Scottish Court of Session Decisions

LORD MARNOCH'S OPINION.—In this action the pursuers seek recovery of a 10 per cent deposit which they paid following a successful bid for certain heritable property in Glasgow at an auction held in London on or about 14th February 1989. The deposit in question amounted to £165,000.

Parties are agreed that the purchase was governed by the articles of roup which incorporated certain general conditions of sale of which cond. 6 provides inter alia as follows:

"When the Lot is knocked down to a successful bidder … the Purchaser shall … pay a deposit representing 10% of the purchase price or £500 (whichever shall be the greater) to the Auctioneer who shall hold the deposit as Agent for the Vendor...."

The only other part of the contractual documents which, in my opinion, is directly relevant for present purposes is cond. 9 of which the first sentence reads as follows:

"The price under deduction of the deposit already paid in terms of Condition 6 of these General Conditions of Sale, will be paid in full on the Settlement Date by the Purchaser."

Such payment is then stated to be "of the essence of the contract" and it is expressly provided that delay in excess of ten days will entitle the Vendor to "resile" from the bargain.

From the above it will be seen that nothing was said in the contract documents as to what would happen to the deposit in the event that, for one reason or another, the sale failed to materialise. In the present case the sale did fail to materialise in that the defenders aver that they "resiled" from the contract following material breach on the part of the pursuers in failing to pay the balance of the purchase price within the period specified. There is, however, no averment of any loss having been sustained as a result.

When the case called before me in procedure roll it was argued for the pursuers that in the foregoing circumstances they were entitled to recover the deposit in question. While it could have been retained by way of "set off" against any loss sustained by the defenders on re-selling the property, it was recoverable where, as here, there was no claim that any such loss either had been or might yet be incurred. The pursuers also advanced a subsidiary argument to the effect that, on a fair reading of the pleadings, the question of whether there had been a material breach of contract such as justified rescission by the defenders remained a matter on which proof before answer was required. The defenders, for their part, argued that, on a proper construction of the contractual provisions, the deposit fell to be forfeited regardless of any loss on their part, and it was maintained that the pleadings left no scope for argument on the antecedent matter of rescission of the contract.

While I had the case at avizandum it seemed to me that something might turn on the nature of the remedy being sought by the pursuers and I accordingly arranged for it to be called by order to obtain clarification on that particular issue. At the hearing in the by order roll counsel for the pursuers confirmed, as I had supposed, that the remedy which they sought was the equitable remedy of restitution and was, indeed, a classic illustration of the condictio causa data causa non secuta. In that situation counsel for the defenders advanced a further argument to the effect that, regardless of the contractual meaning of "deposit", it was on no view equitable that money paid under a contract should be recovered by a party who was himself in breach thereof. In this connection, however, counsel for the pursuers reminded me of their submission that the question of material breach remained open on the pleadings.

I have found this an interesting case and one not altogether easy to resolve. So far as the arguments anent construction of the contract are concerned I cannot avoid thinking that if parties intend a deposit to be "non-returnable" it is a very simple matter to make express provision to that effect. In the present case, however, counsel for the defenders were in the end constrained to rely on what was said to be implicit in the meaning of the word "deposit" itself—at least in the context of a sale of heritage. In my opinion the fact that the contract relates to the sale of heritage is an entirely neutral circumstance, and in the first instance, therefore, I turn to the dictionary for possible guidance as to what is meant by the word in question. In this connection one cannot do better than refer to the second edition of the Oxford English Dictionary published in 1989 where, for present purposes, the word is defined as follows:

"Something, usually a sum of money, committed to another person's charge as a pledge for the performance of some contract, in part payment of a thing purchased, etc."

Not surprisingly, parts of this definition were relied on by both parties and, in the result, I do not think that it really advances matters. That being so, I am impressed by counsel's submission on behalf of the pursuers that, in dubio, the word should not be construed in such a way as to give rise to the quasi-penal consequence of forfeiture. On the contrary, for such a result to follow, there should, as counsel said, be clear and unambiguous language. Moreover, these considerations apply with all the greater force where, as here, the pursuers are able to rely on the additional principle that contractual provisions should be construed contra proferentem. It follows that I am disinclined to construe the word "deposit" as necessarily importing forfeiture, which was the meaning contended for on behalf of the defenders. But nor do I think that one can read into the word the particular meaning ascribed to it by counsel for the pursuers, viz., that it constituted a fund which was available to be set off against any loss or damage sustained by the defenders. In my view this also reads too much into the use of the word in question. In the last analysis I am of opinion that the only meaning which can safely be attached to the word itself is that of advance part payment.

