Twentsche Overseas Trading Co., Ltd v Patel and Co., Ltd (Civil Appeal No. 11 of 1941) [1941] EACA 5 (1 January 1941)

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR JOSEPH SHERIDAN, C. J. (Kenya), SIR NORMAN WHITLEY, C. J. (Uganda) and SIR HENRY WEBB, C. J. (Tanganyika)

## TWENTSCHE OVERSEAS TRADING CO., LTD., Appellants

(Original Plaintiffs) $\nu$ .

M. R. PATEL & CO., LTD., Respondents (Original Defendants)

Civil Appeal No. 11 of 1941

Appeal from decision of H. M. High Court of Uganda.

Contract—Indent for goods containing clause providing that in no circumstances shall the buyer be entitled to compensation for non-shipment or late shipment-Buyers notified that shipment under the indent would not be made-Much subsequently similar goods shipped to buyer's agent for disposal independently of the indent—No right to damages.

The following statement of facts is taken from the judgment of Sir Henry Webb, $C. J.$ :-

"By a contract contained in an indent (No. 6949) dated 28-7-39, and an acceptance, dated 28-8-39, the appellants agreed to sell to the respondents a quantity of nails at Sh. 17 per case. The indent contained a clause (clause 7) of which the material part is as follows: 'Should the goods or any part thereof not be shipped within the time specified, then ..... the buyer shall within three days from the fact of non-shipment or late shipment being notified to him in writing by the vendors be entitled by notice in writing to reject the goods. . . . . Save as aforesaid the buyer shall not be entitled to reject the goods by reason of non-shipment or late shipment, and in no circumstances shall he be entitled to compensation for non-shipment or late shipment'. On 24-10-39 the appellants' head office wrote to their Kampala branch, through which the order had been placed, 'Indent 6949 and 6951. Wire Nails. We had long negotiations with suppliers, who informed us that they are not able to supply the 400 cases on account of the dissolution of the syndicate. We regret therefore that these 400 cases can thus not more be supplied to clients and request you to inform clients accordingly'. On receipt of this letter the Kampala branch wrote to the respondents on 8-11-39 (Ex. M. R. 3), 'We have to write that we have received a letter from our head office to-day to the effect that owing to present conditions the nails of your indent cannot be supplied. We write this for your information. Let us know<br>if there is anything else for us to do'. The syndicate referred to was one through which the appellants purchased the nails, it was not a manufacturing body but only a buying and selling agency for nails which might be manufactured anywhere. Later, at a date which is not specifically mentioned but appears to have been about March or April, 1940. the appellants sold and delivered to the respondents 120 cases of nails at Sh. 45 per case, the total cost with railway charges amounting to Sh. 6,137/19. When the respondents discovered some time later that, as would indeed appear to have been the fact, that these nails had been procured from the manufacturer in Italy in order to fulfil their contract, they wrote (Ex. T. O. 1, 23-5-40) claiming Sh. 5,600 damages, being the difference, Sh. 28, between the contract price and the market price in November, 1939, on 200 cases. The appellants replied (Ex. T. O. 2) that the respondents' indent had been cancelled and that the cases supplied to them had nothing to do with that indent, but contained nails for which the head office had been able to make a new contract at a much higher price. In the present action the appellants sued for Sh. 6,137/19,

the respondents pleaded tender of Sh. 537/19 and claimed to be entitled to setoff the sum of Sh. 5,600 for which they counterclaimed as damages for breach of the contract to supply 200 cases at $Sh$ . 17 per case.

The learned trial Judge held that, if the original contract had been rendered impossible of performance, that impossibility had been caused, not by the failure of something which was the basis of the contract in the minds and intention of both parties, but by a supervening event which never entered into the calculations of the respondents, and he held further, on the authority of Blackburn Bobbin Co. v. Allen (1918) 1 K. B. 540, that the failure of a source of supply upon which the appellants had relied, but in which the respondents were not concerned, did not excuse the appellant from the performance of the contract. He gave judgment for the respondents on the counter-claim at the rate of Sh. 18 per case."

Held (30-8-41).—The clause of the indent gave the appellants the power of refusing to ship the goods if for any reason they found it desirable to do so without being liable in<br>damages for non-shipment. This power had been exercised and due notification given<br>thereof to the respondents. In the circumstances the s ment under the original indent.

