Pim sold a cargo of wheat to Hall at 51s 9d a quarter. Hall had agreed to sell a similar cargo to Williams at 56s 9d a quarter, and Williams to sell again Suzuki at 59s 3d a quarter. Pim bought a cargo of wheat on board the ‘S.S. Indianic’ at 60s a quarter. Pim later secured agreement with all concerned that the sales from Pim to Hall and from Hall to Williams and from Williams to Suzuki should be treated, in each case, as resales of the cargo the subject of the preceding purchase in the chain. Pim gave notice appropriating the Indianic cargo to its contract with Hall and that notice was passed down the chain. Pim sold the Indianic cargo to Rank at 59s 11.5d a quarter. When the cargo arrived the market price was 53s 9d a quarter. Having sold the cargo to Rank Pim could not deliver the documents covering the cargo to Hall. The Court of Appeal had held that Hall’s damages were limited to the difference between the market (53s 9d) and the contract (51s 9d) price at the date of the breach. Hall claimed the difference between the price at which they had bought (51s 9d) and the price (56s 9d) under their sub-sale to Williams.
Held: The House restored the decision of Rowlatt J that Hall was entitled to recover the difference between the price at which it had bought and the price at which it had resold the cargo together with an indemnity for the damages and costs which Hall would have to pay to the buyers who had brought from them. It treated the question as one of the application of the rule in Hadley v Baxendale.
Viscount Haldane said the contract was not merely for the sale of corn in bulk but for the sale of the cargo of an individual ship, either specifically identified or to be identified, by which the seller contracted to put the buyer in a position to fulfil such sub-contract as he might make. It did not matter whether the buyer was likely to enter into a sub-contract. He reached this conclusion on the terms of the contract alone without reference to what took place between the parties after the contract was made. Condition 1 of the contract had provided for notice of appropriation to be given by Pim, ‘and by each other seller’; the arbitration clause referred to intermediate buyers and sellers and to ‘the last buyer’; and the strike clause referred to notices being ‘passed on in due course’.
Viscount Dunedin said that both parties knew it was common practice to resell cargoes whilst afloat, that, apart from common knowledge, the contract itself showed this, and that the correspondence as to the actual appropriation of the vessel was additional proof, if proof were needed, of the familiarity of Pim with the practice of successive resales of cargo afloat. Pim knew as soon as it nominated a cargo that only delivery of that cargo could satisfy the contract, and it was sufficient to give rise to liability for loss of profit that there was an even chance of a sub-sale taking place.
Lord Shaw agreed with Viscount Haldane: ‘My principal reason is that I think that the two parties had actually provided for the very case of sub-sales’. He stated the proposition that a ‘not unlikely’ result of the breach must be reckoned to be within the contemplation of the parties as to its breach. He deprecated an ‘ultra analysis’ of Baron Alderson’s sentence into two portions ‘which are to be reckoned as necessarily and always two distinct and different cases’ and said: ‘These two things, arising naturally from or the probable result of the breach, need not be antithetically treated; they may run into each other and, indeed, be one. I think for instance, that in this case, where the string of sales was to the knowledge of the breaker of the contract within the very scope of the conditions of his bargain, it was fairly and reasonably to be expected, not only, to use the language of the judgment as ‘arising naturally i.e. according to the usual course of things, from such breach’, but also ‘such as may reasonably be supposed to have been in the contemplation of both parties, at the time that they made the contract, as the probable result of the breach of it’. What may be regarded as arising naturally from the breach, may itself be dependent on what is known to the parties at the time of the contract as a possible result of the breach.
Lord Phillimore thought the question to be one of contract. Notice or knowledge of an intended use would not do of itself: ‘But if the tribunal which tries the case comes to the conclusion that he contracted to sell or to carry on terms that he should be responsible for damage which might accrue from his failure to provide for any one of certain objects then he must be held liable’. The contract terms were such that the sellers ‘must be taken to have consented’ to a state of affairs whereby the purchasers would sell on in a string of sales and ‘thereby to have made themselves liable to pay to the appellants their profit on resale’.
Lord Blanesburgh held that it must be taken to have been within the contemplation of the parties that in the event of default by the sellers in tendering documents ‘their liability to their buyers in damages would be in exact correspondence with what it would have been if the contract had been specific all through and if to the knowledge of the sellers the sub-contract had at the date of that contract then existed or been in contemplation’.
Judges:
Viscount Haldane, Viscount Dunedin, Lord Shaw, Lord Phillimore, Lord Blanesburgh
Citations:
[1928] 30 LLR 159
Jurisdiction:
England and Wales
Cited by:
Cited – Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia ComC 1-Dec-2006
The owners made substantial losses after the charterers breached the contract by failing to redliver the ship on time as agreed.
Held: On the facts found the Owners’ primary claim is not too remote. To the knowledge of the Charterers, it was . .
Cited – James Finlay and Co Ltd v N V Kwik Tong HM CA 1929
It will be regarded as unreasonable to require a claimant to take steps which are likely to injure its commercial reputation, or otherwise t in a way it perceives to be commercially unwise, as a mitigation of damages.
Sankey LJ said of the . .
Lists of cited by and citing cases may be incomplete.
Damages, Contract
Updated: 10 May 2022; Ref: scu.246868