That being my opinion as to the meaning of the word, the question remains whether effect should be given to the pursuers' claim for restitution in a situation where they themselves are responsible for the termination of the contract. In my opinion that question, as matter of principle, falls to be answered in the negative. I can see that a claim for restitution of a deposit might succeed where a contract is frustrated, or where it is terminated by breach on the part of the seller. Where, however, it is terminated as a result of breach on the part of the purchaser, himself, I see no basis for allowing a remedy which, of concession, is based in equity. In this connection I have considered the pursuers' subsidiary argument that material breach on their part remains a matter for proof before answer. In my opinion, however, that is not the position. It is true that in ans. 3 the defenders aver in terms that "having failed to make full payment of the purchase price by 24th March 1989, the pursuers were in material breach of contract" and that, as matter of formal pleading, this averment is covered by a general denial on the part of the pursuers. However, it is also true that in cond. 4 the pursuers advance as the very basis of their claim for restitution the fact that the defenders have ‘resiled’ from the contract. It was accepted that the references to resiling were more accurately references to rescission but, be that as it may, it seems to me that the pursuers' reliance on either one or the other is wholly inconsistent with the motion that material breach on their part remains a matter for proof. If material breach of contract on the part of the pursuers were a live issue then there could be no possibility of resiling or rescission on the part of the defenders. On the contrary, the defenders would be under an obligation to perform the contract or, having failed to do so, would themselves be in material breach of its conditions. The pursuers make neither of these cases and instead rely on the fact of rescission. In doing so they, in my opinion, concede unambiguously their own responsibility for the termination of the contract.

So far as the authorities are concerned, the only Scottish cases which have a bearing on the issues before me are Commercial Bank of Scotland v. Beal (1890) 18 R. 80 and Roberts & Cooper v. Salvesen & Co . 1918 S.C. 794. However, in both of these cases there was an express clause of forfeiture and the only argument was whether such a clause was sui generis or in the nature of an unenforceable penalty. The Inner House found in favour of the former view and it was in that context that reference was made to English authority. Nonetheless, in Roberts & Cooper there are a number of dicta which may be of relevance. In particular, I refer to the opinion of the Lord President (Strathclyde) at p. 806 where he expresses himself thus:

"I am of opinion that it is well-settled law that where, in a contract of sale, the intending buyer deposits part of the price, he cannot, if he repudiates the contract without justification, claim repayment of the deposit. That is upon the ground either that a man who repudiates a contract is not entitled to rescind that contract, or that a man who is in default cannot take advantage of his own default, or that a man who has paid down money as a security for performance of a contract cannot have that money back if he deliberately elects to throw up the contract."

The Lord President then goes on to cite with apparent approval numerous English dicta which I do not examine exhaustively since most, if not all, are, I think, entirely consonant with the views which I have expressed above in relation to equity. They include, for instance (at p. 807), a quotation from the Vice-Chancellor in Depree v. Bedborough (1863) 4 Giff. 479 at p. 483 to the following effect:

"How the person who is in default can, upon that default, and in consequence of that default, acquire any right to the money which was parted with as a security that there should be no default, it is difficult to conceive."

They also include the following judgment of James L.J. in Ex parte Barrell. In re Parnell (1875) L.R. 10 Ch. 512 at p. 514:

"The trustee in this case has no legal or equitable right to recover the deposit. The money was paid to the defender as a guarantee that the contract should be performed. The trustee refuses to perform the contract and then says, ‘give me back the deposit’. There is no ground for such a claim."

I would add for my own part a reference to the judgment of Mellish L. J. in the same case which was equally short and to the point:

"It appears to me clear that, even where there is no clause in the contract as to the forfeiture of the deposit, if the purchaser repudiates the contract he cannot have back the money, as the contract has gone off through his default."

I should also observe in passing that the primary argument advanced for the pursuers in this case was in terms advanced and rejected in that case.

Lastly, in the case of Roberts & Cooper, extensive reference was made to the leading English case of Howe v. Smith (1884) 27 Ch D 89 where Cotton L.J. approved in terms of the principle enunciated by James L.J. in Ex parte Barrelland where at one point in his judgment Bowen L.J. said this:

"It is quite certain that the purchaser cannot insist on abandoning his contract and yet recover the deposit, because that would be to enable him to take advantage of his own wrong."

