w w w . L a w y e r S e r v i c e s . i n

Hope Prudhomme & Co v/s Mearnest Louis Max, By His Duly Constituted Agents, Chambers & Co

    Decided On, 18 January 1915

    At, High Court of Judicature at Madras


    For the Appearing Parties: ----

Judgment Text

[1] This is an appeal from the judgment of the Chief Justice, then Mr. Justice Wallis, sitting on the original side. The suit was brought by Monsiour Max, a merchant living in Marseilles, against Messrs. Hope Frudhomme and Co. for damages for breach of two contracts to supply groundnuts. The contracts were admitted by the defendants, who claim to have been entitled to avoid them as they were procured by fraud and misrepresentation. The sole issue settled was whether the plaintiff made certain representation and, if so, whether the representation was false and whether the defendants were entitled to cancel the contract. The representation alleged in the written statement was that the plaintiff stated as a fact that he was sufficiently known to the National Bank of India here and that his drafts will be promptly discounted without banker s credit. The learned Judge found that there was no misrepresentation and that even if there was, the consent of the defendants to the contract was not caused by the misrepresentation within the meaning of Section 19 of the Contract Act and that the defendants were accordingly not entitled to avoid the contracts. He, therefore, gave judgment for the plaintiff with damages based on the difference between the contract rate of 305 francs per 100 kilos and 33 francs, the price which the plaintiff had to pay in March in Marseille s for the same class of ground-nuts.

[2] On appeal Mr. Chamier, for the defendants, renews the argument put before the learned Judge, further contends that the representation was a term of the contract and seeks to make out that the contract w^s not for delivery of ground-nuts in Marseilles, but for delivery to the National Bank of India as agents for the plaintiff in Madras on payment under discount of the bills drawn by the defendants upon M. Max. The first objection to this argument is that it was never set up in the written statement, and no issue was taken on it, and it was not urged before the learned Judge. Mr. Chamier coniftnds that as it is a pure point of law arising on the construction of the correspondence, he can take it in appeal. We have allowed him to argue it and are satisfied that there is no foundation for the contention. The history of the contracts is set out by the learned Judge. The material facts are that the defendants opened negotiations with M.. Max in May with a view to business during the ground-nuts season and suggested that payment should be by three months drafts on him for 93 per cent, of the amount of the invoice against customary credits Dividi Exhibit A). By Exhibit B the plaintiff stated that he was willing to do business, but that he could not accept for more than 90 per cent, of the net amount of the invoice, and with regard to the proposed customary credit he wrote as follows : Letters of credit are not customary but I am sufficiently known to the National Bank of India in your city, so that your drafts will be promptly discounted." In Exhibit C the defendants renewed their demand for 93 per cent, of the invoice amount, and with regard to the other matter in dispute wrote as follows :

[3] "As you are reluctant to open letters of credit, we shall give your counter-proposal a trial when an opportunity occurs and trust we shall have no difficulties in carrying out the same." There was further correspondence and the final letters are, Exhibit E, of the 14th October, from the plaintiff in which he stated he was willing to make a trial allowing the defendants to draw for 93 per cent., and Exhibit P from the defendants containing a clause headed Finance," which ran as follows : We are very pleased to leawi that you are now agreeable to accept our condition of drawing 93 per cent, of the invoice amount." The actual contracts were for 100 tons ground-nuts at 80 5 francs per 100 kilos C.F. Marseilles for December-January shipment and 200 tons at the same price and terms for January-February shipment. Mr. Chamier argues that the word shipment" indicates that delivery was to be on board ship. When pressed as to the person who is to take delivery, he falls back on the reference to the National Bank and states that delivery was to be to them. It is sufficient to say that that was obviously not the contract. The contract was C.F. Marseilles snd the word shipment" has only reference to the period within which the ground-nuts might be shipped. This is made clear by the evidence of P.W. No. 2, who explains that the words mean that the goods may be shipped in the one case to the end of January and in the other case to the end of February at the opinion of the shipper. Another complete answer is that the defendants did not proceed on this footing; for they did not take the shipping documents to the National Bank at first but went to their own Bank, the Mercantile Bank, to get them discounted. It is, therefore, quite unnecessary to decide whether the language in Exhibit B could have been treated as a term, of the contract if the defendants had themselves so treated it. But bearing in mind that they sought by Exhibit A to get as a term of the contract an agreement by the plaintiff that they should draw against custom-. ary credits and that the plaintiff at once repudiated the idea that there was any such custom and refused to give the credit, it would be very difficult to hold that the language I am sufficiently known," etc., was an alternative term. The case relied upon by Mr. Chamier of Behii v. Burness 3 B. and Section 751 32 L.J.Q.B. 204 : 9 Jur. (N.S.) 520 : 8 L.T. 207 : 11 W.R. 496 : 122 E.R. 281 : 124 R.R. 794 does not assist him. What was decided in that case was that the statement in a charter party that the ship is now in the port of Amsterdam1 was intended to be a substantive part of the contract and not a mere representation, the ruling being as follows : "With respect to statements in a contract descriptive of the subject-matter or of some material incident thereof ... the true doctrine appears to be that, if they were intended to be a substantive part of the contract, then they become a condition precedent." It has only to be pointed and that in this case there is no formal contract and that the statements are not descriptive of the subject-matter and are not contained in the contract.

