Scottish Court of Session Decisions

By charter-party dated 3rd July 1891 Morris Carswell, owner of the steamship “Victoria,” then lying in the Clyde, agreed to let, and Richard R. Collard, of Hastings, agreed to hire, said steamship till September 30, 1891, “she being placed at the disposal of the charterer in the Port of Greenock or Port-Glasgow, in such berth as charterers may direct.”

The charter-party further provided—“5. That charterers shall pay for the use and hire of the said vessel at the rate of £425 British sterling per calendar month, commencing the day of delivery in good order and ready for sea in the Clyde, notice whereof to be given to charterers or agents, and at and after the same rates for any part of a month; hire to continue from the time specified for commencing the charter and the vessel is placed at charterers' disposal until her re-delivery to owners at the expiry of this charter-party. … 5. Payment of said hire to be made in cash monthly, in advance, to owners in Glasgow without discount, first month's hire to be paid before the steamer leaves the Clyde. Charterer agrees to give banker's guarantee for the due payment of hire money, and in default of such payment or payments as herein specified, the owners or their agents shall have the faculty of withdrawing the said steamer from the service of the charterers, without prejudice to any claim they (the owners) may otherwise have on the charterers in pursuance of this charter.”

The vessel was to be used for passenger service between Hastings and other ports on the south of England. No particular day for delivery was specified in the charter-party, as the vessel was at the time being fitted out for the season, and the owner did not know exactly when he would be ready to deliver her.

On Monday 13th July Carswell's brokers telegraphed to Collard that the “Victoria” would be handed over at Glasgow on

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Wednesday 15th July, when bank guarantee and a month's hire must be forthcoming. Collard replied that he was leaving for Glasgow on the night of the 15th, and was prepared to take delivery, but he did not appear to take delivery until the morning of the 17th, when he found that Carswell had chartered the vessel to another party.

The present action was brought by Collard against Carswell for payment of damages for breach of contract, in respect of his failure to give delivery of the “Victoria” in terms of the charter-party.

The defence was twofold—(1) That time being of the essence of the contract the pursuer was bound to have taken delivery of the vessel on 15th July, the day on which the defender tendered delivery, and that the failure to take delivery was a breach of contract on the pursuer's part entitling the defender to treat the contract as at an end; and (2) that the pursuer's acts and conduct prior to 17th July were such as to justify the defender in assuming that the pursuer did not intend to fulfil his part of the contract.

The facts bearing on the defender's second ground of defence, as established by the proof, are fully detailed in the opinion of Lord Adam.

Evidence was also adduced showing that the pursuer would have made considerable profits from the use of the vessel.

On 18th February 1892 the Lord Ordinary ( Kyllachy) assoilzied the defender, and decerned.

“ Opinion.—[ After stating the facts]—The breach complained of is this—that the defender (the owner) on 17th July cancelled the contract and hired the steamer to another party, and did so notwithstanding that the pursuer was, as he alleges, ready and willing to take delivery, and to pay the first month's hire, and to grant a banker's guarantee for the remainder of the hire. The defence is that the vessel was ready to be delivered on 15th July, and that the pursuer had due notice of that fact, but that he did not appear to take delivery, or tender the hire or a banker's guarantee, so that after waiting for two days the defender concluded, and was justified in concluding, that he did not intend performance, and was therefore justified in making a new charter so as to preserve the benefit of the season's trade.

The defender further pleaded that there had been an antecedent breach on the part of the pursuer in so far as he was bound under the charter-party to produce a banker's guarantee immediately upon the conclusion of the contract, and that he failed and declined to do so. I have not, however, found it necessary to consider how far such declinature constituted a breach of the contract or justified the de fender's ultimate action. In the course which events took I think the decision turns upon the effect to be attributed to the pursuer's delay to take delivery, and other wise perform his contract prior to the rehire of the vessel on the 17th July.

I am of opinion, on the construction of the charter-party, that the pursuer's obligation was to take delivery on getting due notice of the vessel's readiness for sea; that he was at the same time, if not earlier, bound to furnish a banker's guarantee for the hire; and further, that he was also bound to pay the first month's hire so soon as, having got delivery, he was in a position to leave the Clyde. I am also of opinion that in the nature of the case time was of the essence of the contract, the season being far advanced, and both parties being well aware that if the contract between them failed the defender ran the risk of losing the whole benefit of the season's traffic.

The question I have to decide is, therefore, I consider, simply this, whether the pursuer was in default in taking delivery, and whether the default was of such a character as to justify a rescission of the contract. In my opinion both these questions must be answered in the affirmative.

