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Mcleod and Company Vs. Ivan Jones and Company - Court Judgment

LegalCrystal Citation
Decided On
Reported in87Ind.Cas.218
AppellantMcleod and Company
Respondentivan Jones and Company
Cases ReferredBiddell Brothers v. Clemens. Horst Co.
principal and agent - commission agent and principal, relationship of, after contract has been carried into effect-sale of goods--acceptance of bill against documents--suit on bill consideration, want of--burden of proof--civil procedure code (act v of 1908), order vi, rule 17--amendment of plaint at late stage--new cause of action, whether can be allowed to be introduced. - .....the car which had come into their possession on the 4th june was a car which was bought by ivan jones. ivan jones stated in his evidence that when the question of the nash agency was first mooted he had gone to mcleod's office, and that there had seen a nash car; and that he may or may not have gone for a short spin in that car. but he stated that he asked that he might have the car for demonstration purposes and that the car was delivered to him by mcleod as a demonstration car. now, it is admitted that this car was insured by mcleod on the 4th june and that it was ultimately bought by ivan jones and that this car as well as mr. watson's car were fitted with clincher rims and tyres. mr. ivan jones stated that he was most anxious to see the car, and to test the car, before he entered.....

Page, J.

1. This is a suit brought to recover damages for the breach of a contract to take delivery of and to pay for 4 Westcott Cars, 12 Lexington Cars and 70 Nash Cars sold by the plaintiffs to the defendants. In his opening address Counsel for the plaintiffs stated that the plaintiffs' relationship to the defendants in respect of the sale of these cars was partly that of agent to the principal and partly that of vendor to vendee. At the trial he applied for leave to amend the plaint by adding a claim in the alternative for an indemnity as agents, but I refused the application because in my opinion there was no reasonable ground for permitting an amendment of the claim at so late a stage in the proceedings, and also because, if the amendment were to be allowed a ' new cause of action would be admitted which is now time-barred. I do not wish it to be understood, however that, in my opinion the proposition which was propounded on behalf of the plaintiffs is one to which I. should give' my assent. No doubt circumstances may arise in which a person who enters into a contract of sale as agent, for example, as agent for an undisclosed principal, may be deemed to be either a principal or an agent vis a vis the other party to the contract of sale; but in the eye of the law, in my opinion, he cannot be regarded as filling at the same time both capacities. In effecting the contract of sale, he must needs have acted either as a principal, or as an agent. Now the legal position of a commission agent who sells or purchases goods for a foreign principal is well-known, and has been frequently defined. It may be that the agreement between a commission agent and the party for whom he is acting may, at the outset, be that between a principal and his agent, and so long as the contract remains executory the relationship of principal and agent may subsist between the parties. It has also been held that such a broker may possess a right in certain circumstances to stop the goods in transit. But in my opinion after the contract of purchase has been effected the relationship of the parties quoad the contract of sale ceases to be that of the principal and agent, and ripens into that of vendor and purchaser; though it may be necessary to refer to some other agreement, for example the prior agreement of agency, in order to ascertain the terms and conditions of the contract of sale. If the law were to be otherwise, the result would be that in so far as the agent was acting as vendor he would be under no obligation to account to the other party to the contract in respect of any profit which he might have made through buying or selling the goods in question to that other party. On the other hand, in so far as he' was acting as the agent of the principal he would be liable to account to his principal in respect of any profit in excess of the agreement commission which he might have made out of the transaction. Where goods are sold through A, A must either sell on his own account as principal or, as an agent for B must create privity of contract between B, and a third party [see Feise v. Wray (1802) 3 East. 93 : 6 R.R. 551 : 102 E.R. 532, Ireland v. Livingstone (1872) 5 H.L. 395 : 41 L.J.Q.B. 201 : 27 L.T. 79, Robinson v. Mollett (1875) 7 H.L. 802 : 44 L.J.C.P. 362 : 33 L.T. 544, Cassaboglon v. Gibbs (1883) 11 Q.B.D. 797 : 52 L.J.Q.B. 538 : 48 L.T. 850 : 82 W.R. 138, Ex parte Miles, In Re: Isaacs (1885) 15 Q.B.D. 39 : 54 L.J.Q.B. 566 and Paul Beier v. Chotalal Javerdas 30 B. 1 : 6 Bom. L.R. 948 It is no uninteresting to observe that Lord Blackburn in his Book on Contracts of Sale (3rd Edition page 352) states the position of a commission agent acting for a foreign principal to be as follows:

It seems that in cases where a factor acting for a foreign correspondent purchases goods in his own name and on his own credit, it is rather too qualified a phrase to say merely that he stands in the position of a seller quoad the consignee : if he is not a seller it is difficult to say who is, as there would be much difficulty in establishing any privity of contract between the foreign correspondent, and the original seller. But there is very gradual progression through these cases in which the original seller has a right to elect between the liability of a factor and the consignee' as principals up to those cases in which the factor if liable, at all, is liable merely as a surety, and there may be consequently difficulty at times, in determining whether an agent can be said to be in the position! of seller so as to give him the right to stop the goods in transit on his own. account or not. See further on this subject Siffen v. Wray (1805) 6 East. 371 : 2 Smith 480.

