Scottish Court of Session Decisions

On 1st May 1893 David Ireland & Son, coal merchants and exporters, Dundee, wrote to the Merryton Coal Company, coalmasters, Merryton, near Hamilton—“We have an inquiry for Hamilton Ell, shipment during the next few months, and might arrange 3000 tons at 7s. f.o.b. Grangemouth, in lots of 4/600 tons.” On 2nd May the Merryton Coal Company replied—“We have your memo, of 1st inst. We would take the 3000 tons Ell coal at 7s. per ton f.o.b. G'mouth, for delivery over next four months in average monthly quantities. Delivery in shipping lots of 4/600 tons at a time on due notice being given. We don't guarantee delivery during strikes or stoppage of pits.” On 8th May David Ireland & Son accepted the offer of the Merryton Coal Company by letter in the following terms—“Referring to yours of 2nd, we are glad we have now succeeded in placing the 3000 tons of Ell, and accept this quantity at 7s. f.o.b. Grangemouth, delivery in about equal monthly quantities over the next four months.”

In November 1893 the Merryton Coal Company raised an action against David Ireland & Son for £274, 1s. 7d. as damages for breach of the above contract.

In December 1893 David Ireland & Son raised a counter action against the Merryton Coal Company for £238, 17s., also as damages for breach of the contract.

The actions were conjoined, and a proof allowed, the result of which, so far as it bears upon the legal question at issue, sufficiently appears in the opinions of the Lord Ordinary ( Stormonth Darling) and Lord Trayner.

On 20th March the Lord Ordinary pronounced the following interlocutor:—“Decerns against David Ireland & Son for payment to the Merryton Coal Company of the sum of £157, 4s. 9d. sterling: Finds the Merryton Coal Company entitled to the expenses of the action at their instance against David Ireland & Son up to 9th January 1894: Finds David Ireland & Son entitled to the expenses of the action at their instance against the Merryton Coal Company up to the date of the conjunction of the processes, and to expenses in the conjoined processes to the extent of one-half of the taxed amount thereof, &c.

“ Opinion.—There are various questions raised on record in these cross actions, but the only matter which went to proof and remains for decision is a claim of damages for breach of contract by Ireland & Son against the Merryton Company.

The contract was concluded on 8th May 1893, and was for the sale by the company to Ireland of 3000 tons of Ell coal at 7s. per ton f.o.b. at Grangemouth, delivery during the next four months, in about equal monthly quantities, and in shipping lots of 4/600 tons at a time, on due notice being given. The sellers also stipulated that they did not guarantee delivery during strikes or stoppage of pits.

The parties differ as to the meaning of the contract. Ireland, the purchaser, maintains that the contract was essentially one for the sale of 3000 tons, and no less, to be reasonably spread over the period of delivery, and that this period was either the months of June, July, August, and September, or at all events the period from 8th May to 8th September. The

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seller, on the other hand, maintains that the contract was equivalent to four separate and distinct contracts for the sale and delivery of 750 tons in each of the months of May, June, July, and August.

I cannot agree with the extreme contentions on either side. With regard to time, if I had been construing the contract without aid from the subsequent correspondence I should have said that the four months were to run from the 8th of May. But Ireland's letters of 15th, 17th, and 22nd August show conclusively that he, like the sellers, regarded the period as beginning on the 1st of May and ending on the 31st of August. On the other hand, I do not think that each month's delivery was a hard and fast quantity of 750 tons, and that a portion remaining undelivered at the end of any month was necessarily wiped out of the contract without reference to the cause of non-delivery. In short, I regard the contract as one contract, and not four contracts, but I think that the deliveries were to be spread over the months of May, June, July, and August in nearly equal proportions, with the result that if the purchaser failed to take something like the proper proportion in any month, he was not entitled to demand delivery of that quantity in succeeding months, and that if the seller failed to give delivery of the proper proportion for any month when asked, he was not thereby relieved of the duty of delivering that quantity, but must make it up as soon as possible provided the purchaser were still willing to take it.

