Twentsche Overseas Trading Company, Limited v Uganda Sugar Factory, Limited, Uganda Sugar Factory, Limited, v Twentsche Overseas Trading Company (Privy Council Appeal No. 26 of 1943) [1945] EACA 1 (1 January 1945)

# JUDICIAL COMMITTEE OF THE PRIVY COUNCIL

$\overline{\cdots}$

Before LORD THANKERTON, LORD WRIGHT, LORD GODDARD, SIR MADHAVAN NAIR AND SIR JOHN BEAUMONT

TWENTSCHE OVERSEAS TRADING COMPANY, LIMITED, Appellants ν.

## UGANDA SUGAR FACTORY, LIMITED, Respondents

# UGANDA SUGAR FACTORY, LIMITED, Appellants

## TWENTSCHE OVERSEAS TRADING COMPANY, LIMITED, Respondents (Consolidated appeals)

# From the Court of Appeal for Eastern Africa

## Privy Council Appeal No. 26 of 1943

### Contract—Collateral agreement—Interpretation—Frustration.

By a contract in writing dated 12th August, 1939, the appellants, a company incorporated in Holland and having a branch at Kampala, Uganda, agreed to supply and the respondents, a British company, agreed to purchase three miles of rails of certain specifications. The references in the specifications to "Krupp" did not indicate a source of supply; they were merely items in the specification of the goods required so that they should fit the rails manufactured by Krupp<br>which the respondents were using. Deliveries were to take place in November, December and January, and on 3rd September Great Britain declared war on Germany. The appellants sought to be excused from their failure to deliver the goods on the ground that the rails specified under the contract were to be rails manufactured only by a German firm called Ferrostaal and that the supervening war had rendered the performance of the contract impossible and illegal. They based their contention on the following allegations—

- (a) that there was a collateral oral agreement between the parties that the goods should be manufactured by and procured from the Ferrostaal Company in Germany, and - (b) that, even if there were no such collateral agreement, both parties contemplated that the rails were to come from Germany.

The appellants failed to prove the collateral oral agreement.

Held (20-12-44).—That there was nothing in the contract itself requiring that the rails should be procured from Germany and as the origin of the rails did not constitute the basis or foundation of the contract the defence of frustration failed.

Decision of Court of Appeal for Eastern Africa (set out below) affirmed.

Heilbut Symons and Co. v. Buckleton (1913) A. C. 30

Fibrosa Spolka Achoyjna v. Fairburn Lawson Combe Barbour, Limited (1943) A. C. 322.

Constantine S. S. Line v., Imperial Smelting Corporation (1942) A. C. 154. re Badische Company, Limited (1921) 2 Ch. 331, referred to.

JUDGMENT (delivered by LORD WRIGHT).—This is an appeal from a judgment of the Court of Appeal for Eastern Africa at Mombasa, reversing a decision in favour of the appellants of the High Court of Uganda, sitting at Kampala, Uganda. The Court of Appeal held that the respondents were entitled to recover damages in an action brought by them as plaintiffs against the appellants as defendants for breach of a contract to deliver steel rails. But the Court decided an issue as to the contract price in favour of the appellants. On that part of the decision the respondents have brought a cross-appeal.

The appellants are a company incorporated in Holland, having a branch at Kampala, Uganda. The respondents own and operate a sugar factory in Uganda, on and for the purposes of which they operate about 72 miles of railway.

The contract was in writing and was contained in the following document: —

Kampala,

12th August, 1939.

N. V. Twentsche Overzee Handel Mij.

Twentsche Overseas Trading Company, Limited.

To: Messrs. Uganda Sugar Factory, Limited,

Lugazi.

### Dear Sir.

We beg to report as follows on your order as per your Indent No. 92/Tech.

#### Yours faithfully.

## N. V. TWENTSCHE OVERZEE HANDEL MATTSCHAPPIJ

## (Twentsche Overseas Trading Company, Limited.) (Sd.) W. SAMUEL.

No. $92$ /Tech.