2. As I have stated it may, be difficult to ascertain whether in any particular case the relationship between the parties is that of principal and agent or of vendor and vendee, but inevitably, in my opinion, it must be either the one or the other. I was referred certain passages in the judgment of Mr. Justice Blackburn, as he then was, in Ireland v. Livingston. (1872) 5 H.L. 395 : 41 L.J.Q.B. 201 : 27 L.T. 79 but, in my opinion, these passages when submitted to analysis do not support the proposition that an agent can enter into a contract of sale or purchase for or with a foreign principal without creating the relationship of vendor and purchaser between the par-ties to the contract. In Robinson v. Mollett (1875) 7 H.L. 802 : 44 L.J.C.P. 362 : 33 L.T. 544. Mr. Justice Blackburn in impressing an opinion contrary to that of Mr. Justice Brett, a great Master of Commercial Law, and other learned Judges appeared to think that an agent might purchase goods for his principal without himself being the vendor or creating privity of contract between his principal and a third person, but the opinion which that very learned Judge then expressed was dissented from and; if I may venture to say so, rightly deprecated by other learned Judges and was treated as erroneous by the House of Lords. In this case, however, I will not yield to the temptation to discuss this question further because in my opinion it is clear that in relation to the sale of the motor cars in question in this case the allegation of the plaintiffs, as set out in the plaint, that they were acting as principals is the correct inference to be drawn from the facts. It will, be enough to say in respect of the cars which were sold by Nash to the plaintiffs and re-sold by them to the defendants that McLeod & Co., had contracted with Nash to take consignments of these oars before they had come into any contractual relationship whatever with the defendants, and I have no doubt that in effecting the contract of sale of these cars to the defendants the plaintiffs acted as principals, and not as agents.

3. As regards the 4 Westcott Cars and the Lexington Cars it was not contended that the contract of sale was entered into by Ivan Jones with the plaintiffs otherwise than as principals. With respect to the 4 Westcott Oars in the course of the case, in my opinion acting on sound advice, the plaintiffs abandoned their claim. As regards the 12 Lexington Cars the controversy, between the parties arose in this way.

4. [After discussing the evidence adduced in the case, his Lordship held:]

In my opinion having regard to the form of the contract and the surrounding circumstances the failure to ship in September was a breach of the contract which entitled the defendants to reject the goods when tendered to them on arrival.

5. I now pass on to the 70 Nash Cars, 25 of which were despatched from the factory on the 24th June.

6. After discussing of the position between parties in respect of these 25 cars, His Lordship held:].

7. Having regard to the contract, and to what passed between the parties, in my opinion, the tender of these 25 cars was not a good tender of cars under the contract between the parties the plaintiffs and the defendants. Because firstly, they were not to form the subject-matter of that contract and even if they were, they were cars which did not fulfil the conditions of the contract because they were fitted with battery and not magnet ignition, I have carefully considered the evidence, and I am unable to come to the conclusion that the provision of battery ignition instead of magnet ignition was merely a trifling matter which would not justify Ivan Jones in rejecting the goods. Therefore, as far as these 25 cars are concerned, I come to the conclusion on both grounds that the defendants were entitled to refuse to accept them under the contract.

8. [His Lordship, upon a consideration of the evidence relating to the delivery of the remaining 46 cars held:]

