1. This is a suit for the recovery of the sum of Rs. 5500 as damages sustained as the result of breach of a contract to deliver 2000 tons of manganese ore. The defendants carry on business, inter alia, in the district of Singhbhum and own a manganese mine in the district of Vizagapatam. Apparently, the price of manganese ore varies considerably, from time to time, and when prices are low it is not profitable to work a considerable number of mines actually existing in this country. In recent years however, the price of manganese has risen, with the result that a large number of small mines which had not been worked for years, were again brought into operation, and a considerable number of new firms and companies sprang up, dealing in production and sale of manganese ore. The ore varies in quality, that is to say, the actual amount of manganese in the material taken from the mine varies from 40 to 50 per cent. English and European buyers are interested mostly in ore of the higher percentages whereas in the East and in Japan there is a demand for the lower percentages. The principal area in India from which manganese ore is derived is the Central Provinces, but there are one or two large mines in Vizagapatam also.
2. The defendants apparently had entered into a contract with a man named Patel, under which he agreed to take the whole of the output of their mine. Owing to his failure to fulfil this contract, the defendants found themselves with 2000 tons of manganese ore 41 per cent. upon their hands in the early part of 1936 and they were anxious to sell it. The plaintiffs heard of this and wrote a letter dated 29th April 1936, to the defendant's Manager at Salur in Vizagapatam, saying that they understood that the defendants had 2000 tons of manganese ready at Vizagapatam port, and asking for his lowest quotation, with an approximate idea of its analysis. The Manager was G.E. Bennett, and he replied on 1st May, telling the plaintiffs that he would forward their letter to his Head Office who would take up the matter direct with them. On 16th May, the defendants wrote saying that they had 2000 tons of manganese ore for disposal and quoted a rate, which they stated was the same as the plaintiffs had quoted them for some previous parcel, that is to say, Rs. 9-2-0 Ex Stack Docks, for 41 per cent. grade, plus or minus 0-4-0 unitage. Further they gave the approximate analysis and said that if the terms were acceptable to the plaintiffs they would like an advance of 50 per cent. against value. They concluded by asking the plaintiffs to send their reply 'to our Manager at Salur, a copy of which may be sent here for our information.'
3. The meaning of the term 41 per cent. grade plus or minus 0-4-0 unitage is that the material contained 41 per cent. ore and that it was to be sold upon the condition; that if it turned out to be one or more per cent higher or lower than the figure quoted, then the matter would be adjusted by adding or deducting 0-4-0 per ton for each unit of percentage higher or lower than 41 per cent; thus 41 per cent. being. Rs. 9-2.0, 40 per cent. would be Rs. 8-14.0, and 42 per cent. would be Rs. 9-6-0 and so on.
4. In response to the defendant's invitation to correspond with their Manager, the plaintiffs wrote to him at Salur on 20th May, acknowledging the letter from his Head Office and complaining that the price quoted was a little too high. The plaintiff's were prepared to purchase the lot at Rs. 8-8.0 per ton, Ex Stack, Vizagapatam Harbour, on the basis of 41 per cent. manganese, with a unitage of 0-4-0 up and down, rejection below 40. It was to be understood also that silicia contents should not exceed 7.5 per cent. and their offer-was subject to the Manager's confirmation by the 27th instant. He replied on 22nd May and referred to the plaintiffs quotations in 1935 at Rs. 9-2-0, saying that the price of manganese had slightly hardened. He was imable to accept the plaintiffs' offer but was prepared to accept Rs. 8-14-0 per ton, and asked the plaintiff's to let him have their acceptance or refusal of this offer before the 28th as he had another buyer waiting. The plaintiffs replied on 25th May, saying that they were pleased to confirm finally their purchase of 2000 tons of ore at Rs. 8-14-0 but they added to the terms offered a further term, namely 'sampling and analysis by Messrs. E. V. Briggs & Co. is to be taken as final and costs thereof to be shared equally.' They also stated that delivery of the lot would be taken in June and July 1936 and that they were arranging to send the Manager a form of a contract for his signature. A copy of this letter was sent to the defendant's office in the district of Singhbhum.
5. On 27h May, Mr. Bennett replied saying that he was certainly not prepared 'to pay half the cost of sampling as the cost of sampling etc. was always paid by the buyer. Further, he asked the plaintiffs to let him have their reply by return as he had had to write to another party, to whom he had promised to give a reply by the 28th, putting him off for a few clays.
