2 Hurl. & C. 906, 159 Eng. Rep. 375 (Ex. 1864)

Raffles
v.
Wichelhaus.

To a declaration for not accepting Surat cotton which the defendant bought of the plaintiff " to arrive ex Peerless from Bombay," the defendant pleaded that he meant a ship called the "Peerless" which sailed from Bombay, in October, and the plaintiff was not ready to deliver any cotton which arrived by that ship, but only cotton which arrived by another ship called the " Peerless," which sailed from Bombay in December. -Held, on demurrer, that the plea was a good answer.

DECLARATION. -For that it was agreed between the plaintiff and the defendants, to wit, at Liverpool, that the plaintiff should sell to the defendants, and the defendants buy of the plaintiff, certain goods, to wit, 125 bales of Surat cotton, guaranteed middling fair merchant's Dhollorah, to arrive ex "Peerless" from Bombay; and that the cotton should be taken from the quay, and that the defendants would pay the plaintiff for the same at a certain rate, to wit, at the rate of 17¼ d. per pound, within a certain time then agreed upon after the arrival of the said goods in England. -Averments: that the said goods did arrive by the said ship from Bombay in England, to wit, at Liverpool, and the plaintiff was then and there ready, and willing and offered to deliver the said goods to the defendants, &c. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them.

Plea. -That the said ship mentioned in the said agreement was meant and intended by the defendants to be the ship called the "Peerless," which sailed from Bombay, to wit, in October; and that the plaintiff was not ready and willing and did not offer to deliver to the defendants any bales of cotton which arrived by the last mentioned ship, but instead thereof was only ready and willing and offered to deliver to the defendants 125 bales of Surat cotton which arrived by another and different ship, which was also called the "Peerless," and which sailed from Bombay, to wit, in December.

Demurrer, and joinder therein.

Milward, in support of the demurrer. -The contract was for the sale of a number of bales of cotton of a particular description, which the plaintiff was ready to deliver. It is immaterial by what ship the cotton was to arrive, so that it was a ship called the "Peerless." The words " to arrive ex 'Peerless,'" only mean that if the vessel is lost on the voyage, the contract is to be at an end. [Pollock, C. B. -It would be a question for the jury whether both parties meant the same ship called the "Peerless."] That would be so if the contract was for the sale of a ship called the "Peerless;" but it is for the sale of cotton on board a ship of that name. [Pollock, C. B. -The defendant only bought that cotton which was to arrive by a particular ship. It may as well be said, that if there is a contract for the purchase of certain goods in warehouse A, that is satisfied by the delivery of goods of the same description in warehouse B.] In that case there would be goods in both warehouses; here it does not appear that the plaintiff had any goods on board the other "Peerless." [Martin, B. -It is imposing on the defendant a contract different from that which he entered into. Pollock, C. B. -It is like a contract for the purchase of wine coming from a particular estate in France or Spain, where there are two estates of that name.] The defendant has no right to contradict by parol evidence a written contract good upon the face of it. He does not impute misrepresentation or fraud, but only says that he fancied the ship was a different one. Intention is of no avail, unless stated at the time of the contract. [Pollock, C. B. -One vessel sailed in October and the other in December.] The time of sailing is no part of the contract.

Mellish (Cohen with him), in support of the plea. -There is nothing on the face of the contract to shew that any particular ship called the "Peerless" was meant; but the moment it appears that two ships called the "Peerless" were about to sail from Bombay there is a latent ambiguity, and parol evidence may be given for the purpose shewing that the defendant meant one "Peerless" and the plaintiff another. That being so, there was no consensus ad idem, and therefore no binding contract. -He was then stopped by the Court.

Per CURIAM. There must be judgment for the defendants.

Judgment for the defendants. Pollock, C. B., Martin, B., and Pigott, B. Jan. 27.

202 Wis. 539
MILLER, Respondent,
vs.
STANICH, Appellant.
March 6—Apri1 1, 1930.
October 18—December 9, 1930.

1. While a mistake of one of the parties to a contract may be ground for rescission or cancellation in equity, in order that there may be reformation the mistake must be mutual, or mistake on one side and fraud on the other. pp. 542, 543.

2. Where an executory contract is modified the consideration for the original is deemed imported into the new contract, which becomes binding without any new consideration. p. 544.

