross-appeal dismissed with costs, the judgment and decree of the Supreme Court be set aside and judgment entered for the plaintiff-appellant for Sh. 4,801 and the plaintiff's taxed costs of the proceedings in that Court.