Appeal allowed.

Atkinson for the Appellant.

## M. L. Patel for the Respondent.

SIR JOSEPH SHERIDAN, C. J.—The decision of this case in my opinion depends on the construction to be placed upon clause 7 of the indent M. R. 2. The clause reads:-

"Should the goods or any part thereof not be shipped within the time specified, then, unless the cause of such non-shipment or late shipment be due to fire, war, tempest, frost, flood drought, strike, lock-out, accidents to mills, machinery, railways, steamers, etc., failure of suppliers or any other cause beyond human control (proof whereof shall be conclusively established by a certificate to that effect under the hand of the Secretary of the Chamber of Commerce at the place where the goods are being manufactured) the buyer shall within three days from the fact of non-shipment or late shipment being notified to him in writing by the vendors be entitled by notice in writing to reject the goods. Should the goods or any part thereof not be shipped for any of the excepted causes within two months after the expiration of the time specified, the buyer shall within three days after the expiration of the said period of two months be entitled by notice in writing to reject the goods. Save as aforesaid the buyer shall not be entitled to reject the goods by reason of non-shipment or late shipment, and in no circumstances shall he be entitled to compensation for non-shipment or late shipment."

As I interpret that clause whether the goods were shipped late or not shipped at all the defendants were not entitled to claim damages. In the present case it was not a case of delayed shipment but rather that the goods were not shipped and by "not shipped" I mean not shipped under the indent. The Exhibit M. R. 3-

"Kampala, D/8-11-39. Messrs. M. R. Patel & Co., Jinja. We have to write that we have received a letter from our head office to-day to the effect that owing to present conditions the nails of your indent cannot be supplied. We write this for your information. Let us know if there is anything else for us to do.

Your faithfully,

Rubber stamp of N. V. TWENTCHE HANDEL MAATCHAPPIJ.

Twentsche Overseas Trading Co., Ltd., Kampala,

Sd. Raval."

establishes that the defendants were notified on the 8th November, 1939, that the plaintiffs did not intend to ship the goods. To that for one reason or another the defendants took no exception. Possibly they considered that the plaintiffs could have made out a case of frustration of contract, but as to what they did think, if they thought at all, it is idle to speculate. Later on a shipment of nails was made and of that shipment the defendants purchased 120 cases at Sh. 45 per case. Still later the defendants came to the conclusion that these nails were nails which were to have been supplied under the indent. They may possibly have been ordered by the appellants' head office for the purpose of fulfilling the original indent, but the contract as between the parties under the original indent was off as notified by M. R. 3. (It would seem that the real reason for this was that the price of the nails had gone up.) Because those nails were packed and invoiced in such a manner as to identify them in the mind of the respondents with the nails under the original indent does not mean that they were shipped under that indent or that the defendants were entitled to obtain them at Sh. 17 per case. It was open to the defendants to purchase the nails at the increased price (see Exhibit T. O. 5) and this they did. Their counter-claim for damages cannot in my opinion succeed for the failure to ship, which as I have said was notified, was a failure to ship under the original indent and under clause 7 of that indent they were not liable to damages. I would allow the appeal with costs and direct that judgment be entered for the appellants as prayed the appellants to have the agreed costs in the High Court and the taxed costs on the counter-claim which is dismissed.

SIR NORMAN WHITLEY, C. J.—This appeal seems to me to turn entirely upon the construction of clause 7 of indent 6949 dated 28th July, 1939, under which the respondents ordered from the appellants 200 cases of wire nails at Sh. 17 per case for shipment in October. This order was accepted by letter from the appellants' Kampala branch dated 28th August, 1939, this was just prior to the outbreak of war. On the 8th November, 1939, the appellants' Kampala branch notified the respondents that "owing to present conditions the nails of your indent cannot be supplied". Nothing further happened until the 23rd May, 1940, when the respondents, who had meanwhile placed an order with the appellants for<br>similar nails at Sh. 45 per case and received delivery of the same, got the impression from the markings on the cases that these were nails which had been shipped against their original July order and which accordingly should have been supplied to them at the originally agreed price of Sh. 17 per case. They wrote to the appellants to this effect and claimed to set off against the sum due from them in payment of the later consignment at Sh. 45 per case damages represented by the difference between the original price of Sh. 17 per case and the market price in November, 1939, when the nails ought to have been but were in fact not delivered.