DESCRIPTION OF GOODS: 3 (Three) MILES OF NEW UNMOUNTED LIGHT RAILWAY TRACK for 24 in. Gauge, consisting of 70 mm. high 20 lb. rails, Krupp Section K. 10 C in dead length of 5 m. with 2,900 steel sleepers per mile 130 mm. wide, weighing about 11 lb./yd., Krupp Section K. 105B of 1,000 mm. cut off length, with closed ends and with 2 holders pressed on, complete with all accessories, i.e. fishplates, fishbolts, nuts, clips, clipbolts and nuts, etc. Approximate weight per mile of track, 50,300 kg.

PRICE £390 per mile of track c.i.f. Mombasa, not landed.

TERMS: At 90 days sight in London.

SHIPMENTS: One mile each in November, 1939/December, 1939/January, $1940.$

## UGANDA SUGAR FACTORY, LIMITED.

For and on behalf of: $-$

## (Sd.) R. G. VEDD, $\mathcal{L}$

General Manager.

## ORDER ACCEPTED BY H. O. TECHNICAL O. C. 1244

Please return one copy duly signed by you.

Prices without engagement unless otherwise stated in this report.

This document to which both appellants and respondents were parties, and which both Courts have held to embody the bargain between them, contains no provision as to the source from which the appellants were to obtain the goods. The reference in it to Krupps does not indicate a source of supply; it is merely an item in the specification of the goods required by the respondents because they were using rails manufactured by Krupps, and it was necessary that the rails ordered under the contract should correspond to those made by Krupps, so that the new rails should, when supplied, fit the rails already in use. The appellants

claimed however that the rails specified under the contract were to be rails manufactured by a German firm called Ferrostaal and by that firm only. On this they base their claim to be excused from their failure to deliver the goods, because to do so, they say, would have involved a dealing with alien enemies and hence the performance of the contract became impossible and Illegal. Their case was that the manufacture of the goods in Germany and their importation from Germany was the only mode of fulfilling the contract and was the only mode of fulfilment which was contemplated by the parties and was the condition upon which the appellants entered into the contract. In the first place they based this contention on an allegation that there was a collateral oral agreement between them and the respondents that the goods should be manufactured by and procured from the Ferrostaal Company in Germany. They failed on that warranty contention as both the trial judge and the Court of Appeal held. It depended on proving an oral agreement said to have been made about three weeks before the 12th August, 1939. As they failed on that issue of fact, it need not now be further considered. Whatever was said between the parties at the earlier date was superseded by the final agreement which the Court of Appeal held was contained in the document of the 12th August, 1939. The Court of Appeal particularly relied upon the considerations laid down in the House of Lords in Heilbut Symons and Co. v. Buckleton (1913) A. C. 30, especially in the opinion delivered by Lord Moulton at p. 47 that collateral contracts must from their very nature be rare. A collateral agreement must be in every sense a complete legal contract, and the effect must be to vary or to add to the terms of the contract. "Such collateral contracts are viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contracts but the existence of an *animus contrahendi* on the part of all the parties to them must be clearly shown. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have effect of lessening the authority of written contracts by making it possible to vary by suggesting the existence of verbal collateral agreements relating to the same subject matter." Their lordships have quoted these words because they go to help the decision of the main contention as to frustration relied on by the appellants. If, they say, the contract does not expressly require that the rails should be supplied by the Ferrostaal Company and if there is no collateral warranty to that effect, they are still entitled to be relieved from the obligation to supply. because to the knowledge and intention of both parties, irrespective of contractual stipulation, the goods were to come from Germany and as this had become illegal and impossible the contract was frustrated. It was not true, they said, that there was not frustration unless there was a contractual obligation that the goods were to come from Germany.