6. On 29th May the plaintiffs replied to him saying that they had considered the question of the sharing of the sampling and analysis charges, and that this being their first transaction with him they were agreeable to comply with his request, namely that the sampling and analysis should be entirely on their account. They concluded You may therefore now consider our transaction as finally closed'. On 1st June they sent him a contract note which contained some usual customary terms which had not been specifically mentioned in the correspondence between the parties, such as an arbitration clause, a condition of payment of Rs. 1000 payable by the buyers as advance with shipping instructions and the balance at the time of shipment, harbour's weighment at the time of shipment to be taken as final, and so on.
7. As they did not receive back the contract note, they wired to the Manager and wrote again on 4th June asking the Manager to hold himself in readiness to deliver at least 1500 tons, to fill a shipment engagement of the plaintiffs between 15th and 28th June. On 4th June it appears that Mr. Bennett wrote to Mr. Agarwalla, a partner in the defendant firm, enclosing the plaintiff's letter and contract note and asking him to reply to it as he (Mr. Bennett) did not know whether Mr. Agarwalla was going to sell the ore to the plaintiffs or to Mr. Patel, and on 6th June he wrote to the plaintiffs saying that he had forwarded the contract note to his Head Office. Further letters followed in which the plaintiffs urged the defendants to return the contract note and to arrange for delivery of the ore, and on 16th June the defendants wrote saying that they had no knowledge of the contract and had asked their Manager Mr. Bennett about the position. This statement can hardly be accurate because they had received Mr. Bennett's letter of 4th June, and have disclosed it in their affidavit of documents. Further, they had received a copy of the plaintiff's letter sent to their Manager on 25th May. On 16th June and before the defendants had had any opportunity of asking him what the position was, the Manager wrote to the plaintiffs saying that while he was corresponding with them about the sale of the ore, his Head Office had also been negotiating with another party and that he (the Manager) was not informed till after he had sent the contract note to the defendants that they had already sold the ore and he returned the contract note. On 22nd June the plaintiffs pointed out to the defendants that their contract had been definitely made, and depending upon it they had' already sold the ore for shipment in June and July 1936.
8. Upon failure of the defendants to deliver the goods, the plaintiffs bought 2000 tons of ore in the open market. They allege that they have sustained a loss of Rs. 5500. They were unable to purchase the ore in the district of Vizagapatam. According to the evidence of Mr. Tulsi Charan Basu, who is one of the Managing Directors of the plaintiff-company, there was no manganese 'available at that time in Vizagapatam and the only alternative was to try the Central Provinces market. According, to him in the Vizagapatam district there is only one manganese company worth the name and that is the Vizianagram Mining Co. He applied to them and they had no stock. It was just after the rainy season and the stock was exhausted. In the Central Provinces he purchased from various suppliers and at different rates. He was unable to obtain any ore of 41% but succeeded in purchasing ore of 48%, 45% and 44% and his claim is based upon the prices which he had to give for these supplies of ores, after making a correction down to 41% by deducting a unitage of 6 annas per unit; thus, from the price given for the ore at 48% he has deducted 7 units at 6 annas a unit, making Rupees 2-10-0, and so on.
9. The defendants in their written statement allege that no contract was made. Secondly, that G. R. Bennett who purported to enter into the alleged contract on behalf of the defendants had no authority to do so. The plaintiffs replied in a further written statement, saying that Mr. Bennett was the Manager of the defendant company and that it was within the apparent scope of his authority as such Manager to enter into the contract. Further, they said that the defendant firm by their letter dated 16th May held out Bennett as their Manager and so as having authority on their behalf to deal with the plaintiff company in regard to the contemplated purchase of manganese, and thereby induced the plaintiff company to believe that the acts of Bennett in dealing with the plaintiff company and in entering into the contract with them were within the scope of his authority.
