Scottish Court of Session Decisions

Messrs Dick & Stevenson, engineers, Airdrie Engine Works, Airdrie, by letter of specification dated 5th February 1883, offered to supply The Woodside Iron and Steel Company, Coatbridge, with a horizontal 3-cylinder engine with Stevenson's Patent Rolling Mill Clutches, at the price of £2680, and their offer was accepted by letter dated 12th February. The following were the important parts of said letter of specification—“The price of the whole is to be £, one-half payable when the principal parts of the materials of the engines and gearing are delivered at place of erection, one-fourth on the same being started, and the remaining one-fourth within three months thereafter We undertake to uphold the whole machinery herein specified for the space of twelve months from date of starting, inasmuch as we will supply and fit up, free of charge, parts to replace every part which may prove defective during that time, and will re-adjust all parts which may wear out of order within the time named; and, in short, we guarantee that the whole will be left by us in as good and perfect working order at the end of twelve months from date of starting as at first, excepting (of course) ordinary wear and tear and such wasting or breaking of parts as may be caused by accident or by derangement of the mills or other parts of machinery not embraced in this specification, and excepting also the doings of ill-disposed or malicious persons.”

By letter dated 20th February 1883 the engineers offered to change the engine from horizontal to vertical form, and to make certain other alterations in the specification on condition of the price being advanced to £2830, and this was agreed to. No precise time was specified within which delivery was to be given.

The engine and gearing were begun to be laid down in the Woodside Company's works in October

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1883. On 3rd December £1000 was paid to the engineers, and on 16th May 1884 a further sum of £400, leaving a balance of £15 still unpaid on the first half of the price. The engine and gearing were started on 30th September 1886, when a further instalment of £707, 10s. became due. An interim payment of £500 had been made on 25th January 1885, of which one-half, or £250, went to reduce said sum of £707, 10s., leaving a balance of £457, 10s. This, with the above sum of £15, left £472, 10s. due to the engineers, and for this sum they raised an action against the Woodside Company in the Sheriff Court at Airdrie in November 1886. They admitted that the defenders had a claim of £13, 4s. against them which would be given effect to on a final settlement taking place. The defenders admitted that under the contract the sum sued for was due, but they alleged that the engine and gearing were not timeously delivered; that while they were in course of erection objection had repeatedly been taken to parts thereof; that they were not conform to contract, and were worth less by upwards of £472, 10s. than those contracted for; and that the defenders had sustained loss and damage through the pursuer's delay in completing their contract to the amount of upwards of £4000, which sum the defenders claimed to set off against the balance of the contract price.

The pursuers pleaded—… “(2) The defenders' counter claim being illiquid, cannot be set off against the sum sued for.”

The defenders pleaded—“(1) The engine and gearing in question not being yet completed in terms of the contract, the pursuers are not entitled to any further payments to account. (2) The defenders having sustained loss and damage through the pursuers' failure timeously to implement their contract, they are entitled to set off such loss and damage against the contract price. (3) The engine and gearing not being conform to contract, and the pursuers having refused or failed to complete the same, the defenders are entitled to deduct from the contract price the difference in value to them between the engine and gearing as delivered and said price.”

The Sheriff-Substitute ( Mair) on 16th December 1886 pronounced this interlocutor—“Repels the pleas-in-law for the defenders, and decerns in terms of the prayer of the petition against the Woodside Steel and Iron Company, Coatbridge, and John Allan, and James Allan junior, individual partners of the company, for the sum of £472, 10s., but under deduction of the sum of £13, 4s. admittedly due by the pursuers, with the legal interest on the sum of £459, 6s. from the 30th September 1886: Finds the said defenders liable in expenses, &c.

“ Note.—The case for the pursuers is practically admitted by the defenders, and the defence itself as appears from their pleas resolves itself into a claim of damages for breach of contract. The claim of the pursuers is clearly a liquid one constituted by the contract between the parties, while that of the defenders is as clearly illiquid and of uncertain amount. The pursuers on 5th February 1883, by letter of specification, offered to supply the defenders with a horizontal three cylinder engine with Stevenson's Patent Rolling Mill Clutches at the price of £2680, and on the 12th of that month the defenders by letter accepted of said offer. By letter dated 20th February 1883 the pursuers offered to change the engines from horizontal to vertical form, and to make certain other alterations on the specification on condition of the price being advanced from £2680 to £2830, and this was agreed to by the defenders. By said letter of specification the pursuers stipulated that one-half of the price was payable when the principal parts of the engine and gearing were delivered at the place of erection, one-fourth on the same being started, and the remaining one-fourth in three months thereafter. The defenders in their defences refer to the documents above referred to, copies of which are in process, and they admit that the instalments of the price were to be paid as stated in the contract between the parties. The pursuers aver—and the averment is also admitted by the defenders—that the principal parts of the engine and gearing were delivered to the defenders at the place of erection, and that on 3rd December 1883 they paid the sum of £1000, and on 16th May 1884 a further sum of £400, making together £1400 on account of the one-half of the price of the engine and gearing as stipulated in the contract, leaving a balance of £15 of the said one-half still unpaid. The pursuers further aver that the engine and gearing were started on 30th September 1886, and were then and are now at work manufacturing iron, and that one-fourth of the purchase price, viz., £707, 10s., then became due and payable. The defenders' answer to this averment is as follows — ‘Admitted that the engine and gearing were started shortly after 30th September 1886, and have since been at work.’ The pursuers also say that the defenders on 25th January 1885 made an interim payment of £500 to account of said engines and gearing, half of which, in terms of letters dated 15th and 19th January 1885 (copies of which are in process), was applicable in reduction of the said instalment of £707, 10s., leaving the balance of £457, 10s. due and payable on 30th September 1886, and the present action has been brought for payment of this sum and of the £15 before referred to, making together £472, 10s. Practically, as I have said, the case for the pursuers is admitted by the defenders. It is admitted that the principal parts of the engine and gearing were delivered to the defenders; it is admitted that one-half of the contract price was then to be paid, and that that half less £15 has been paid; it is admitted that one-fourth of the contract price was payable on the engine and gearing being started, and it is admitted that the engine and gearing were started on 30th September 1886 or shortly thereafter. So standing these admissions, the pursuers' case is established, and unless there is something in the defences to prevent it they are entitled to instant decree. What, then, is the defence set up? It is simply this—that there was great delay on the part of the pursuers in furnishing the engine and gearing, and that the defenders in consequence sustained considerable loss to the extent of upwards of £4000, which they claim to set off against the pursuers' claim for the contract price of the engine and gearing. On the face of it, therefore, this is an attempt to set up an illiquid claim against one which, by the terms of the contract and the admissions of the defenders, is a