The word frustration is here used in what may now that it has received statutory recognition in the Law Reform (Frustrated Contracts) Act, 1943, be regarded as a technical legal sense. It is a sort of shorthand: it means that contract has ceased to bind the parties because the common basis on which by mutual understanding it was based has failed. It would be more accurate to say, not that the contract has been frustrated, but that there has been a failure of what in the contemplation of both parties would be the essential condition or purpose of the performance. Here it is said that both parties contemplated that the rails were to come from Germany and, when the possibility of that being done, died, the contract died with it.

It is not now necessary to examine the various decisions which have sought to define and explain the nature of frustration. It is enough to refer to the recent decisions of the House of Lords in Fibrosa Spolka Achoyjna v. Fairburn Lawson Combe Barbour, Limited (1943) A. C. 32 and Constantine S. S. Line v. Imperial *Smelting Corporation* (1942) A. C. 154, in which the relevant principles are defined and explained. In the former the goods were under the contract which was made before the outbreak of war between an English and a Polish company sold for delivery c.i.f. Gdynia, which at the date of the contract was Polish but when the time came for delivery had become by occupation an enemy territory. There was no difficulty there in holding that the contract was frustrated by intendment of law having regard to its express terms. It could not be performed except by trading and intercourse with the enemy. Whether frustration occurs or not, depends on the nature of the contract and on the events which have occurred. Here there was nothing in the contract itself which called for the appellants obtaining the rails from Germany. So far as concerns the respondents the buyers, their evidence was that it was purely a matter for the appellants where the rails came from. There were many possible sources of supply, from manufacturers in England, or America, or Belgium, or France, or Germany. The contract left the respondents with a free hand in the matter of how they performed their contract. The trial judge found that "the balance of probability is that to the knowledge of both sides these goods were to be supplied by Ferrostaal of Germany"; or as he puts it later in his judgment "it was in the contemplation of both parties that these rails should be supplied by Ferrostaal of Germany." In the Court of Appeal a more qualified view was taken which is in their Lordships' opinion the most that can be said in support of the appellants' contention. Webb, C. J., puts his opinion clearly. "I think," he said, "all that the evidence established is that the defendants contemplated getting the rails from Ferrostaal and the plaintiffs knew this and were content, but it did not establish that the defendants were bound to supply Ferrostaal rails and none other—clearly all that the plaintiffs insisted upon was rails that would be interchangeable with their Krupp rails." Thacker, J., coming to much the same conclusion, thought that "the respondents cancelled the contract after the war because they believed that they were protected by the condition which they would have had if they had proved, as they did not, the collateral agreement.'

In their Lordships' judgment, the appellants were not entitled to invoke the doctrine of frustration on the ground either of the nature of the contract or of the facts. The war did not terminate the contract having regard to its actual terms. Shipments from Germany was not merely no part of the express contract but it could not be described as the basis or foundation of the contract within the meaning of the frustration doctrine. It was simply the convenient method of performing the contract which the sellers contemplated. Mr. le Quesne submitted that the appellants lost the opportunity which they possessed before the war of shipping from Germany. That may be true but it was their own affair. Their Lordships may here again refer to Lord Moulton's words quoted above. To accede to the appellants' arguments would be to impair the confidence of commercial men in the conditions of their contracts. It would lessen the authority of written contracts not merely as Lord Moulton was contemplating by the too easy introduction of collateral agreements but by lax or too wide application of the doctrine of frustration. Modern English law has recognized how beneficial that doctrine is when the whole circumstances justify it, but to apply it calls for circumspection.

In the present case a carefully drawn specification has defined precisely what are the goods called for by the contract. That specification contains no term intended to define what is to be the source of the goods. The contract is silent on the point, To introduce into the specification the term that the goods should be the manufacture of Ferrostaal would be to vary the contract by defining what the contract has left open. And in considering the question of frustration the same result would follow. In a case like this the contract is not frustrated, because only one of the many possible ways of performing it has become illegal and impossible.