[4] If the defendants could succeed, it could only be on the basis of a misrepresentation. This has been dealt with very fully by the learned Judge and we do not think it necessary to cover the same ground. It is sufficient to say that the words used are not a positive assertion of that fvhich is not true. They mean nothing more than this: "l can assure you that as far as my credit is concerned, I am sufficiently well known to the National Bank for your drafts on me to be promptly discounted." That is certainly a statement of his financial status in Madras: but the rest of it is purely an inference. He had no power to compel the National Bank to discount any draft. That was a matter for the Bank itself. It appearit that his confidence in his financial status was too great; for the Manager of the National Bank states in evidence that" he regarded the plaintiff as a " weak name." But there is nothing to show that the plaintiff was not warranted by the information then in his possession in making the statement. The learned Judge has given reason for holding this and we agree with him.

[5] Further, it is abundantly clear that the defendants consent to the contract in December was not caused by this representation, for in October they specifically state that they will give the plaintiffs counterproposal a trial when opportunity occurs-which can only mean that they were prepared to make the contracts and see if there was any difficulty in getting the drafts discounted. That this is the true view is clear from the facts that they did not take the drafts to the National Bank first, but went to their own Bank and when that Bank, the Mercantile Bank, refused to discount the bills, they cabled for a credit not on the National Bank, but on the Mercantile Bank and that they sought to have the contracts cancelled by Exhibit W before they even went near the National Bank.

[6] Lastly, we are strongly inclined to think that in any cafce the exception to Section 19 would apply; for although it may be that the National Bank would not have made any statement about the plaintiff s credit to a casual inquirer, we can hardly doubt that if the defendants had before closing the contracts taken the letter, Exhibit B, to the National Bank and asked them whether they would discount the drafts for those contract they would have got an answer one way or the other from the Bank. For these reasons we agree with the learned Judge that the defendants were not entitled to avoid the contracts.

[7] The only question that remains is the amount of damages. Mr. Chamier has argued that the damages should be assessed as at the date of Exhibit BB "The National Bank of India refuse to take up. If you cannot arrange with the Bank cancel the contract in consequence of, which is on the 3rd instant" (January), relying chiefly on his argument that the contract was for delivery to the Bank. We have already decided against him on this point: and furth

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er we are of opinion that the plaintiff was entitled to await the arrival of a definite repudiation by letter before taking action, especially in view of the fact that the defendants had up to the end of January in one case and the end of February in the other case to fulfil the contract. [8] We cannot, however, agree with the learned Judge that the damages should be assessed on the price in March. The learned Judge was led to fix that date by the view which he expresses on page 12, that the goods ought to have been shipped by the end of January and the end of Feburary and would have been delivered in the course of Feburary and the course of March. We think that he has overlooked the evidence as to the option of the shipper; and we, therefore, take the price at the end of January, the date on which the plaintiff received the definite repudiation by Exhibit CO. The price then was 32 50 francs as against 33 given by the learned Judge. We allow the appeal to this extent but in the circumstances without costs.