On reargument:

3. Equity has jurisdiction in a proper case to grant rescission and cancellation of an instrument for a unilateral mistake, even in the absence of fraud. p. 549.

4. A lessor, unable to read English, having two sets of renewal leases submitted to him, who inadvertently signed the wrong lease containing a further renewal privilege which he did not intend to grant and who promptly on discovering his error demanded cancellation and brought action for rescission, is held under the evidence and findings entitled to judgment of cancellation upon condition of executing a lease in the form and terms of that he intended to sign and deliver.

FRITZ, J., dissents. p. 552.

APPEAL from a judgment of the circuit court for Milwaukee county: AUGUST E. BRAUN, Circuit Judge. Modified.

[540] Action commenced September 15, 1927, for reformation of a lease. From a judgment entered August 28, 1929,decreeing reformation, defendant appealed.

Walter Schins, Jr., attorney, and Joseph F. Schoendorf of counsel, both of Milwaukee, for the appellant.

For the respondent there was a brief by Hugo Trost of Milwaukee, attorney, and William R. McCaul of Tomah of counsel, and oral argument by Mr. McCaul.

The following opinions were filed April 1, 1930:

FRITZ, J. Plaintiff, engaged in the wholesale fruit and cold-storage business at Marshfield, Wisconsin, acquired property located in Milwaukee which was occupied by the defendant under a lease for a five-year term commencing on June 6, 1922, with provision for extension and renewal for a further five-year term, at the lessee's option, providing he gave thirty days' notice of such intention. On February 14, 1927, Joseph A. Fleckenstein, who collected the rents as agent for plaintiff, was notified by Joseph F. Schoendorf, defendant's attorney, that defendant desired a new lease for the further term of five years. On February 15, 1927, Schoendorf prepared and mailed to Fleckenstein two copies of a proposed lease for those five years, with a clause again giving the defendant an option for an extension for an additional five-year term. Fleckenstein, without consulting plaintiff, notified Schoendorf that he did not believe that plaintiff would give defendant another option for an additional five-year term. Thereupon Schoendorf prepared and mailed two copies of another lease for the five-year term, but without any option for a future renewal. Fleckenstein sent all of the copies to plaintiff during February, 1927. As plaintiff could not read the English language, his stenographer or one of his two adult sons, who were in business with him, read the leases to [541] him, and he then discovered that one set contained the clause for another five-year renewal option, and that the other set did not contain such clause.

On March 15, 1927, defendant caused a notice of his intention to take advantage of the extension privilege to be served on the former owner and lessor and on Fleckenstein. On May 21, 1927, defendant also caused such a notice to be served on plaintiff. Thereupon plaintiff consulted his attorney at Wisconsin Rapids, and was advised that defendant was entitled to the first extension of five years. However, inadvertently, plaintiff's attorney inserted the date "May 24" in the blank spaces left for the date in the two copies which had the clause that granted defendant a new option for another five-year extension. Plaintiff returned to Marshfield, and there signed the two copies in which his attorney had inserted "May 24," and sent them to defendant, who signed them and returned one copy to plaintiff on June 1, 1927. There was no misrepresentation, concealment, or fraud in any respect on the part of either party or their respective agents or attorneys. The court found that the plaintiff intended to make a new lease for only the first extension of five years, without giving defendant any new option for a further extension; that plaintiff, on discovering his error, promptly demanded the cancellation of the provision for the second extension; and that upon defendant's refusal to consent to such cancellation, plaintiff promptly commenced this action. On the other hand, the court also found that the defendant intended to obtain an option for an additional term of five years, but, failing in that, he intended to secure a new lease for merely the five-year extension under the original lease. Upon those facts the court concluded that plaintiff was entitled to judgment "canceling and rescinding the provision contained in said lease purporting to grant an option for an additional [542] five-year term;" and it was provided in the judgment that the lease dated May 24, 1927, "be and the same is hereby reformed by canceling and striking out" the provision for the second renewal.