Their Lordships do not know of any strictly parallel case in which a contract has been held to be frustrated. The appellants did indeed rely upon words of Russell, J. (as he then was), in re Badische Company. Ltd. (1921) 2 Ch. 331 at p. 377. He said of the contract he was then dealing with "there is no doubt in my mind that this contract was to the knowledge of both parties a contract for the supply of goods to be obtained from Germany." It would be proper to add the words "and to be obtained only from Germany," because it is in this way that he states the position at p. 373, "another ground suggested was that the parties to the contract contracted on the footing that the goods sold would only come from Germany and that accordingly the continued existence or further performance of the contract would involve intercourse with the enemy or tend to assist the enemy." These words of the learned Judge, while no doubt applicable to the facts and documents of this case cannot be extended to cover a case like the present, where, as their Lordships have held, the parties to the contract did not contract on the footing or common assumption that the goods sold would come only from Germany.

It is scarcely necessary to observe that according to the views of law now accepted the doctrine of frustration may apply to a contract for unascertained goods.

The present appellants, who were respondents in the Court of Appeal, succeeded in their cross-appeal that the words in the document of the 12th August, 1939, superseded the specific price named in the earlier part of the document and substituted a reasonable price. This decision involved a considerable advantage to the present appellants, and afforded justification for the order of the Court that the present respondents as they had failed on the issue of the price should not have the costs of the appeal, though they were given the costs of the trial in the first Court. Before their Lordships, the present respondents lodged a crossappeal, which in their Lordships' opinion was bound to fail, was not persisted in. Their Lordships will accordingly dismiss both the appeal and the cross-appeal. They would normally do so with costs in either case, but to avoid separate taxations they will order that the costs of the respondents in the appeal should be reduced by a set-off of one-eighth part thereof, on account of the costs of the cross-appeal.

They will humbly so advise His Majesty.

#### JUDGMENTS OF THE COURT OF APPEAL FOR EASTERN AFRICA

SIR JOSEPH SHERIDAN, C. J.—I have had the advantage of reading the judgment of the learned Chief Justice of Tanganyika with which I concur.

I think it has to be decided that the oral evidence that the rails were to come from Ferrostaal was inadmissible and that it cannot be admitted under proviso 2 of S. 91 of the Evidence Ordinance. I have been unable to find any case in the Indian Law Reports which might be regarded as an authority for admitting the evidence. (Section 91 of the Evidence Ordinance is identical with section 92 of the Indian Evidence Act.) It appears to me that any oral agreement that the rails were to come from Ferrostaal and Ferrostaal only would be inconsistent with the terms of the written contract and so not covered by proviso 2. It also seems to me that the contract between the parties is contained in the letter of the 12th August which contains the printed clause "Prices without engagement unless otherwise stated in this report." One may well ask why is that clause there unless it is to be operative and I agree with what my brother Webb has said as to Vedd's failure to read it not excusing him from being bound by it, as I also agree with the plain meaning of the clause as stated by him.

The Sale of Goods Ordinance has been referred to in the course of the case. All I wish to say about it is that if the case had rested on a verbal contract the

party relying on such contract could not have been defeated by reason of the provisions of section 6 of the Sale of Goods Ordinance not having been complied with. As authority for this I would refer to Brutton and Anor. v. Branson (1898) 67 L. J. Q. B. 827 and Roe v. Naylor (1918) 87 L. J. K. B. 958. At p. 962 of the report Swinfen Eady, M. R., in his judgment said "According to the County Court Rules, where a defendant relies upon the Sale of Goods Act, 1893, he has to plead it specially. Order $X$ rule 18 of the County Court rules provides that where in any action the defendant relies on any statutory defence he has to give particulars of it in his statement; and it has been held that the defence that there is no memorandum in writing under section 4 of the Sale of Goods Act, 1893, is a statutory defence within the meaning of that order. That was held by the Divisional Court in the case of *Brutton v. Branson* (1898) 67 L. J. Q. B. 827; (1898) 2 Q. B. 219."