This claim was allowed by the learned trial Judge and it was clearly well founded if the appellants committed in respect of the original order at Sh. 17 per case a breach of contract sounding in damages.

The appellants, however, argue that they are protected by clause 7 of the indent which was the basis of the original contract. This clause reads as follows: —

"Should the goods or any part thereof not be shipped within the time specified, then, unless the cause of such non-shipment or late shipment be due to fire, war, tempest, frost, flood, drought, strike, lock-out, accidents to mills, machinery, railways, steamers, etc., failure of supplies or any other cause beyond human control (proof whereof shall be conclusively established by a certificate to that effect under the hand of the Secretary of the Chamber of Commerce at the place where the goods are being manufactured) the buyer shall within three days from the fact of non-shipment or late shipment being notified to him in writing by the vendors be entitled by notice in writing to reject the goods. Should the goods or any part thereof not be shipped for any of the excepted causes within two months after the expiration of the time specified, the buyer shall within three days after the expiration of the said period of two months be entitled by notice in writing to reject the goods. Save as aforesaid the buyer shall not be entitled to reject the goods by reason of non-shipment or late shipment, and in no circumstances shall he be entitled to compensation for non-shipment or late shipment."

The wording is somewhat curious. Mr. Patel put forward the view that "nonshipment" in the concluding sentence must be read as meaning "non-shipment within the specified time", whilst Mr. Atkinson for the appellants at first contended that the word non-shipment in the context does not make sense and should therefore on the authorities be ignored. I find it impossible to accept the view supported by Mr. Patel. If the parties had had that intention it would have been a simple matter for them to add the words which he would like to imply. Nor could I accept Mr. Atkinson's alternative. The Court must give full value to every word in a document if it is reasonably possible so to do, and I personally can see no difficulty in the way of doing so in the case of this clause. It seems to me that the word non-shipment is intended to mean and must be taken to mean exactly what it purports to mean and that the effect of the clause is that the sellers in Uganda say to the buyers in Uganda, "We agree that there shall be shipped to you in October 200 cases of nails at Sh. 17 per case, but in view of our long distance from the sources of supply in Europe we have to insist on the following conditions. You must realize the possibility that for some reason or other over which we have no control our head office in Holland may, when the time comes for shipment, inform us that they are unable to ship the nails or that they will only be able to ship them at some later date. In either of such events we refuse to lay ourselves open to being sued for damages or compensation either for your not getting the goods at all or for getting them late and we will only do business with you on the understanding that you agree not to hold us liable in damages for such nonshipment or late shipment. But whilst in no such case being prepared to entertain any claim for damages we appreciate that it is only fair that you should be protected in some way and accordingly we agree that if you receive from us notification that the goods have not been shipped by the due date you shall be entitled to send us notice in writing that you reject the goods, that is to say that you call the deal off and refuse to take them even if our head office find later that they are in a position to ship them and further you shall be entitled to send us a similar notice of rejection if we notify you that the goods have been or are going to be shipped late.'

That seems to me to be a perfectly business like arrangement and if as the parties did in this case they choose to enter into it, each is of course bound by it. Mr. Atkinson, I gathered, was prepared to accept this reading of the clause. That being so, the position which arose is completely covered by the clause. The head office had placed an order on the continent before war broke out with a view to supplying nails under this indent. When war broke out they found that they could not get the nails except at such an increased price as to make it impossible to sell to the buyers in Uganda at Sh. 17 per case or anything like that figure. The correspondence makes it abundantly clear that the head office, immediately they realized this, informed their Kampala branch that for the reasons given there could be no shirment under the indent and that when if ever the nails became available they could only be supplied against new orders at greatly enhanced prices. The Kampala branch promptly sent the respondents in Jinja notification of non-shipment and under clause 7 the latter could, if they wished, have called the deal off by giving notice of rejection, but equally under the clause they had no right to claim damages. They would appear to have appreciated that such was the position in as much as for months they made no complaint.