There can, I think, be no doubt that the pursuer was in default. He had notice on the 10th of July that the vessel would be ready to be handed over on the 11th or 13th. He replied that that was too indefinite, and that he must have a day of delivery fixed and guaranteed. He was then informed, by telegram received on the evening of the 13th, that ‘the vessel will be handed over at noon on Wednesday (the 15th) when bank guarantee and month's hire must be forthcoming.’ He received a further telegram to the same effect on the morning of the 15th. He did not appear on the 15th, but intimated by telegram on that day that he was to go down to Glasgow that night. He did, not, however, do so, being detained by the engagements of a friend who had arranged to accompany him. And both the 15th and 16th passed without any communication being received from him, or any explanation of his absence. Neither was any such communication received from him on the morning of the 17th, or until after the defender had, somewhere about noon of that day, concluded a new charter with another party. It then appeared that the pursuer had travelled down to Glasgow during the night of the 16th, had arrived there on the morning of the 18th, had gone to the vessel in the course of the forenoon, and had thence sought ineffectually to open communication by telephone with the defender's brokers. He had not, however, as he might have done, called on these brokers on his arrival in Glasgow, nor taken any means otherwise to communicate with them, and the result was that when they did come to know of his arrival the recharter of the vessel had, as I have already said, been concluded.

In this state of the facts the defender asks, naturally enough, what was he to do? He had no desire to be off with the pursuer. On the contrary, the charter which he took was in all respects less desirable. But two days had passed, and he had heard nothing of or from the pursuer, except that having announced he was to leave London on the night of the 15th he did not arrive on the following day. The defender knew, more

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over, that although a respectable man, the pursuer was not a man of means, and he knew also that if he waited longer he lost the only other offer which he had for the vessel, and ran the risk of losing its whole hire for the season. In my opinion, in such circumstances, he was not unduly precipitate. I think he was justified in assuming that the pursuer had found himself unable to fulfil his contract, or that he did not intend to fulfil it; and if the circumstances justified that assumption, there can be no doubt in point of law that he was entitled to rescind the contract. Reference was made to various authorities—English and Scotch—on this matter, and I note them for reference— Freeth v. Barr, 9 C.P. 208; Mersey Steel and Iron Company v. Naylor, 9 QBD 648, 9 App. Cas. 434; Reuter v. Sala, 4 C.P.D. 739; Turnbull v. M'Lean, 1 R. 730; but none of them appear to me to throw any doubt upon the propositions (1) that when the circumstances sufficiently indicate that one party to a contract does not intend to carry it out, the other party is entitled to resile; and (2) that, at all events, in the case of an entire contract like the present a breach in a material, and certainly in an essential, part justifies the conclusion that the contract is off.

On the whole, therefore, I must assoilzie the defender with expenses.”

The pursuer reclaimed, and argued—The cases referred to in the Lord Ordinary's note showed by contrast when a contract might be rescinded on account of the purchaser's or hirer's delay to take delivery. There was no case in which a seller had been found entitled to rescind without a refusal on the part of the purchaser to fulfil his part of the contract, or such conduct as would found the inference that he did not intend to fulfil it. In the present case there was no obligation upon the charterer to be present to take delivery the moment it was tendered. He was only bound to pay hire from the date on which the ship was tendered to him. Where time was not originally made of the essence of the contract, one of the parties was not entitled afterwards by notice to make it of the essence, unless there had been some default or unreasonable delay on the part of the other party— Green v. Sevin, 1879, 13 L.R., Ch. Div. 589; Compton v. Bagley, 1892, L.R., 1 Ch. Div. 313. The pursuer's slight delay in taking delivery did not constitute a breach of contract. Nor had his conduct been such as to justify the inference that he was not prepared to fulfil the obligations which the contract laid upon him. The pursuer was entitled to substantial damages for the loss of the profits which he would have made from the use of the vessel, such loss necessarily having been, at the date of the contract, in the contemplation of parties as the result of its breach.

Argued for the defender—The pursuer was bound to appear and take delivery on the appointed day, and his failure to do so was a breach of contract. Further, the decisions established that if one party to a contract had shown an intention to refuse to implement it, the other party was entitled to treat the contract as at an end. The question accordingly was, whether the defender was justified in assuming that the pursuer had no intention of fulfilling the conditions of the charter-party— Freeth v. Barr, 1874, L.R., 9 C.P. 208; Turnbull v. M'Lean & Company, March 5, 1874, 1 R. 730, per Lord Justice-Clerk, p. 738. Now, time was of the essence of the contract, as the time for hiring the vessel for the summer's traffic was fast passing away, and the pursuer, having not only disregarded all the defender's urgent appeals for the bank guarantee, but failed to appear to take delivery on the appointed day, the defender was justified in believing that he did not intend to fulfil his contract. In any event, no sufficient evidence of loss of profits had been laid before the Court to justify any more than a nominal award of damages.

At advising—