Order VI rule 5 of the Civil Procedure Code contains similar provisions to Order 19 rule 15 of the English Rules. Rule 5 of the Uganda Rules provides: —

"The defendant or plaintiff, as the case may be, must raise by his pleading all matters which show the action or couunterclaim not to be maintainable, or that the transaction is either void or voidable in point of law, and all such grounds of defence or reply, as the case may be, as if not raised would be likely to take the opposite party by surprise, or would raise issues of fact not arising out of the preceding pleadings, as, for instance, fraud, limitation act, release, payment, performance, or facts, showing illegality either by statute or common law."

In the present case section 6 of the Sale of Goods Ordinance was not pleaded and so had the contract been a verbal contract, it could not in my opinion have been invoked.

In the result I find myself in agreement with my brother Webb's decision that the decree of the High Court should be reversed and the case remitted for the assessment of damages, that the appellant should have their costs in the High Court but that there should be no order as to the costs of the appeal.

SIR HENRY WEBB, C. J.—This was an action for the breach of a contract to deliver three miles of light railway track with accessories at the price of £390 per mile. It was pleaded and agreed that the contract was contained in a letter dated 20th July, 1939, from the plaintiffs to the defendants and a letter from the defendants to the plaintiffs dated 12th August, 1939. I was at one time inclined to think that, having regard to the evidence of Mr. Samuel, the defendants' local manager at the time—"They made a counter-offer at £390—1 closed the deal at £390"—a binding verbal contract had been concluded on 20th July, but on further consideration I am satisfied that this was not so, and that the interview of that date was only a discussion as to the goods to be supplied and bargaining as to the price which the plaintiffs were prepared to offer. I am also satisfied that the plaintiffs must have known that Mr. Samuel had not himself authority to conclude a contract, but would merely submit the offer to the defendants' head office; the idea of a verbal contract having been concluded is, to my mind, wholly inconsistent with the plaintiff's letter of 20th July, "We confirm our order," as well as with their plaint in the action. The letter of 12th August was, in my opinion, not an acceptance of the plaintiff's offer, but a counter-offer, for it contains new and different terms, in particular the printed clause "Prices without engagement unless otherwise stated in this report." Two copies of this letter were sent to the plaintiffs who were asked to return one copy signed by them, and one was returned duly signed by their manager, Mr. Vedd. In my opinion this document, so signed on behalf of the plaintiffs, constitutes the contract between the parties. Mr. Vedd may have signed it without reading it, or without having appreciated its effect, but there is no suggestion that he had not ample opportunity of considering it, and in these circumstances the plaintiffs are bound by it: see L'Estrange v. Graucob (1934 2 K. B. 394). The plain meaning of the clause that I have quoted is that, though a price may be mentioned, the defendants are not to be understood as contracting to supply the goods at that price. Mr. Christie has argued that the clause should be rejected as being repugnant to the earlier words, "Price: £390 per mile of track..." and he has cited authorities, such as Furnival v. Coombes (134 E. R. 756), Glynn v. Margetson (1893 A. C. 351), Kauffman v. British Surety Insurance Company (45 T. L. R. 399), to the effect that in a contract partly in print and partly in writing the written words are to be preferred, in the event of an apparent contradiction, as being the immediate terms selected by the parties to express their intention in that particular case, whereas the printed clauses are intended only to apply to what is contemplated as being the usual or ordinary circumstances. This, no doubt, is often so, but it is well known that a decision as to the meaning of one document is an unsafe guide as to the interpretation to be placed upon another. In my opinion there is no necessary repugnancy between the two sentences here: the printed sentence is a general warning, or guide as to the construction to be placed upon the document as a whole; it says, in effect, "Remember that though we may have quoted a price higher up we are not to be bound to supply at that price unless we have added words indicating that it is a firm price". So far from the printed words being controlled by the written, I would say that on the reasonable construction of this document the exact reverse is the case, and cases like Forbes $v$ . Git (1922) 1 A. C. 256) and Salmon v. Duncombe (11 A. C. 627) are authorities against Mr. Christie's argument rather than for it. By its very words the printed clause contemplates that a price will be mentioned; if, then, the mere mention of a price is to cancel the effect of the printed clause the latter is bound to be always nugatory. which we can hardly suppose to have been the intention of the draftsman.