Although plaintiff may have made a mistake in signing and sending to defendant the copies of the lease which contained the provision giving defendant an option for a further renewal, nothing had occurred because of which the defendant had reason to believe that plaintiff did not intend to agree to that provision, or that plaintiff had made a mistake. Defendant, in good faith, had submitted two forms. Without being misled by any trick or artifice on the part of anyone, plaintiff signed and sent the two copies, containing the clause for another option, to defendant for his signature. When defendant also signed those copies he was entitled to assume that the minds of the parties had met as to all terms embodied in the signed instruments, and that the plaintiff, by signing, had evidenced his intention to agree to all of those terms. Nothing had been done by plaintiff, of which defendant had knowledge that indicated an intention on plaintiff's part not to consent to the option for the additional extension. Nothing had occurred which can be said to evidence a meeting of the minds of the parties to another contract, which plaintiff is now entitled by reformation to have expressed in the lease which he voluntarily signed. There was no mutual mistake. At best it was merely a unilateral mistake, without any fraud on the part of the defendant. Under the circumstances there was no ground for reformation.

"In order to reform a contract on the ground of mistake, the general rule is that the mistake must be mutual or mistake on one side and fraud on the other." Chicago, St. P., M. & O. R.Co. v. Bystrom, 165 Wis. 125,133, 161 N. W. 358; 1 Black on Rescission and Cancellation (2d ed.) pp. 396, 398, 399; Id. § 131, pp. 402-405.

[543] As was said in Grant Marble Co. v. Abbot, 142 Wis. 279, 287, 124 N. W. 264:

"The minds of the parties met upon this contract, hence there is no ground for reformation. There was no mutual mistake. The parties to the contract made the contract they intended to make. Even if a mistake were made, it is established that it was the mistake of Mr. Grant, president of plaintiff; hence was not mutual. To allow reformation in this case would be to justify the court in making a contract for the parties which they themselves did not make. This the court cannot do. The plaintiff must show that the minds of the parties met upon the contract which it seeks to establish."

Likewise, in Jentzsch v. Roenfanz; 185 Wis. 189, 193, 195, 201 N. W. 504, this court said:

"The determination of this case must rest upon the question of whether or not there was a mutual mistake. A mistake, in order to be mutual, means one reciprocal and common to both parties, where each alike labors under the misconception in respect to the terms of the written instrument. Botsford v. McLean, 45 Barb. 478, 481." (Page 193.)

"While a mistake of one of the parties in a proper case may be grounds for rescission or cancellation, in order that there may be a reformation the mistake must be mutual. In other words the court cannot rewrite the contract which the parties have made so as to express an agreement which the parties had not entered into." (Page 195.)

The mistake in the case at bar was in relation to but one clause or detail of the lease. It did not go to the entire contract as in the case of Chicago, St. P., M. & O. R. Co. v. Bystrom, supra,. Consequently, in this case plaintiff could not have rescission of the entire contract. However, even if he sought such rescission, to entitle him to relief because of his mistake he would have to establish that there was fraud on defendant's part, or, at least, that he knew that plaintiff was laboring under a mistake (Grant Marble Co. v. [544] Abbot, supra, p. 289); or, in the case of a unilateral contract, such as a deed, that it was without consideration and that the mistake was excusable (Chicago, St. P., M. & O. R. Co. v. Bystrom., supra, p. 133).

Respondent also contends that the provision granting the new option for a further five-year term is subject to cancellation because there was no consideration for such grant, in excess of defendant's rights under the original lease. However, in so far as such grant constituted a modification of the original lease, no new consideration was necessary. Foley v. Marsch, 162 Wis. 25, 30, 154 N. W. 982; Schoblasky v. Rayworth) 139 Wis. 115, 117, 120 N. W. 822. The consideration for the original, executory contract is deemed imported into the modified contract, and such new contract becomes binding without any new consideration. Lynch v. Henry, 75 Wis. 631, 634, 44 N. W. 837.

For the reasons stated, the court erred in decreeing reformation of the lease dated May 24, 1927.

By the Court.—Judgment reversed, with directions to dismiss the complaint.

