United Kingdom House of Lords Decisions

Viscount Haldane—This appeal arises out of an action brought by sellers of timber under a contract, for damages for non-fulfilment of the contract by the buyer. The answer made is that the contract was illegal because the buyer was not a person provided with a permit, and under the law existing at the time there could be no contract excepting with a person provided with a permit from the Timber Controller.

The action came before the Lord Ordinary, who directed that there should be a proof before answer, taking the view that there was a conditional contract, and that it should be permitted to the pursuer to prove that if the buyer had chosen to take the proper steps to obtain a permit he might have got one, and consequently that the contract might have been implemented. The First Division, however, on appeal recalled that interlocutor and dismissed the action on the ground that there was no contract at all.

Now the contract itself was of this nature—Messrs Cant & Kemp, timber merchants, acting on behalf of the appellant, agreed to sell a quantity of timber lying in store at Glasgow, consisting of so many planks ex such-and-such ships at such-and-such prices, subject to the following conditions:—First, that the buyers obtained a permit from the Timber Controller to purchase; secondly, four weeks' free rent to be allowed to the buyers from the date of the permit; if incurred, then fire insurance to be for sellers' account; and payment to be made by cash in Glasgow in one month from date of permit less 2 1 2 per cent. discount.

Now I pause to observe that that contract on the face of it appears to be an actual contract subject to a resolutive condition, or condition-subsequent, which would put an end to it if not fulfilled. It is not in the form of a contract which had no existence at all until some condition which was preliminary to its existence as a contract should come into operation. Is such a conditional contract, resoluble by a condition-subsequent, one which at its date, the 22nd October 1918, the law allowed? Now the Timber Control Order 1918, which was then in operation, provided by Part I, paragraph 2 ( b), that no one should “sell or enter into any contract for the sale of any such timber except to the holder of a permit granted by or on behalf of the Controller, and then only in accordance with the terms and conditions specified in such permit.” These words appear to me clearly to prohibit actual sale and the entering into any contract of sale equally, and they appear to me therefore to render the contract which purported to be entered into in the case before this House altogether inoperative in law. I agree entirely with the view taken by the First Division, and I move your Lordships accordingly that this appeal be dismissed, and dismissed with costs.

Viscount Finlay—I am of the same opinion. If there was any contract at all it was a conditional contract of sale, and it appears to me to be clear that there is no foundation for the view taken by the Lord Ordinary that the Order does not strike at conditional contracts of sale but only at absolute contracts of sale. The words are perfectly plain—“No person shall ( a) buy or enter into any contract for the purchase of any timber imported into the United Kingdom except under and in accordance with the terms and conditions of a permit granted by or on behalf of the Controller,” and then the words under ( b) are to the same effect, only if possible clearer. That seems to me to show beyond all doubt that before entering into any contract for the purchase of timber imported into the United Kingdom there must be an existing permit, and that you cannot enter into a contract until you have got that permit. A conditional contract of sale or purchase is none the less such a contract on account of the condition which exists in it. It seems to me that the order of the Lord Ordinary cannot be sustained on any reading of the effect of the Order.

There is another view, of course, which may be taken of the effect of the clause in this contract, but it would be even more fatal to the pursuer's case. The words of the note are—“Sold 1892 planks cypress … at 19s. 6d. per foot cube, ex store in Glasgow. This contract is issued subject to buyers obtaining permit from the Timber Controller to purchase.” That may mean that it is to be taken as “issued” only after that permit is obtained, and that it does not form a contract at all until the permit is obtained. Then, of course, if that be so, it is absolutely fatal to the pursuer's case, because on that reading until the permit is obtained there is no contract of any sort or kind. If it is regarded as a conditional contract of sale it is hit by the Order; if the document is read in the way I have suggested, then there is no contract at all and no action could possibly be brought, because the event on the happening of which there was to be a contract of any kind has never happened.

Viscount Cave—I agree. Adopting and slightly varying the language of Lord Cullen,

I think the meaning of the Order was that a buyer of timber should obtain a permit before he proceeded to buy or to enter into a contract to buy. I also think that a conditional contract to buy is a contract to buy. Accordingly this contract, which was entered into without any permit, was a breach of the Order and was illegal and void.

Lord Dunedin—I concur.

Lord Shaw—I concur.