I have to acknowledge that in certain other English authorities and, indeed, in certain other passages in the case of Howe v. Smith, there are dicta which, taken on their own, would seem to suggest that the idea of forfeiture is somehow implicit in the actual word, "deposit". If this means that in English law that word has acquired some technical or special meaning then, clearly, that is not a meaning which would be imported into Scots law. However, taking the English authorities as a whole, my impression is that the predominant strand of reasoning is one based on equity and is not dissimilar to that which I have followed in the present case. More importantly, the view which I have taken is, I think, in accord with Lord President Strathclyde's own opinion, albeit obiter, on the matter now before me.

In conclusion, I should record that, in the course of discussion, counsel for the pursuers as a last resort sought to leave open an argument that, independently of a claim for restitution, the court had an inherent equitable power to grant relief. This submission was based solely on dicta of Denning L.J. (as he then was) in the case of Stockloser v. Johnson [1954] 1 Q.B. 476 at p. 490. That case was concerned with the purchase of plant and machinery by instalment payments and, at the passage cited, there was a suggestion that the forfeiture of deposits or instalment payments might in certain circumstances be regarded as a penalty and thus unenforceable. No authority was cited for that proposition in so far as it related to deposits, and I was informed that since 1925 the position in England, so far as land is concerned, has in fact been governed by sec. 49 (2) of the Law of Property Act 1925. So far as Scotland is concerned, I am in no doubt whatever that the cases of Commercial Bank of Scotland v. Beat and Roberts & Cooper v. Salvesen & Co are authoritative for the view that deposits do not fall within that chapter of the law which is concerned with penalties and liquidate damages. In taking the opposite approach in Roberts & CooperLord Skerrington was, in my opinion, clearly in the minority. In the result, I consider that there is no substance in this last argument of the pursuers. I shall accordingly sustain the first plea-in-law for the defenders and dismiss the action.

The pursuers reclaimed.

The cause called before the Second Division, comprising the Lord Justice-Clerk (Ross), Lords Morison and Clyde, for a hearing thereon.

At advising, on 30th October 1991;—

LORD JUSTICE-CLERK (Ross).—In this action the pursuers are seeking payment from the defenders of the sum of £165,000. The action relates to a contract for the purchase by the pursuers of heritable property in Glasgow. At an auction held in London on 14th February 1989 the pursuers' bid of £1,650,000 in respect of the subjects was accepted by the defenders' auctioneers. The bid was made and accepted in terms of the auctioneer's articles of roup incorporating their general conditions of sale. The general conditions of sale which apply are those which are stated to be "Applicable to Scottish Courts only". In terms of the articles of roup and general conditions of sale the pursuers were referred to as "the Purchaser" or "the Guarantor" and the defenders were referred to as "the Vendor". Clause 6 of the general conditions of sale provided that: [His Lordship quoted cl. 6 as set out at pp. 58–59 supra and continued thereafter.]

It is agreed between the parties that after the pursuers' bid for the subjects was accepted, they signed the minute of enactment, and they paid £165,000 to the auctioneers, being 10 per cent of the purchase price. It is further agreed that in terms of the articles of roup and general conditions of sale, the date of entry was 14th March 1989. In terms of cl. 8 of the general conditions of sale the date of entry was called "the Settlement Date". It was further provided in cl. 8:

"Settlement of the transaction shall take place before 3.00pm on the Settlement Date at the offices of the Vendor's solicitors or at such other time and place as they may direct."

Payment was not made by 24th March, and on 28th March 1989 the defenders intimated that they had resiled from the contract. Although the general conditions of sale applicable to Scottish lots only bear to have been prepared by Scottish solicitors, the expression "resile from" hardly seems appropriate in the circumstances; the right conferred upon the vendor is not a right to resile, but a right to rescind, and counsel on both sides were agreed that the words "to resile from the bargain" should be read as meaning "to rescind the contract".