FOWLER, J. I feel that I must record a dissent. The case is so simple that to my mind the mere statement of it proves the decision of the court wrong. The plaintiff executed to defendant a lease in writing containing an option to defendant for a five-year extension. The premises are in Milwaukee. The plaintiff resides at Marshfield and the defendant in Milwaukee. Near the end of the term the defendant submitted to plaintiff's agent in Milwaukee a new lease in the same terms as the original including an option for another five-year extension and asked him to procure plaintiff's signature to it. The plaintiff's agent answered that he did not think the plaintiff would execute a lease with the extension clause. The defendant thereupon submitted to the agent another lease like the original without the extension clause and asked that he get the plaintiff to execute [545] and return one or the other of the leases. The plaintiff claims, and the court found, that he by mistake signed the lease containing the option for extension and sent it to the defendant instead of the one without such option which he intended to sign and deliver. On discovering the mistake plaintiff asked defendant to return the lease he had and accept the one without the option for extension. The defendant refused to do so. The plaintiff, promptly and before defendant had taken any steps whatever in reliance upon the provision for a five-year extension, comes into a court of equity and asks relief on the ground of his mistake.

The defendant gave timely and proper notice to entitle him to a five-year extension of his original lease. This he was entitled to. He was not entitled to anything more. No extra rental or other consideration for another five-year extension was agreed to or given. The defendant was not induced to accept the lease signed by the plaintiff and enter into his covenants therein contained because of the inclusion in the lease of the clause for the additional extension. He would have accepted the other lease had that lease been returned to him. It is true that when the defendant signed the lease returned by plaintiff he understood that the plaintiff had signed it advisedly and had thereby agreed to the additional extension. But the plaintiff had not so agreed. There was thus no meeting of the minds of the parties in respect to the extension. No such agreement was reached as the signed lease evidences.

No plainer case for relief from mistake was ever sought in a court of equity. It is true, as stated in the opinion of the court, that equity does not reform instruments for mistake unless the mistake is mutual, and that the mistake here involved is not mutual but unilateral. But equity rescinds written instruments for unilateral mistakes. The opinion of the court recognizes this rule. The complaint in terms erroneously asks for reformation of the lease by [546] striking out the clause for extension. The plaintiff, strictly speaking, is not entitled to the particular form of relief he asks for, because the defendant did not by signing the lease returned to him agree to a lease without the extension. But the fact is proved and found by the court that entitles plaintiff to rescission of the lease signed by him. Striking from that lease the provision for extension and letting the lease stand as so changed, affords the plaintiff precisely the same relief that he would have were the lease declared canceled and the defendant adjudged to have the right to hold the premises for the extended term provided for by the original lease. Strictly speaking, that is the relief that should have been adjudged. But the error of decreeing reformation instead of rescission did not affect the substantial rights of the defendant, and under sec. 274.37, Stats., the judgment should be affirmed.

There would seem to be no more need to cite authorities in support of the above than to cite the multiplication table to support the statement that once one is one. However there is ample authority for the proposition that rescission or cancellation will be granted for a unilateral mistake. See 9 Corp. Jur. p. 1168, note 74 ;21 Corp. Jur. p. 88, note 49. Of the cases there cited the following directly support the proposition: Fleischer v. McGehee, 111 Ark. 626, 163 S. W. 169; Moffett v. Rochester, 82 Fed. 255; Wirsching v. Grand Lodge, etc. 67 N. J. Eq. 711, 56 Atl. 713, 63 Atl. 1119; Smith v. Mackin, 4 Lans. (N. Y.) 41; Crowe v. Lewin, 95 N. Y 423; Frazer v. State Bank, 101 Ark. 135, 141 S. W. 941; Morgan v. Owens, 228 Ill. 598, 81 N. E. 1135; Dsuris v. Pierce, 216 Mass. 132, 103 N. E. 296; Werner v. Rawson, 89 Ga. 619, 15 S. E. 813; Diman v. Providence, W . & B. R. Co. 5 R. I. 130. The court may properly, as condition of granting the relief of rescission, require plaintiff to give to the defendant the option to take such a lease as the plaintiff  intended to sign, as was in effect done in Brown v. Lamphear, 35 Vt. 252; Paget v. Marshall, L. R. [547] 28 Ch. Div. 255; Keene· v. Demelman, 172 Mass. 17, 51 N. E. 188. But here there is no need to do even that, as adjudication that the defendant has the right to hold under the original lease for the extended period would satisfy all requirements of equity.