In so far as this is a claim for goods sold and delivered the onus is upon the plaintiffs to satisfy me that the goods tendered were goods which correspond with the description provided in the contract, and they have not done so. On the other hand, although, in my opinion, the plaint is not aptly drawn to raise this issue, I propose to consider one further matter, and it is a very important one, namely, that in respect of these 46 cars two drafts were accepted by the defendants, and having regard to the principles of law applicable to this matter and the observations of Baron Parke in Stephens v. Wilkinson(1805) 6 East. 371 : 2 Smith 480 and the case of Biddell Brothers v. Clemens. Horst Co. (1911) I K.B. 214 on appeal (1911) 1 K.B. 934 : 16 Com. Cas. 197 the purchaser of goods who has accepted a bill against documents is in my opinion, under an obligation as the acceptor of a negotiable instrument to pay for the value of the instrument according to its tenor, notwithstanding that at the time when the bill is duly presented for payment,' the goods may not have arrived at the place where they are to be delivered, and therefore, the purchaser had had no opportunity before payment,: of examining the goods. In my opinion, the position in law of such a purchaser is this, that although he is bound to honour the bill according to its tenor, the payment of the bill will not in any way prejudice his right subsequently to reject the goods if he is entitled to do so under the contract after examination. But in a suit to recover the amount of the bill the onus is upon the defendant to prove that no consideration passed to him which would sanction the obligation under which he came through accepting the bill. There-fore, on the assumption that the plaintiffs are entitled in this suit as framed to sue upon the bills, (though in toy opinion, they are not so entitled) the onus is upon the defendants to satisfy me. that there was a total failure of consideration for their acceptance and payment of the bill, or in other words, they have to satisfy me that the goods as tendered were not in accordance with the contract. In order to satisfy me of that the defendants make this case, Mr. Jones states, and it is not in dispute that he had never seen the export specification of the models in question before the contract was entered into,; but that in June, before the contract was entered into a Nash Car arrived for McLeod & Co., from Bombay. It is reasonably clear to my mind that a Nash Car did come into McLeod's possession sometime in June, because on the 4th June they insured it. The car which had come into their possession on the 4th June was a car which was bought by Ivan Jones. Ivan Jones stated in his evidence that when the question of the Nash Agency was first mooted he had gone to McLeod's office, and that there had seen a Nash Car; and that he may or may not have gone for a short spin in that car. But he stated that he asked that he might have the car for demonstration purposes and that the car was delivered to him by McLeod as a demonstration car. Now, it is admitted that this car was insured by McLeod on the 4th June and that it was ultimately bought by Ivan Jones and that this car as well as Mr. Watson's car were fitted with clincher rims and tyres. Mr. Ivan Jones stated that he was most anxious to see the car, and to test the car, before he entered into the contract, that he had this car that he ran about in the car and that he was satisfied that the car had clincher rims, and tyres. lie further stated that he had this car before he entered into the contract, and that Mr. Dwyer told him that this was the demonstration model of the Nash Cars which was the subject-matter of the contract, Mr. Jones further asserted that it was on the faith of that representation that he entered into the contract. Now, the plaintiffs do not accept Jones' version of what took place. They agree that he went for a spin in Mr. Watson's car. They admit that they bought a car like Watson's car, which was insured on the 4th June, and which was ultimately bought by Jones, but it was suggested on behalf of the plaintiffs that probably this car had nothing to do with the contract which was, entered into but was a car which Mr. Jones bought for his own 'purposes after the contract was entered into, that it was in no sense a demonstration car, and that the plaintiffs had not represented' it as being fitted with the type of tyre with which the cars under the contract would be fitted. I have to satisfy myself as to the probability of the evidence given on the one side and on the other. In my opinion, the version given by Mr. Jones is the correct one, and I am supported in that view by a letter written on the 7th September by the plaintiffs. On the 7th September the plaintiffs wrote to the defendants:

Nash DemonstratorDear Sirs,We beg to return herewith our Bill No. 1013, dated 5th August for the above. car.

We note that your Mr. Jones has called our attention to the fact that he is buying Nash Cars at Rs. 5,250, this price we know to be f.o.b. Bombay, you will realise that we ourselves purchased this car in Bombay from your Messrs. Hill Sawyer & Co., re railed it to Calcutta by passenger train and had it equipped with spare tyres, side lamps, horns and also cushion covers. At the time Mr. Jones took delivery of this car he enquired the price and was told that it would be approximately Rs. 5,500 the actual cost to us here.

With regard to the extra charge for insurance premium, as advised to Mr. Jones, this car was insured by our office here and. this is the actual cost of the premium to us.

In view of the fact that this was a verbal arrangement whereby Mr. Jones took over this car at our cost we feel sure that upon going into this matter you will realise that with the extra fitting the* car cost us just exactly what We are charging you.

We will appreciate receiving your cheque by return. Yours faithfully,Pro. McLeod & Co.(Sd.) J.H. DULTON.

9. The fact that the defendants themselves described the car as a Demonstration car, in my opinion, throws a considerable light upon the probability of the two stories. If Mr. Jones entered into this contract upon the faith of a representation by Mr. Dwyer, on behalf of the plaintiffs, that the export specifications of the models under the contract would be equipped among other things with the clincher tyres with which his Demonstration car was fitted, that in my opinion, if Mr. Jones was induced to enter into this contract by reason of that representation, and accepted the bills for the cost on the faith of the representation, it would not be open to the plaintiffs now to assert that the export specifications of the models in question did not provide for the clincher tyres. The law of estoppel is only a branch of the law of evidence. I have come to the conclusion that, in the absence of any specification which had been given to Mr. Jones, and having regard to the fact that a Demonstration car with clincher tyres was given to him, as I find was a fact, before he entered into the contract, that the plaintiffs are now precluded from asserting that the export specifications did not provide for clincher tyres. Under the circumstances I come to the conclusion and for the purpose of this case it must be taken, that these 46 cars which were tendered in partial fulfilment of the contract did not conform to the description provided in the contract, and, therefore, even if the suit may be regarded as a suit on the bills of that the defendants have satisfied me that there was a total failure of consideration. That disposes of the case in respect of all the cars which were in question and, in my opinion, the plaintiffs have failed to make out their claim, and the suit must be dismissed with costs on Scale No. 2.

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