The pursuers contend that on a proper construction of the articles of roup and general conditions of sale, the £165,000 paid by them to the auctioneers as agents for the defenders was a part payment of the purchase price, and that since the defenders resiled from the contract the pursuers are entitled to repayment. They further maintain that it was neither an expressed nor implied condition of the contract that in the event of the defenders resiling from the contract, they would be entitled to retain the sum of £165,000. The defenders on the other hand maintain that on a proper construction of the articles of roup and general conditions of sale, the £165,000 was paid by the pursuers to the auctioneers as agents for the defenders as a deposit, that it was an implied term of the contract between the parties that the deposit operated as a security for performance of the contract by the pursuers, and that in the event of the pursuers failing to fulfil their contractual obligations they would forfeit the said sum. The Lord Ordinary concluded that the only meaning which could safely be attached to the word "deposit" in this context was that of advance part payment. He also concluded that the pursuers were not entitled to restitution in a situation where they themselves were responsible for the termination of the contract. He accordingly sustained the defenders' first plea-in-law which was a plea to the relevancy of the pursuers' averments, and he dismissed the action. Against that decision of the Lord Ordinary, the pursuers have taken this reclaiming motion.

The first question raised in the reclaiming motion is what construction falls to be placed upon the requirement in cl. 6 of the general conditions of sale to the effect that the pursuers as purchasers require to pay a deposit representing 10 per cent of the purchase price or £500 (whichever should be the greater). The choice is between holding that these provisions are concerned solely with providing for an advance of part of the purchase price or holding that the provisions are intended to provide to the vendor a guarantee that the purchaser will complete his part of the contract of sale. For the reasons more fully described by Lord Clyde, I am satisfied that what is demanded of the purchaser is a pledge or guarantee of performance, and not merely an advance of part of the purchase price. Although the views expressed in Roberts & Cooper v. Salvesen & Co 1918 S.C. 704 were obiter, these views have stood unchallenged for over 70 years, and in my opinion, they constitute correct statements of the law of Scotland in this connection. In delivering his opinion in that case the Lord President made it plain that what was then the settled law in England was also the settled law in Scotland, and all the judges referred with approval to a number of English cases.

In particular reference was made by the Lord President to Soper v. Arnold (1889) 14 App. Cas. 429. In that case Lord Herschell said:

"The deposit is given as a security for the performance of the contract. The appellant admittedly cannot recover that deposit if it was through his default that the transaction was not completed."

In the same case Lord Macnaghten said:

"Everybody knows what a deposit is. The purchaser did not want legal advice to tell him that. The deposit serves two purposes—if the purchase is carried out, it goes against the purchase money—but its primary purpose is this, it is a guarantee that the purchaser means business."

Three more cases referred to with approval by the Lord President should also be noted. In Collins v. Stimson (1883) 11 Q.B.D. 142, Pollock B. observed:

"According to the law of vendor and purchaser the inference is that such a deposit"

—10 per cent upon the purchase money as here—"is paid as a guarantee for the performance of the contract, and where the contract goes off by default of the purchaser, the vendor is entitled to retain the deposit".

In Ex parte Barrell, In re Parnell (1875) L.R. 10 Ch. 512, James L.J. said:

"The trustee in this case has no legal or equitable right to recover the deposit. The money was paid to the vendor as a guarantee that the contract should be performed."

In Howe v. Smith (1884) 27 Ch D 89, Cotton L.J. said:

"There is a variance, no doubt, in the expressions of opinion, if not in the decisions, with reference to the return of the deposit, but I think that the judgment of Lord Justice James gives us the principle on which we should deal with the case. What is the deposit? The deposit, as I understand it, and using the words of Lord Justice James, is a guarantee that the contract shall be performed. If the sale goes on, of course, not only in accordance with the words of the contract, but in accordance with the intention of the parties in making the contract, it goes in part payment of the purchase-money for which it is deposited; but if, on the default of the purchaser the contract goes off—that is to say, if he repudiates the contract, then, according to Lord Justice James, he can have no right to recover the deposit."

In the context in which the provisions for the payment of a deposit appear in the general conditions of sale, I am satisfied that the word "deposit" should be given the meaning which it was recognised as having in Roberts & Cooper v. Salvesen & Co . I see no justification for regarding "deposit" in this context as meaning simply an advance of part of the purchase price.