Where, if I may say so with respect, the learned trial Judge went wrong was, in holding that the nails received by the respondents seven or eight months later (May and June, 1940) were goods shipped under the original July indent stipulating shipment in October, 1939. He was probably misled by the arguments on frustration and impossibility of performance which on my reading of clause 7 have no application to the circumstances of this case. The appellants had in November, 1939, notified the respondents that there could be no shipment under the indent for the excellent reasons given and the respondents having agreed in advance that in such event they would have no right to compensation later bought at the increased price necessitated by war conditions. It was a mere coincidence that the cases delivered in May-June, 1940, happened to bear markings appearing to connect them with the indent of July, 1939, but the fact of markings corresponding goes no further than to show that the appellants had before the war placed with the manufacturers an order for nails to enable them to supply under the indent. It cannot in my opinion make the shipment in 1940 a shipment under the 1939 indent so as to entitle the respondents to appropriate the nails to that indent under which they had long ago been duly notified.no shipment would be made. The respondents had agreed to buy at the enhanced price and the nails were shipped in 1940 on that understanding.

I would allow the appeal with costs, setting aside the decree and directing that judgment be entered for the appellants for the amount claimed in the plaint with interest as claimed. The appellants to have also costs of plaint agreed at Sh. 750 and costs of the counterclaim to be taxed.

SIR HENRY WEBB, C. J., after stating the facts, continued as follows: -In my judgment the decision of this case turns, not upon any question of impossibility of performance or frustration, but upon the meaning and effect of clause 7 of the indent, No. 6949. That clause, which I have already quoted, is not happily worded; I find it difficult to distinguish between non-shipment and late shipment in reference to the specified time, which is merely "Probably October"; if the goods were not shipped in October there would be both a non-shipment within the specified time and also a late shipment. It may be that if the agreed "Time of shipment" had been something different, e.g. shipment in different consignments at different dates, the words "non-shipment" and "late shipment" might each bear an appropriate meaning or perhaps "non-shipment" may have been intended to cover the event which happened in this case, where the vendor informs the buyer that he does not propose to ship the contract goods at all. In any event the meaning of the clause appears to me to be plainly this, if the goods are shipped late, or are not shipped at all, then the buyer may, provided that he does so in due time, give notice that he will not take delivery of the goods if and when they arrive, but, if he does not avail himself of this right, then he cannot, as but for the clause he might, accept the goods and claim compensation for their late arrivals, nor can he claim compensation if they are never sent at all. From the point of view of the buyer this may seem to be a stringent provision, and one gravely limiting his ordinary contractual rights, but that is not to say that if a party has agreed to such a term he is not bound by it, and that the appellants were careful to guard themselves is further shown by the sentence which appears at the end of the acceptance (Ex. M. R. 1) dated 28-8-39, signed by the Managing Director of the respondents' company, "Prices without engagement unless otherwise stated in this report". At the trial the respondents relied on the decision in Wills $v$ . Cunningham (1924) 2 K. B. 220. In that case there had been a contract for the delivery of goods subject to the condition "Unforeseen contingencies excepted" and Greer, J. in giving judgment for the plaintiffs, who complained of non-delivery, said:

"It is not enough for the defendants to show that it was impossible for them to get the goods from the particular source they contemplated when entering into the contract. If they could have obtained goods elsewhere which would have satisfied the contract they were bound to do so."

In my opinion that decision has no bearing in the present case, where the clause upon which the appellants rely is so entirely different. Clause 7 has, as I interpret it, the effect of giving the vendors the power of refusing to ship the goods, if for any reason, such as a rise in prices, they find it desirable to do so, without being liable in damages for non-shipment.

Counsel for the respondents attempted to argue that, as the nails sold to them were those ordered in order to fulfil this contract, their shipment, whenever it took place, had the effect of appropriating them to the contract. This point was neither pleaded, nor rasied in the Court below, and as, apart from this, the contract called for delivery f.o.r. Mombasa. I am of opinion that there is no substance in it.

In my opinion, therefore, the appeal should be allowed with costs and judgment entered for the appellants for the sum claimed with Sh. 750 costs, as agreed, in the High Court, and the counterclaim dismissed with costs.