But though, in my judgment, this clause of the contract placed the defendants in a very favourable position, they did not bother to rely upon it either in the steps that they took after the outbreak of war, or in their pleading and at the trial. And the reason, I think, is obvious, they regarded as their main ground of defence the allegation that the plaintiffs' order had been gummed, with the plaintiffs' consent, into the defendants' Indent Book and had thereby become subject to various printed conditions, one of which, condition 7, denied the buyer the right to claim compensation for non-shipment or late shipment. But the learned Judge found as a fact that the defendants had failed to prove that the order had been put into the Indent Book with the plaintiffs' knowledge and approval, or that the conditions contained therein had been brought to their notice, and he held that this defence failed.

The other ground of defence, and that upon which the defendants succeeded in the Court below, was that there was a collateral oral agreement that the goods should be supplied by a German firm, and owing to the outbreak of war the performance of the contract had become illegal and impossible. According to English authorities I think that evidence of any such agreement was inadmissible, for it is well settled that in contracts to which the Sale of Goods Act applies the memorandum "must contain all the material terms of the contract as made and charged, leaving none to be proved by parol evidence"; see Leake on Contracts 7th Ed. 184-188, Greaves v. Ashlin (170 E. R. 1433), Bailey v. Woolstone (42 Law Journal Magazine, $p$ 457); and the contract here is silent as to the source from which the goods were to come. It may be, however, that the words "any matter required by law to be reduced to the form of a document" in section 91 of the Uganda Evidence Ordinance, over-ride the principle of English law, and allow evidence of a "separate oral agreement" to be given under proviso 2. It is unnecessary for me, in the view that I take, to express an opinion upon this point, though I think that the evidence was inadmissible for the reason that it was inconsistent with the terms of the contract; but, even if it was admissible, it did

not help the defendant's case for the reason that, as I think, it clearly did not establish the existence of a binding contract to supply goods of the manufacture of a particular German firm, and it is only when the evidence established that the separate oral agreement itself constitutes a contract between the parties that it can avail the party relying upon it; see *Heilbut v. Buckleton* (1913 A. C. 47). Here, I think, all that the evidence established is that the defendants contemplated getting the rails from Ferrostaal and the plaintiffs knew this and were content, but it did not establish that the defendants were bound to supply Ferrostaal rails and none other—clearly all that the plaintiffs insisted upon was rails that would be interchangeable with their existing Krupp rails.

In view, however, of what was, in my opinion, the true effect and meaning of the contract between the parties, namely the letter of 12th August, questions as to the admissibility of oral evidence and its effect are immaterial. What the defendants were bound to do was to supply the goods specified, one mile in each of the months of November, 1939, December, 1939, and January, 1940, but, as they were not bound in the matter of price, they could have complied with their obligation by tendering the goods in due time at a reasonable price-Sale of Goods Ordinance, section 10 (2)—whatever that might be in the circumstances. But what in fact happened was that, believing themselves to be protected by Condition 7 of the Indent, they purported to cancel the contract on 5th October, and the plaintiffs by their letter of 13th November accepted that as a repudiation of the contract. The defendants have, therefore, as it seems to me, broken their contract and they are liable to pay to the plaintiffs such damages as, subject to the terms of the contract, the latter can prove that they have sustained.

In my opinion the decree of the High Court should be reversed, and the case remitted for the assessment of damages: the appellants should have their costs in the High Court but there should be no order as to the costs of the appeal.