The second question to be determined is whether the pursuers were in breach of contract. This question is critical because counsel for the defenders accepted that if there was no breach of contract by the pursuers, the pursuers would be entitled to repayment. On the basis of the pleadings I am satisfied that the pursuers were in breach of contract. In terms of cl. 8 of the general conditions of sale settlement was to take place before 3 p.m. on the settlement date at the offices of the vendor's solicitors or at such other time and place as they might direct. In terms of cl.9, the vendors were entitled to resile (i.e. to rescind the contract) in the event of the failure of the purchasers to pay the purchase price within 10 days of settlement date. In the present case this meant that payment required to be made by 24th March and payment was not made by that date. Counsel for the pursuers maintained that they were not obliged to make payment by the due date to the defenders' solicitors because the effect of the letter from the defenders' solicitors to the pursuers' solicitors dated 13th March 1989 was to vary the place where payment was to be made in terms of cl. 8. In that letter the defenders' solicitors stated inter alia:

"We shall revert to you later today with a State for Settlement for approval. Said State for Settlement will also include the details of the account into which the purchase price less apportionments is to be telegraphically transferred."

Counsel for the pursuers maintained that that letter constituted a direction or a partial direction to pay into an account which was later to be advised. In my opinion, however, no such direction can be detected in that letter. There is no question of the defenders' solicitors in the letter stating that payment is no longer to be made as provided for in cl. 8. On the contrary, what the letter does is to indicate an intention on the part of the defenders' solicitors to provide for another method of payment, but whatever may have been intended, there is nothing to indicate that the defenders' solicitors ever did give any such direction. Indeed the terms of the letter make it plain that there is no question of any direction being given until the state for settlement is sent to the pursuers' solicitors. It is not suggested that any such state for settlement with details was ever sent to the pursuers' solicitors prior to 24th March 1989, and accordingly I am satisfied that no direction was ever given to vary the terms of cl. 8 relating to the method and time of payment. Accordingly, since the pursuers failed to make payment within 10 days of the settlement date, namely by 24th March 1989, I am of opinion that they were in breach of contract. Moreover since it was expressly provided in cl. 9 that payment of the full purchase price on the settlement date was of the essence of the contract, I am also satisfied that the breach of contract by the pursuers was material.

This is sufficient for the disposal of the case. The matter is very clearly expressed by the Lord President in Roberts & Cooper v. Salvesen & Co . at p. 806:

"But whether this be so or not, I am of opinion that it is well-settled law that where, in a contract of sale, the intending buyer deposits part of the price, he cannot, if he repudiates the contract without justification, claim repayment of the deposit. That is upon the ground either that a man who repudiates a contract is not entitled to rescind that contract, or that a man who is in default cannot take advantage of his own default, or that a man who has paid down money as a security for performance of a contract cannot have that money back if he deliberately elects to throw up the contract."

The basis of the pursuers' claim was said to be condictio causa data causa non secuta, but for the reasons expressed by Lord Clyde in his opinion I agree that in the circumstances the condictio has no application.

Accordingly, although for different reasons, I am of opinion that the Lord Ordinary arrived at the correct conclusion in this case, and I would accordingly move your Lordships to refuse the reclaiming motion.

LORD MORISON .—The pursuers, at an auction held on 14th February 1989, contracted to purchase from the defenders heritable property in Glasgow. The contract was subject to certain conditions, one of which provided for immediate payment by the purchaser to the vendor of a sum amounting to 10 per cent of the purchase price, which was described as a "deposit". Another of the conditions provided for payment of the full price under deduction of the deposit on a specified date. It was provided that payment on that date was "of the essence of the contract" and that failure to pay it within 10 days would "entitle the vendor to resile from the bargain". The pursuers did not pay the full price within 10 days from the date upon which it became due and the defenders then intimated to them that they were "resiling" in terms of the latter condition. It is agreed that this intimation constituted a purported exercise by the defenders of a right to rescind the contract which the condition gave them in the event of non-payment. In this action the pursuers seek to recover the deposit which they paid immediately after the contract was entered into.

The Lord Ordinary held that the word "deposit" could only safely be construed as meaning an advance part payment of the price. He determined however that the pursuers were not entitled to recover the sum by way of restitution, since that remedy is based in equity and the pursuers' pleadings made it clear that they were themselves responsible for the termination of the contract. I agree that the pursuers' pleadings do not relevantly set out a case that they are entitled to recover the sum in dispute, but my opinion to that effect is based on different reasons from those given by the Lord Ordinary.