The opinion of the court to support the lease signed by plaintiff invokes the rule that no consideration is, necessary to uphold modification of a contract. It is true that the original consideration would support modification of the original lease as evidenced by the lease signed by plaintiff, if plaintiff had agreed to the modification so evidenced. But he did not agree to such modification. The trial court so found upon ample evidence. The rule invoked therefore has no application.

Mere inadvertence in signing the wrong lease is not such negligence as should bar plaintiff from relief. Almost every mistake involves some negligence. One using due care does not ordinarily make mistakes. Unless the mistake induces the other party to take some steps to his prejudice that he would not otherwise have taken, there is no good reason why relief should not be granted. Where no one is injured by a mistake except the party making it, and no one has changed his position in consequence of it, relief may be granted although a high degree of care was not exercised. See 21 Corp. Jur. p. 90. But in this case the plaintiff's mistake was excusable. The trial court found that the plaintiff cannot read English and on receipt of the two leases went to his lawyer for advice. The lawyer advised him that he was not bound to sign the lease with the extension but should sign the other, and by mistake inserted the date in the wrong lease and gave it to plaintiff to sign and send to defendant. A court of equity must, under the circumstances here involved, grant relief from a mistake so happening; else it is not a court of equity.

It does not at all detract from the force of the above to quote the maxim "Equity follows the law." Even the law [548] gives adequate relief from mistakes less excusable than the one here involved; as where it refunds money paid to secure compliance with a bid for public work from which items are inadvertently omitted in making the estimate. Gavahan v. Shorewood, 200 Wis. 429, 228 N. W. 497.

I am authorized to state that Mr. Justice STEVENS concurs in this dissent.

A motion by the respondent for a rehearing was granted and the cause was reargued.

Walter Schins, Jr., attorney, and Joseph F. Schoendorf of counsel, both of Milwaukee, for the appellant.

For the respondent there was a brief by Hugo Trost of Milwaukee, attorney, and William R. McCaul of Tomah and Goggins, Braseau & Graves of Wisconsin Rapids of counsel, and oral argument by R. B. Graves.

The following opinion was filed December 9, 1930:

FOWLER, J. On motion for rehearing reargument was ordered. On reconsideration we are of opinion that the rule under the Wisconsin cases, and very generally in other jurisdictions, is contrary to the views expressed in the original opinion of the court. A dissenting opinion was filed by the writer, in which Mr. Justice STEVENS concurred. No statement of facts in addition to the statements of the opinions first filed is deemed necessary for the purposes of this opinion. But it is considered that further elucidation of the position of the court should be made in view of the very inadequate treatment of the subject in the dissenting opinion.

An exhaustive note on the jurisdiction of equity to rescind instruments for unilateral mistakes is given in 59 A. L. R. 809. It is there said:

"Equitable relief from a mutual mistake is frequently given by a reformation of the contract. But a contract will [549] not be reformed for an unilateral mistake. Equitable relief may, however, be given from an unilateral mistake by a rescission of the contract. Essential conditions to such relief are: (1) The mistake must be of so grave a consequence that to enforce the contract as actually made would be unconscionable. (2) The matter as to which the mistake was made must relate to a material feature of the contract. (3) Generally the mistake must have occurred notwithstanding the exercise of ordinary diligence by the party making the mistake. (4) It must be possible to give relief by way of rescission without serious prejudice to the other party except the loss of his bargain. In other words, it must be possible to put him in statu quo."

Cases in support of the text are there cited and stated from eighteen states, including Wisconsin, and England. It is not considered necessary to refer more particularly to cases in other jurisdictions, but it is deemed that the Wisconsin cases should be gone into somewhat in detail as in our view they settle the question involved for this jurisdiction.

The Wisconsin case cited in support of the text in the A. L. R. note above cited is Chicago, St. P., M. & O. R. Co. v. Washburn Land Co. 165 Wis. 125, 161 N. W. 358. The action was for rescission of a quitclaim deed given under the mistaken idea of the company that it did not own land covered by a tax deed involved in a suit to quiet title in which the company was defendant. It is said in the opinion (p. 133):

"It is well settled that equity, in a proper case, will relieve against mistake. The instant case is not one of settlement or compromise of a disputed right or claim. It is a clear case of mistake, and a mistake on the part of the plaintiff here which is excusable. It is not necessary that fraud be shown. Nor is it necessary that the mistake be mutual in all cases. In order to reform a contract on the ground of mistake the general rule is that the mistake must be mutual, or mistake on one side and fraud on the other. [550] But where one deeds his property to another without consideration through mistake, equity will, in a proper case, grant relief by rescission. 9 Cyc. 394; Clemens v. Clemens, 28 Wis. 637; Hurd v.Hall, 12 Wis. 112; Johnson v. Parker, 34 Wis. 596; Rider v. Powell, 28 N. Y. 510; Smith v. Mackin, 4 Lans. (N. Y.) 41; 1 Story, Eq. Jur. (12^thed.) § 138i."

