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SCOTTISH_HoL_JURY_COURT

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(1773) 2 Paton 300

CASES DECIDED IN THE HOUSE OF LORDS, ON APPEAL FROM THE COURTS OF SCOTLAND.

No. 75.

Robert Alexander, Esq. Appellant

v.

James Montgomery & Co. Respondents

House of Lords, 19th February 1773.

Subject_Sale — Locus Penitentiæ.—

Circumstances in which written correspondence, in regard to a sale of coal, was not held to amount to a final and conclusive agreement, the parties having stipulated that their agreement was to be a written agreement, and, until this was executed, either might resile; affirming the judgment of the Court of Session.

A proposal was entered into for the sale of coal, on the appellant's part, to the respondents on the other; and the question was, Whether the following letters, which passed from the one to the other, imported a definite and final agreement on the subject of the sale?

Mar. 12,1770.

The respondents were possessors of the Newton colliery in Ayr: and Mr. Alexander addressed the following letter to Dr. Campbell, one of the partners of that company. “Sir,—My friend, Mr. M'Adam, acquaints me, he had talked over a proposal which I had desired him to make to you and partners of the Newton coal work, for the delivery of a quantity of coals at the harbour from my brother's estate yearly. Mr. M'Adam informs me that your company agree to take 25,000 tons yearly, and to pay for the same, on delivery, 5s. per ton, the agreement to commence Martinmas next. Mr. M'Adam says nothing of the endurance of the agreement, but my agreement was to agree for 21 years. It being understood that, should the coal work cease for want of coal, or other unavoidable

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obstructions, the agreement shall cease, but otherwise you shall have all the coals taken out to the extent you agree for, and for any quantity short taken out, we shall pay you a penalty equal to what we suppose your profits may be, suppose 6d. per ton; and this I now confirm. I dare say, as our interests are by this agreegment the same, you will have no difficulty in allowing a waggon to pass through your grounds, on paying damages.— Mr. Beaumont, who is to work the coal for my brother, will doubtless call on you, and as he is a very skilful and judicious man. I doubt not but he may be of use even to your works, and that, in all events, you will go on together harmoniously. He brings most of our colliers from England. I think a missive letter as binding as any other. But as the agreement is for a long time, it may be convenient to have a deed on stamped paper. If you will send me a scroll, I shall return it with my observations, or extend and sign it if right.”

The answer to this letter was as follows:—

“Having been some days from home, I did not get your letter till just now, else I should have answered it in course. I did agree with Mr. M'Adam, as he wrote you, to give you 58. per ton for your coal, delivered on the quay, and to take 25,000 tuns the first year, and 30,000 tons every after year, but no more, as I was apprehensive that quantity, with what may be expected from the other coal pits, would be as much as could possibly, in the present state of our (Ayr) harbour, Be shipped in 12 months, and more than can be shipped at the present wharf; but, as we have an exclusive privilege of erecting wharfs on the other side during the course of our lease, we can in some measure obviate that difficulty. I told Craigengillan, (meaning Mr. M'Adam), if our harbour came to be improved, so as to contain more shipping, I should have no difficulty in extending the export of your coal, as there is no present appearance of the markets falling for commodities; we did not agree as to time. I did not know how much of our Newton tack was to run, and he was not very sure how long you might like to engage. But I must now inform you, that we do not incline to take it longer than till the end of our Newton tack of which there is to run 16 years, after Martinmas next. As to the bargain being void, upon the coal becoming unworkable, it is reasonable and agreed to; as to 6d. a ton for what you may fall short while it is wrought, it is more than we get by it; and therefore cannot be objected to.— As to the waggon way, I cannot speak to that point; I am
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afraid we have it not in our power, without the consent of the proprietors, to grant it; neither do I know (as I have not seen any of them) how far it may be agreeable to the other gentlemen concerned, if we should get the consent of the community of Newton; but this I will venture to say, that there is nothing Mr. Alexander ought to ask, or we to grant, that will be refused, as I am sure we will most heartily wish to see a thing of such general concern fairly on foot. When I have your answer to this, I shall cause scroll the contract, and send it you.”

Mar. 19, 1770.

To this letter, Mr. Alexander returned the following answer:—

“I have your favour of the 17th confirming, on behalf of the Newton Company, the verbal agreement made with Mr. M'Adam about my brother's coal; by the said letter, I see you propose to take about 30,000 tons of coals annually, after the first year, which, accordingly, I engage for him to deliver to the company, the agreement to last for 16 years from Martinmas next, the penalty 6d. per ton. I apprehend our mutual missives sufficiently explicit and binding; and the only use of a formal contract is, in case any of the letters being lost, or to enforce summary execution. When you send me the scroll, I shall examine and return it with my observations. In regard to a waggonway, every motive of mutual interest, exclusive of the public benefit, will certainly induce you to promote a waggonway, which may carry both coals; and we send next week a gentleman well conversant in these matters, with full power to transact this; and to prepare for opening the coal. His name is Mr. John Beaumont. He will be very ready to give his best advice and assistance, which may be worth attending to; you need say nothing to him of the agreement.”