THACKER, J.-I have no apology to make when I say that this appeal has exercised me more than a little. The difficulties are due to the fact, as I see it, that certain points of law which arise do not seem to have been sufficiently argued in the lower Court. My principal difficulty has been to decide wherein lay the contract between the parties. The parties themselves do not appear to be quite certain of this. It is of course a matter of law for the Court to decide. The pleadings taken by themselves show that both the plaintiffs and respondents considered the contract to be contained in the letter of 20th July, 1939, from the plaintiffs to the defendants and in the defendants' letter of 12th August, 1939, to the plaintiffs.

However, the arguments before this Court were not so definite. During the course of his argument before this Court, Mr. Christie for the appellants said, "The contract is contained in the order of 20th July and the letter of 12th August." Mr. Atkinson for the respondents said "The contract is in Exhibits TO. 3 and TO. 4" (i.e. the same two documents) and again "The contract was not concluded until the letter of the 12th August, 1939". Mr. Atkinson went on to point out that the terms of the 12th August document differed in two respects from the terms in the 20th July letter namely (a) in the matter of shipment; (b) and in the clause "prices without engagement unless otherwise stated." Later Mr. Atkinson said "The contract is in the letter of 12th August." Mr. Ishmael, later, for the appellants said "The contract is contained in the letters of 20th July and 12th August. This has been agreed all along." To that Mr. Atkinson interposed "No, the contract is the 12th August letter." Later Mr. Ishmael said "We say the contract was made by the 20th July letter." It would seem to me that by then (namely at the end of the appellants' submissions) Mr. Ishmael appreciated the possible risk of conceding that the letter of 12th August formed any part of the contract, for the reason that it contains the clause "Prices without engagement unless otherwise stated in this report."

Now, as I say, this particular aspect of the case, namely, wherein exactly lay the contract does not appear to have been argued or considered at length in the Court below, and it is clear that the two parties when in the Court below were satisfied that the contract was contained in the letter of 20th July from the plaintiffs to the defendants and that of 12th August from the defendants to the plaintiffs. Until the point of the "without engagement" clause was raised by this Court, both parties and their advocates regarded the contract as consisting of the two letters of 20th July and 12th August. In other words, the parties would seem to have regarded the 20th July letter as a firm order or offer to purchase rails, which was accepted by the respondents on the 12th August, after reference to their head office. The two questions whether the contract did not in fact consist of the oral bargain made on the 20th July or whether, if it did not, it was contained solely in the letter of 12th August do not appear to have been argued or considered in the Lower Court. Since the respondents did not plead the statutory defence of section 6 of the Uganda Sale of Goods Ordinance, the oral agreement of 20th July seemed to me at first and for some time after judgment was reserved to have some importance. The evidence as to the making of an oral agreement on 20th July is as follows: $--$

Werner Walter Samuel (page 9)—"On 20, 7, 39 I received a telegram from head office and went out to Lugazi and saw Vedd. Mr. Raval went with me. I told Vedd and Nanji Kalidas that I could now supply the goods to their specification at £400 a mile. They made a counter-offer at £390. I closed the deal at £390".

R. V. Raval (page 19).—"I went to Lugazi in July with Samuel: present Vedd, Nanji, Samuel and self. We submitted offers to Nanji for track with Krupp specification at £390 a mile. They said they were prepared to buy for shipment Nov., Dec., Jan. They compared the catalogue of Krupp and Ferrostaal; they had the latter in their office. Then Samuel started to write an indent: Vedd said he would give the specification in writing to avoid mistake and he got his clerk to type it from something he got from a file which may be from Krupps. Told the clerk to type out the specification the same as in the file. Vedd gave us 3 copies; one for our file, one to be pasted in the indent book, and one to be sent to our head office. The clerk handed the typed copies to Samuel. I had no other discussions about the matter".

N. K. Mehta (page 20)—"Next meeting was at Lugazi, Samuel and Raval came to Lugazi, Vedd and I were there. An order was given to Samuel and Raval for 3 miles railway $@$ £390. No books were produced as far as I know I have never seen one of defendant's indent books. The bargain was concluded, we all had tea and they went away.'