Now, the facts are these—In their letter of 9th May confirming the contract the sellers asked Ireland when his first boat was expected, so that they might prepare. The answer next day was that he hoped to send the first order in a day or two, but that the navigation to Cronstadt was reported still unsafe. On 17th and 27th May the sellers repeated their inquiry, but not till 7th June did Ireland send his first order, and that was for a vessel not expected to be ready till 13th or 14th June, It may be that the state of the Baltic made it difficult to procure tonnage, but the sellers have proved that six vessels sailed from Grangemouth for Cronstadt in May 1893 taking large cargoes of coal, and in any case I do not see that the purchaser can be relieved on that ground from the consequences of what was clearly a breach of contract on his part. The sellers did not at once intimate that they regarded the first month's instalment as cancelled, but the result, I think, was the same unless they chose to carry forward the delivery. So far from being willing to do that, the whole subsequent correspondence consisted of demands for coal by Ireland to an extent considerably exceeding the contract quantity, and excuses by the sellers for nondelivery, except of comparatively small shipments, on the ground that their men were not working full time. It is in evidence that during the summer of 1893 there were difficulties with the miners in the west of Scotland, but the Merryton Company's average output was something like 400 tons a-week, and I have heard no satisfactory reason why the deliveries were not much larger than they were. On the whole, down to the last delivery in the early part of September the quantity delivered was 1594 tons 9 cwt. The balance undelivered was thus 1405 tons 11 cwt. From this I deduct 750 tons, as representing the quantity which Ireland failed to take in May, leaving 655 tons 11 cwt. for non-delivery of which I hold the Merryton Company responsible.

In the view which I take of the case it is unnecessary to analyse the correspondence, or to inquire how far short of the required quantity the Merryton Company were in any particular month. From the beginning of June onwards they were, I think, continuously in default. The only remaining question is, whether the purchaser was bound to treat them as in default at the end of each month, and buy in against them at once, or was entitled to wait until the termination of the contract. I do not doubt that when a seller intimates unequivocally that he intends to make no more deliveries it is the right and duty of the purchaser forthwith to buy in against him at the market price of the day. But that rule applies to the case where there is an absolute repudiation of the contract. I do not find in this correspondence any positive refusal on the part of the sellers to make further deliveries until their letter of 28th August. The contract was treated by both parties as in full vitality till then, and although the sellers had once or twice asserted their view that they were not bound to deliver more than 750 tons per month, these were rather of the nature of excuses for short deliveries, and not binding declarations on which the other party would have been justified in acting.

I hold it proved that at the end of August the price of Ell coal had risen from 7s. to 10s. 3d. a ton, and Ireland is therefore entitled to the difference of 3s. 3d. on 655 tons. 11 cwt., being £106, 10s.”

The Merryton Coal Company reclaimed, and argued, inter alia—The Lord Ordinary's view of the contract was wrong. The contract must be treated as four separate contracts for delivery of 750 tons of coal in each of four successive months, and the damage sustained must be calculated as if this were so— Brown v. Muller, June 8, 1872, L.R., 7 Exch. 319; Roper v. Johnson, February 6, 1873, L.R., 8 C.P. 167; ex parte Llamsamlet Tin Plate Company, in re Voss, March 17, 1873, L.R., 16 Eq. 155.

Argued for David Ireland & Son—There were not here four separate contracts for delivery of 750 tons of coal at the end of each of four months, but one contract for 300 tons of coal deliverable if possible in equal monthly quantities. The other side laid far too much stress on the mode of delivery, and far too little upon the quantity expressed in the contract. The contract was one complete contract and not split up into as many contracts as theer were to be deliveries. The contract did not draw a hard and fast line, but showed

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that a reasonable allowance as regards the periods of delivery was to be made on both sides, provided that the 3000 were delivered and taken within the four months. Deliveries which were not demanded or made within one month could be demanded, and if demanded, were bound to be made during the other months unless parties acted unreasonably— De Oleaga & Company v. West Cumberland Iron and Steel Company, July 3, 1879, 4 Q.B. 492; Ogle v. Earl Vane, February 11, 1867, L.R., 2 Q.B. 275— aff. February 1, 1868, 3 Q.B. 372; Tyers v. Rosedale and Terryhill Iron Company, May 15, 1875, L.R., 10 Exch. 195; Mersey Steel and Iron Company v. Naylor, Benzon, & Company, March 28, 1884, 9 App. Cas. 439. A contrast to the present case was Higgins v. Pumpherston Oil Company, March 14, 1893, 20 R. 532, where such delivery was declared in the contract to constitute a separate contract. There was no such declaration in the present contract.

At advising—