The question whether the sum in dispute was to be forfeited if the contract was terminated on any failure by the pursuers to comply with obligations which were of the essence of the contract is one which must be determined by reference to the terms of the whole contract and not only by a construction of the word "deposit" which was used to describe that sum. But the use of the word strongly suggests that something more was intended by the payment than a mere advance of the price. In Roberts & Cooper v. Salvesen & Co 1918 S.C. 794, all three judges referred with approval to statements contained in certain English cases that one purpose of a deposit is to "guarantee that the purchaser means business", and that "it creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract". These opinions were expressed obiter, since there was express provision contained in the contract under consideration for forfeiture of the advance payment. But the judges' definition of the meaning of the word "deposit" has never been challenged in any Scottish case to which we were referred. Consideration of the condition under which the pursuers' obligation to pay the sum in dispute arose confirms the view that it was intended as more than an advance of the price, which might have been set off against a claim for damages, but which otherwise might be recovered even if the pursuers were in material breach of their obligations. The payment was not in that or any other condition described as an advance of the price; and its amount was to be calculated not only by reference to the amount of the price but additionally by reference to the sum of £500. In a sale of commercial property of substantial value, particularly if the sale is one which takes place by auction, it is natural that the vendor should take steps to protect himself against speculative offers made by persons who have not assured themselves that the necessary finance is available if their offer is successful or who have no firm intention of making payment in that event. The expedient of providing for payment of a deposit which will be forfeited in the event of non-payment of the price at the stipulated date is one which affords to the vendor some protection in these respects, and it was this expedient which in my opinion was adopted in the present case.

It was conceded by the defenders that whatever was the meaning of the word "deposit", they were obliged to repay the disputed sum if the pursuers were not in breach of contract such as entitled the defenders to rescind it. This concession was correctly made, since the conditions of the contract only implied forfeiture of the deposit in the event that the pursuers failed to discharge obligations which were of the essence of the contract, including the obligation to pay within the stipulated period. If the pursuers did discharge these obligations, the sum would be repayable on the principle of restitution. If they did not, it would not be repayable, since the condictio causa data causa non secuta would not then apply: the consideration for which the sum was paid, i.e. as security against non-performance, would not have failed.

The pursuers maintained that they were not in breach of contract notwithstanding that they did not make payment of the price within the stipulated period. The sole ground presented to us as justifying this submission was that a letter sent on the defenders' behalf and dated 13th March 1989 constituted a legitimate variation by the defenders of the provision previously made as to the place of payment, and that this variation could not be complied with by the pursuers since it was subject to further information being provided by the defenders within the 10 days, and this information was not provided during this period.

This argument does not appear to have been fully presented to the Lord Ordinary, who does not deal with it in holding that the pursuers had unambiguously conceded their own responsibility for termination of the contract. But it is in my opinion ill-founded. Although the defenders were entitled under the conditions of the contract to direct that payment should be made at a place other than at the offices of the vendor's solicitors (which was the place of payment specified) they gave no such direction. The letter of 13th March stated that the defenders' solicitors would "revert to you later today with a State of Settlement for approval. Said State for Settlement will also include the details of the account into which the purchase price … is to be telegraphically transferred". It is clear that the defenders were intimating an intention to direct a change from the stipulated place of payment as they were entitled to do, but that intention was never put into effect. However misleading the letter may have been, it did not therefore affect the pursuers' obligation to pay at the offices of the vendor's solicitors, nor did it affect their essential obligation to make that payment within the period allowed to them.

For these reasons the pursuers are not in my opinion entitled to recover the disputed sum and the question whether the condictio is available to a person who is in breach of contract does not arise. In deference to the arguments submitted to us on that matter and to the decision of the Lord Ordinary, I would however briefly express my opinion that a breach of contract by the payer of part of the price which is sought by him to be recovered, following rescission of the contract by the payee on the ground of that breach, does not per se affect the equity of the claim for restitution. This is because the ordinary remedies for breach of contract are available to the payee and the payer is already fully accountable for the breach by the operation of these remedies. The view which I have expressed is at least consistent with the principles laid down in the case of Cantiere San Rocco v. Clyde Shipbuilding and Engineering Co . 1923 SC (HL) 105, and it is directly supported by a passage in Gloag on Contract (2nd edn), p. 59.

For the reasons which I have given I agree that the reclaiming motion should be refused.

LORD CLYDE .—The pursuers in this action successfully bid for certain heritable subjects at a public auction. Clause 6 of the general conditions of sale relevant to the transaction required three things to be done on the lot being knocked down to them. The successful bidder had to hand a notice appropriately completed to the auctioneer or his clerk. Secondly the purchaser required to sign the minute of enactment. Thirdly the purchaser required on doing so to "pay a deposit representing 10% of the purchase price or £500 (whichever shall be the greater) to the Auctioneer who shall hold the deposit as Agent for the Vendor".