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liquid one, and the question to be considered is, whether this is to be allowed in the present action? Erskine, iii. 4, 16, says ‘compensation is not regularly receivable where the debts of both sides are not clear beyond dispute. They must be ascertained either by a written obligation, the oath of the adverse party, or the sentence of a judge, or as put up by Professor Bell (Prin., sec. 572)—‘The debts must both be liquid certum an et quantum debeatur, it being, however, sufficient that the debt shall be instantly verified by writ or oath.’ It is true that an exception has been admitted to the rule thus laid down by the authorities where the illiquid claim arises out of a mutual contract, but this only where there has been a failure on the part of the party seeking to enforce his liquid claim to fulfil a stipulation in the contract. Was this the case here? The claim for the defenders, as I have said, is really one of damages for delay in the delivery of the engine and gearing. But when the contract is looked at, it will be found that there is not a syllable in it from beginning to end as to when the engine and gearing were to be delivered. There was thus no provision as to time, and therefore no failure on the part of the pursuers so far as the contract was concerned. But the defenders say that the pursuers ought to have delivered the engine and gearing within a reasonable time, and that they took an unreasonable time, and hence the defenders say they sustained the loss and damage. In such a case, however, the defenders cannot be allowed to plead their illiquid claim in the present action against the pursuers' liquid claim. In the case of M'Bride v. Hamilton, June 11, 1875, 2 R. 775, it was held that where no time is expressly stipulated within which work is to be completed, a claim of damages on the ground that the work was not completed within a reasonable time cannot be pleaded ope exceptionis. In that case the Lord President (Inglis), referring to the case Johnston v. Robertson, 1861, 23 D. 646, says:—‘There was a careful and precise stipulation that the building was to be completed and the keys delivered over by a specified day. There could be no doubt there was a breach of contract in point of time. I think it was the opinion of all the Judges that if there had been no express provision in the contract as to time, and the only complaint of the employers had been that the work was not completed in reasonable time—which is an implied condition in all contracts—that would not have led to the same result, since there would not have been a breach of the particular contract sued on, and the plea would not have been available in the same way against the contractor that he had not performed his part of the contract, and therefore could not recover.’ Lord Ardmillan in the same case said— ‘If the contract had borne some specific date for the delivery of the machinery—that is, for erecting it in the premises of the defenders—I should have no doubt that the contractor could not have sued for the contract price without laying himself open to a claim for damages for delay in fulfilling his contract. If no specific time for completion had been mentioned in the contract, there would have been more difficulty. I am disposed to think that if no time for completion was stipulated, and if it was necessary to go into an inquiry as to what was a reasonable time, then that would have been a different case from the present, and the defender would not have been entitled in such a case to maintain ope exceptionis a claim of damages against the pursuer in respect of unreasonable delay in fulfilling the contract.’ The observations I have quoted from the two eminent Judges have a striking application to the present case. In the same case it was further remarked by the Lord President—‘If this defence is not pleadable ope exceptionis, there is no defence to the present action, and the pursuer is entitled to instant decree.’ Upon this authority, therefore, I have no alternative but to refuse to allow the defenders a proof of their counter claim, and must accordingly give instant decree to the pursuers. I have, however, deducted from the sum sued for £13, 4s. claimed by the defenders as set forth in article 6 of their statement in connection with certain accumulators. The pursuers admit this claim, but they say credit will be given for it on a final settlement taking place. I see no reason, however, why it should not now be deducted from the sum sued for. With reference to the statement in the same article as to certain additions having been made to the engine and gearing, and certain governors connected therewith, which the defenders say have necessitated the employment of a man night and day, this, in my opinion, is sufficiently answered by the provision in the contract under which the pursuers undertook ‘to uphold the whole machinery herein specified for the space of twelve months from the date of starting,’ &c. If the defenders have any ground of complaint with reference to the engine and gearing, they have their remedy under this guarantee, but it cannot be entertained as a defence to the claim now made by the pursuers.”

The defenders appealed to the Sheriff, and upon 10th November 1887 were allowed to put in a condescendence of res noviter.

They alleged that on 19th May 1887 the engine and gearing had broken down owing to original defect in the engine, and that the pursuers, notwithstanding the clause of guarantee in their letter of specification, declined to interfere; and they pleaded—“(1) The engines and gearing in question having been all along defective and disconform to contract, and having in consequence thereof broken down during experimental working by the defenders, and the pursuers having refused to put said engines into good and perfect working order, in terms of contract, the defenders are entitled to absolvitor, with expenses. (2) Separatim—The pursuers are not entitled to insist upon payment of the contract price until they have made the engines and gearing complete in terms of contract.”

The pursuers replied that the breakdown was entirely owing to a subsidence of the foundations on which the machinery rested, for which the defenders were alone responsible, and that the defenders had begun to patch the engines themselves instead of informing them at once of what had occurred.