10. With regard to the first point, Mr. Banerjee on behalf of the defendants, has argued that the letter of 25th May from the plaintiffs to Mr. Bennett amounted to a counteroffer and that this was rejected by Mr. Bennett in his letter of 27th May. Consequently, it was no longer in the power of the plaintiff's to accept the offer made by Mr. Bennett on 22nd May, and he referred to a passage in Leake on Contracts, Edn. 8, p. 26, and to the case in Hyde v. Wrench (1840) 49 ER 132, in support of his contention. No authority is required for such a proposition, but, of course, it depends upon whether the letter of 25th May can be regarded as a counteroffer. In my opinion it cannot. The position in law was that on 22nd May Mr. Bennett offered to sell the ore at Rupees (8-14-0 per ton. On 25th May the plaintiffs accepted this offer, but sought to add a further term, namely that sampling should be paid for equally. On 27th May Mr. Bennett refused to consider this proposition, and the effect of his letter was to repeat the offer which he had made on 22nd May, that is to say, the offer without the new term for sampling which the plaintiffs had sought to add. On 29th May, the plaintiffs accepted the offer which Mr. Bennett had made on 22nd May and repeated on 27th. By reason of this acceptance the contract was made and the transaction was completed as stated by the plaintiffs in their letter of 29th May.
11. The second point raised by learned Counsel for the defendants was that the parties contemplated that the contract would be reduced to the form of a formal document and that the letters were not intended to contain the contract. In support of this argument, he pointed to the fact that the letters did not contain all the necessary terms as would be seen by reference to the actual contract note tendered by the plaintiffs, but in my opinion, the terms in the tendered contract note which do not appear in the correspondence are only usual and customary terms of such contracts, and the letters show quite clearly that both Mr. Bennett and the plaintiffs intended that the terms contained in the letters which passed between them should form the basis of the contract. Mr. Bennett pointed out on 22nd May that he must have the matter decided quickly because he had another buyer waiting, and on 27th May that he had had to write and put off another party for a few days, to whom he had promised an early reply. It is clear, therefore, that he intended that the plaintiffs should, in their reply, enter into a firm contract, and the correspondence shows that neither the plaintiffs nor the defendants were in a position, with regard to third parties, which would allow them to leave the matter open while formal documents were being exchanged.
12. The third point raised on behalf of the defendants was that Mr. Bennett had no authority and that the defendants had not held him out as having authority. It is not, necessary for me to discuss this point at length because it seems to me clear that it; was within the scope of the authority of the Manager of the defendants' mine to enter into such contract, and that, even if this were not so, the defendants clearly held out their Manager as having such authority, and invited the plaintiffs, in their letter of 16th May 1936, to deal direct with him in the negotiation of the proposed contract.
13. The fourth and fifth points raised on behalf of the defendants may be dealt with together. It is alleged by them that the plaintiffs did not do their utmost to mitigate the loss by going into the market at once on the repudiation of the contract, and buying in the open market. Further, they allege that, even assuming that the plaintiffs did their best to mitigate the loss, the mode by which they have arrived at their damages cannot be supported, because they have not made a sufficient deduction from the contract prices by means of the unitage system which they have adopted.
14. Now, the date of repudiation was about 16th June, but owing to the contract the plaintiffs were entitled to ask for delivery up to the end of July. Accordingly they should have made an attempt to buy in the open market at the end of July. Whereas their purchases in the Central Provinces were made at a somewhat later date. The evidence given on both sides on these points was not very illuminating, and I have experienced considerable difficulty in arriving at a conclusion with regard to the correct amount of the loss which the plaintiffs have sustained. Mr. Tulsi Charan Basu's evidence struck me as being reliable and I am satisfied that he was a truthful witness. In his evidence he pointed out the difficulties which faced the plaintiff's upon repudiation of the contract, one of them being that there seems to have been no real open market to which the plaintiffs could go when the defendants repudiated their bargain. The supplies in Vizagapatam were small at any time, and they had been exhausted at this time, which necessitated going to the Central Provinces, in order to obtain supplies. In that district the plaintiffs were unable to get ore of 41 per cent. and have had therefore to arrive at an estimation of their loss by making the unitage reduction to which I have already referred.