The question arises what was the nature of that payment. The answer seems to me to be a matter of construction of this particular contract. Looking to the language used and the context of the requirement it seems to me that what was intended was that the payment should serve as a guarantee that the purchaser would complete his part of the contract. The distinct use of the word "deposit" as distinct from "the purchase price" or, as it appears in cl. 9, "the price", suggests that this was not to be merely an advance of part of the purchase price. It was submitted by counsel for the pursuers and reclaimers that it was to be a security for damages but to my mind the word suggests something more than that. Any payment in advance might serve that purpose by way of a set-off. In the context of cl. 6, where each step appears to be designed to affirm the commitment of the purchaser to the contract, it seems to me that what was here intended was a guarantee of performance of the purchasers' obligations so as to make the sum open to forfeiture if the purchaser failed in that performance. Such a guarantee of performance seems to me appropriate in a sale by roup where, except for the provision in cl. 5 requiring notification of potential bidders, the seller will have no knowledge of the purchaser, the seriousness of his intentions or his creditworthiness. I am fortified in the construction which I have preferred by the observations of the judges in the case of Roberts & Cooper v. Salvesen & Co . 1918 S.C. 794, where the construction established in the English courts was recognised as applicable in Scotland.

The next question is whether the pursuers were in breach of contract so as to incur a forfeiture of the sum paid as guarantee of their performance. I am satisfied that this is a matter which can be resolved by a consideration of the pleadings, including the correspondence incorporated therein, without the need for proof. Indeed it can be determined as a matter of the relevancy of the pursuers' averments. There is no doubt from the pleadings that the pursuers did not pay the purchase price on the settlement date as cl. 9 required. It is equally evident that they did not pay it within 10 days of that date, and the clause expressly provides that failure to pay within that period shall "entitle the Vendor to resile from the bargain". The phrase "resile from" is inappropriate in this context but it seems to me that it must here stand for the word "rescind". I find it hard to avoid the conclusion that failure to pay was here being recognised in the contract as a material breach. Counsel for the pursuers submitted before us that the defenders had in the letter of 13th March 1989 given a direction or at least a partial direction under cl. 8 whereby the price was not to be paid at the office of the vendor's solicitors but to a bank account yet to be specified. They aver that despite requests by the pursuers' solicitors the defenders' solicitors failed to provide details of the total settlement figure or the bank account to which payment was to be made, and they argued that the pursuers were thus impeded in the performance of their contractual obligation and should not be held to be in breach of their obligation. This line of argument is not very evident from the pursuers' pleadings and may well be thought to be contradicted by their averment, which is echoed in their principal plea-in-law, that the defenders had "resiled" from the contract which, with the same looseness of language which was used in the contract, might be understood as an admission that a breach of contract had occurred. But while the defenders admit that their solicitors did not provide the details of the final settlement figure or of the bank account into which the payment was to be made I am not persuaded that that is relevant to the performance of the pursuers' contractual obligation. I am unable to construe the letter of 13th March as a direction under cl. 8. It seems to me to be a statement of intention to make a direction on the place of payment, but so far as it goes it does not innovate upon the directions as to place and time set out in cl. 8. The obligation then still remained on the pursuers to pay the purchase price less the amount of the deposit, and that was an ascertainable sum, before 3 p.m. on the settlement date at the offices of the vendor's solicitors. Their failure to do so then was a failure in the performance of their contractual obligation and their failure to do it in the following 10 days constituted a material breach of contract.

The basis of the pursuers' claim for repayment of the money which they paid under cl. 6 of the contract when the lot was knocked down to them is the condictio causa data causa non secuta. On a proper construction of the contract however and from a consideration of their averments it appears that the money was paid as a guarantee that they would perform their obligations under the contract, that they failed in their obligation to pay the purchase price and that despite their general denial of the defenders' averments they were in breach of the contract. While the sum would have been deducted from the purchase price on the settlement date had the contract been performed, its nature as a guarantee involved its forfeiture on the failure in performance by the pursuers. In these circumstances it seems to me that the condictio has no application. The counterpart of the payment made was not the conveyance of the subjects but the due performance of their obligation by the pursuers. It thus becomes unnecessary to decide the question which was argued before us whether the condictiocan be available to one who is himself in breach of contract. On the whole matter I agree that the reclaiming motion should be refused.