R. G. Vedd (page 23)—"First saw defendants about this contract in May and June, 1939; saw de Boer and Samuel, and eventually placed a contract with them. Price was fixed and the contract concluded."

As I say it seemed to me from the evidence of these witnesses (the first two for the defendants and the latter two for the plaintiffs) that an oral contract was concluded between the parties for the supply and delivery of three miles of light railway track with accessories at the price of £390 per mile. However the appellants do not rest their case on the oral agreement and on further consideration, I have come to the conclusion that all that happened on the 20th July was an offer to purchase on terms provisionally agreed to by the respondents but subject to acceptance by the respondents' head office. But I cannot consider the letter of the 12th August as an acceptance of the 20th July letter for the reason that it contains new and different terms, in particular the printed clause "Prices without" engagement unless otherwise stated in this report." It would therefore seem that the letter of 12th August was not an acceptance of the offer of 20th July but a counter-offer, accepted by the appellants, when they signed, through their manager, Mr. Vedd, and returned to the respondents one copy of the two copies of the

letter of 12th August which had been sent to them by the respondents. In my judgment this document constitutes the contract between the parties and it would seem that the letter of 20th July is not even part of the contract. It matters not that Mr. Vedd signed it without noticing or reading the terms of this document of 12th August—he had every opportunity of so doing and the appellants are bound by it (L'Estrange v. Graucob, Ltd., 1934 2 K. B. 394). This brings me to the next legal point which does not appear to have been discussed in the lower Court, namely the meaning of the clause "Prices without engagement unless otherwise stated in this report" which is contained in the memo of 12th August. The effect of this woud appear to be that, although the defendants quote the price of £390 per mile, they are not to be taken as undertaking to supply at that price. I think that the phrase means that the price agreed to carries with it no contractual or pecuniary liability based on that particular figure in so far as the defendants are concerned, in other words if by some chance the goods could not be supplied at £390 per mile, then the respondents were entitled to charge a reasonably higher rate.

One ground of defence in the lower Court was that there was a collateral oral agreement that the goods were to be supplied by the Ferrostaal Company in Germany and that owing to the outbreak of the war the fulfilment of the contract became illegal and impossible. Evidence to this effect was admitted in the lower Court.

Upon this defence the defendants succeeded in the lower Court but, in my view, such oral evidence was inadmissable, as varying the terms of the contract. in that it tended to restrict the area from which the goods were to come. Moreover I am not wholly satisfied after much consideration that it was a condition of the contract that the goods were to come from the Ferrostaal Company and from no other manufacturers. I have little doubt that both parties understood or contemplated that such would be the case but that is scarcely the same thing as saying that it was a condition of the contract. When I ask myself the question, looking at the terms of the document of 12th August, could the appellants have refused to accept rails made, say, by an English manufacturer I can only answer, assuming that the rails conform in every respect with the specification demanded in the contract, that they could not legally do so. However, since in my view the oral evidence was inadmissible, the point is not of importance.

In the result therefore the position seems to be this. That the respondents had legally contracted to supply one mile of rails in each of the months of November and December, 1939, and January, 1940, but that they were not bound to supply at £390 per mile, and were not bound in the matter of price at all. It would have been a sufficient execution of the contract if they had tendered these rails to the Krupp specification required in the time contracted for at a reasonable price. Instead of doing this, doubtless influenced by their consideration of the protection which they thought that condition 7 of the printed indent clauses gave them but which the learned trial Judge found as a fact had never been brought to the appellants' notice, the respondents cancelled the contract by their letter of 5th October and the appellants accepted that cancellation as a repudiation of the contract by the respondents. The respondents are therefore liable in such damages for this breach of contract, as can be proved to have been sustained, subject of course to the effect of the clause "Prices without engagement, etc..."

It would seem probable that the measure of damages will be, on account of this clause, substantially lower than if the clause had not been inserted.

In my judgment the decree of the High Court should be reversed and the case sent back for the assessment of damages, and that the appellants should have their costs in the High Court and that there should be no order as to the costs of this appeal.