15. On the other side the defendants have called Mr. Joshi. His evidence struck me as wholly unsatisfactory. His object seemed to me to be an attempt to confuse the Court by talking rapidly and pursuing a most erratic course which I was unable to follow. He started off with a lengthy description of his own firm, on account of which he wanted the Court to believe that he had done a large business in the production, buying and selling of ores for a considerable time. He is the General Manager and a Director of the Aryan Mining and Trading Corporation, Ltd., with offices at No. 15, Clive Row, Calcutta, but upon investigation it appears that this company was only formed in 1936, and was founded upon a very much smaller edifice, namely the witness's own business called the Indian Mining Syndicate. Upon cross-examination he had to admit that his company was not doing any mining work at present and that they were not the owners of any mine. In 1936 they had negotiated one transaction of 15,000 tons and another of 500 tons. On being asked whether he had shipped that ore he said that his company was supplying it, that they were buying some ore from Singhbhum and were going to buy from the Central Provinces. In order to clarify his evidence a little, I asked him what his firm actually bought in 1936, his answer being 'nothing,' because the company was not floated until December 1936. I then asked him how much they had bought in 1937, and his answer was 500 tons in the Singhbhum district and 15,000 tons which will be forthcoming very shortly from the Central Provinces. Since the company has been started and up to date, it has purchased only 500 tons of ore. He said that in 1936, he personally, in his business of the Indian Mining Syndicate, had not bought anything because the market was flat and he was simply studying it. In truth, the witness was only a very cheerful and optimistic speculator and so far as I could judge, his only knowledge of the market was based upon anticipation of business to come. I gathered nothing from his evidence except the assertion that it is impossible to reduce the prices of 48 per cent. ore down to the appropriate prices for 41 per cent. According to him there are three grades of manganese ore, 40, 41 and 42 being the lowest and 48, 49 and 50 being the highest. Between these grades there can be no comparison because according to the witness, manganese ore at 48 to 50 per cent. is a totally different material and in a totally different category from manganese ore at 41 per cent. To attempt such a comparison would be as difficult as to try to compare the price of Nux Vomica with the price of Myrabolam. The ores in the various grades are very different things. The result of his evidence was that assuming that the plaintiffs had to purchase ore of 48' per cent. it was quite impossible to arrive at an appropriate figure representing their loss by any kind of deduction, and that certainly the unitage deduction made by the plaintiffs would not enable the Court to arrive at a correct figure.
16. A further point made by this witness was that there was no alteration in the prices of manganese ore during the whole of the year 1936, or, at any rate, that the market did not vary until October 1936. If this evidence were true, it is obvious that the defendants would have had no difficulty in fulfilling the present contract by going into the market and buying at the contract price. By this means, they could have avoided the consequences and the worry and cost of the present suit, because the real reason for their repudiation of the contract was that they found themselves in considerable difficulty owing to the fact that Patel came forward at the crucial moment and demanded delivery of the ore under his own contract. If the defendants could have bought in the market at the contract price there would have been no difficulty in supplying both Patel and the plaintiffs. Moreover, if his evidence were correct, the plaintiffs would have had no difficulty in buying in the open market at the contract rate. There is nothing in the evidence to show that they avoided buying ore at the lower percentage, or to show that it was possible anywhere, either in Vizagapatam or in the Central Provinces, to buy ore at anything like the contract price. I regret to have to say that I formed the opinion that this witness's evidence was wholly unreliable.
17. The other witness called by the defendants to give evidence on this point was a much better witness, but he also at first took up the attitude that it was impossible to reduce the price of 48% manganese ore down to a comparable price for 41% ore. However after I had pointed out to him that there must be some way of arriving at the damages sustained by the plaintiff and after considerable pressure he eventually consented to put prices upon all the percentages from 40 to 50. To some extent they varied from the prices which the plaintiffs actually paid, and even this witness was not very clear, and his evidence was somewhat difficult to follow. However in the end I was able to obtain from him the information that in his opinion the only fault to be found in the account submitted by the plaintiffs was that they had made use of units of 0-6-0 each, whereas they should have been 0-12-0. Therefore after substituting 0-12-0 for 0-6-0 he was satisfied that the figures would be correct. His information, though a little wider than that of Mr. Joshi, was not very adequate. His knowledge of the prevailing prices was based upon a small purchase of about 800 tons, spread over about four months. It may well be that small quantities like this can be obtained at places where it is impossible to get larger quantities such as were required by the plaintiffs in the present case; or it may be that the prices vary for such small amounts as this witness was dealing with.
18. Though I consider his evidence more valuable than that of Mr. Joshi, I do not think it sufficient to displace the evidence given by Tulsi Charan Basu. However it is sufficient to make me think that Tulsi Charan's figures may be a little too high : that is to say, I do not doubt the accuracy of the account which he supplied of the amounts which he paid, but I think that he failed to make a sufficient reduction for unitage. It is very difficult indeed, from the information which I have to arrive at the appropriate figure but I have come to the conclusion that the unitage ought to be 0-9-0. Upon this basis it is agreed on both sides that the plaintiffs' damages would amount to Rs. 3500. There must therefore be judgment for the plaintiffs for this sum with costs.