As in these letters reference is made to the alleged agreement entered into in regard to the sale of the coal, the following letter from Mr. Alexander then followed:—

“Sir,— As you are so good to offer to make enquiry about the sale of coals, and to see if any of the Air gentlemen would engage and buy my brother's, deliverable at the ship's side in Air, or on the coal hill, I beg leave to acquaint you that, having taken all possible information concerning the coal, we have reason to think it valuable; and as the offers hitherto made are noways adequate, my brother thinks of working it himself, at least till such time as the value of it is better understood. We have in view a man of skill and abilities, who would work it for my brother's account;
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but, unless the sale could be extended to at least 25 or 30,000 tons, we could not offer him such an appointment as would be necessary to engage him; we find the coals could be delivered on board ship for 5s. per ton good weight, or 4s. 6d. on the hill; and as we live at such a distance, and charges must attend the receiving the money, and making it a staple trade, if men of character could be found who would take the coals as they are turned out, which shall be in a good merchantable condition, the quantity annually as above to be increased in the option of the buyer, not to exceed 60,000 tons, my brother would enter into a contract, to commence Martinmas next; and as the contractor would be put to no advance, and the present export price is 6s. per ton, or 5s. per ton on the hill, supposing export sale could be pushed at 5s. 8d., the difference would be a handsome allowance to the contractor. I beg to hear from you soon on this subject, as we must decide on something immediately.”

No written or stamped agreement followed; but a scroll was made out, and sent by the one to the other, and in the correspondence that attended the alterations thereon, and the terms thereof, the parties finally disagreed.

In the meantime, it was alleged by the appellant, that on the faith of the preliminary agreement, they made a contract with a man of skill, who had proceeded to take measures for opening and working the coal in question. And, conceiving that by the letters above quoted, there was a conclusive binding agreement, the appellant raised action for implement thereof.

June 26, 1771.

The Lord Ordinary, of this date, pronounced this interlocutor, “Having considered the letters of correspondence exhibited by both parties, finds, in the treaty for entering into a contract between the parties, several of the material and essential articles were not adjusted and agreed upon, and that no finished bargain was concluded so as to be binding upon the parties, but that either of them may resile from their proposal; therefore dismisses this action, and assoilzies the defenders, and decerns.”

Mar. 6, 1772.

On petition, the Court altered, and held that there was a concluded bargain, and that the parties were not entitled to resile. But, on a second reclaiming petition, the Court found—“That no finished bargain was concluded so as to be binding upon the parties, but either of them may resile. Therefore assoilzie the defenders and decern.”

Against this interlocutor of the Court, and that pronounced

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by the Lord Ordinary of the 26th June 1771, the present appeal was brought.

Pleaded for the Appellant.— The question upon the present appeal is, Whether such an agreement is made out by the letters which passed between the parties, supported by acquiescence, as establishes a concluded bargain? The requisites essential in a contract of sale, are, consent of the parties, certainty in the thing sold, and the price paid. In the present case, all these three requisites are present; and if that be fixed, it can afford no solid objection to the efficacy of the contract, that the parties disagree about the mode or manner of carrying the contract into execution. Hence, in the transaction, there are termini habiles to constitute a binding bargain; and, as obligations in respect to land rights may be constituted by letters, a fortiori in mercantile transactions, the case must be the same. The want of obligatory words in this correspondence, is no good objection, because Mr. Alexander had engaged to deliver 25 or 30,000 tons per annum; and no verba solemnia are necessary to constitute a bargain by letters. The price was fixed at 5s. per ton, to be delivered at the quay of Ayr. The agreement was to endure for 16 years. And it was no objection to this to say, that the parties had agreed, that the articles were afterwards to be reduced into a formal contract, and therefore, that until such contract was prepared and executed, the bargain was incomplete, and the parties entitled to resile; because, although this rule of law was undoubted, yet where, from the tenor of the letters themselves, which clearly shewed that both parties understood themselves bound by these letters, and only bound themselves to enter into a more formal contract for the purpose of summary execution, it was clear that this rule of law did not apply to the circumstances of this case. Nor does it signify that the person who wrote these letters had no power, his brother, the appellant, being the proprietor, and the only party entitled to treat; because the appellant's brother, who wrote these letters while the appellant was on the Continent, had full power, and was authorized to enter into such a contract; and Mr. Campbell was a copartner of the company.

Pleaded for the Respondents.— Both parties, from the beginning of this correspondence, had a contract in contemplation, which appears from the letters themselves. Mr. Alexander even first proposed it, and accordingly a scroll of the contract was written out. This was agreed to; and it was upon descending to particulars in this scroll, that the parties disagreed. A contract, therefore, having been agreed upon,

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the rule of law which gives locus penitentiœ to either party, applies with its utmost force to this case, where that contract was never followed up. Whatever might be the form of agreement necessary in such a case was immaterial, so as this was fixed, that the parties having agreed to a particular mode of contract on stamped paper, could not depart from that mode, and, until this was completed, there was locus penitentiœ. But, independently of this, the letters do not contain a final agreement. They were indefinite in a great many essential and important points, in such a transaction. Nothing was fixed about preventing the appellant from afterwards opening other coal works, and bringing them into Ayr, and so competing with him. Nor was the penalty properly fixed. Nor was it stated whether the ton was to be measured at Ayr, or to be weighed, as is customary, in Ireland. Nor was the time of delivery of the coal fixed, or any thing specified, whether it was to be delivered daily or weekly, as it should be dug out of the mine. As the parties differed about these things, the presumption is, that no concluded bargain was entered into by the letters, and it does not affect the question in the least, that the appellant has been so rash, as in the face of these differences, to open the ground in question.

After hearing counsel, it was

Ordered and adjudged that the appeal be dismissed, and that the interlocutors therein complained of be, and the same are hereby affirmed.

Counsel: For the Appellants, E. Thurlow, Ja. Montgomery.
For the Respondents, Al. Wedderburn, Ar. Macdonald.

Note.— Not reported in Court of Session. The judges in House of Lords seem to have been as much divided in this case as the judges in the Court of Session. After the debate, the votes of the Lords were equal—four for reversing, and four for affirming, whereupon it was determined that the interlocutor should not be reversed. It would seem from this, that the lay lords joined in the voting.

1773