Woldenberg v. Riphan, 166 Wis. 433, 166 N. W. 21, was an action for specific performance. The defendant counterclaimed for cancellation on ground of his (unilateral) mistake in thinking the instrument signed gave him five days in which to accept or reject it, whereas it was an absolute agreement operative at its date. The trial court denied cancellation and granted specific performance. The judgment was reversed. The opinion by Mr. Justice ROSENBERRY closes as follows:

"The trial court has found that the proposition was signed under a mistake of fact and that defendant acted within the time in which he supposed he was to act. The rights of third parties not having intervened, we are of the opinion that within established principles specific performance of the contract in question should be denied and the purported agreement canceled."

Stimpson v. Stimpson, 168 Wis. 146, 169 N. W. 295, was an action brought to cancel a stipulation for probate of a will on allegations that the signature of plaintiffs was induced by misrepresentation of the facts, which were charged as fraudulent. The misrepresentation was not made intentionally, nor was it made by the party adverse to plaintiffs, although it was made by an attorney representing the proponent, the executor named in the will, who took it upon himself to procure the signatures with the approval, if not the direction, of the attorney of the party adverse to plaintiffs. This court treated the case as one for cancellation on the ground of unilateral mistake. The opinion states:

"An application for cancellation of a contract is addressed to the sound discretion of a court of equity. Intentional [551] fraud is not an essential. Substantial mistake on the part of the party seeking relief may be sufficient if such course is in accordance with established rules of equity and seems reasonable and just to the court in view of all the circumstances of the case. Wolden berg v. Riphan, 166 Wis. 433, 166 N. W. 21."

In De Voin v. De Voin, 76 Wis. 66, 44 N. W. 839, one partner bought out another and their contract was reduced to a writing which recited that the purchaser was to assume the partnership debts, the amount of which was not stated, and pay the seller a specified amount. The purchaser had himself made an inventory, in absence of the seller, and in footing up the debts had made a mistake by which the debts were footed $1,000 less than they were, and as the purchase price was based on the excess of assets over liabilities, the mistake made the purchaser's payment $500 too much. On discovering the mistake he brought action for money had and received for recovery of the $500. This court reversed the case for determination whether defendant had promised to repay the $500. In so doing the opinion states (p. 70):

"We strongly incline to the opinion that, whether the mistake was or was not mutual, the only remedy of plaintiff was promptly to rescind the contract, or institute appropriate proceedings to that end. If the mistake was not mutual—that is, if the plaintiff entered into the contract on the basis of actual indebtedness of the firm and the defendant entered into it without any reference thereto-the minds of the parties did not meet as respects that important element in their contract. This also is a valid ground for the cancellation of the contract in equity. 2 Pom. Eq. Jur. § 870, and cases cited; 1 Story, Eq. Jur. § 144.

"The rule on the subject is thus stated by Mr. Pomeroy: 'Cancellation is appropriate when there is an apparently valid written agreement or transaction embodied in writing, while in fact, by reason of a mistake of both or One of the parties, either no agreement at all has really been made, since the minds of both parties have failed to meet upon the same matters, or else the agreement or transaction is different, [552] with respect to its subject matter or terms, from that which was intended.' "

In Clemens v. Clemens, 28 Wis. 637, eighty acres of land had been conveyed by a father to his son with intent to defraud creditors. In it was included the father's homestead forty. The father brought action against the son to compel a reconveyance on the grounds that the son included the homestead in fraud of the father and that the father conveyed the homestead under the mistaken belief that the deed conveyed only the other forty. The court says (p. 644):"That there was, so far as the plaintiff was concerned, at least a mistake on his part, is very clearly shown in proof. He did not intend to convey the east forty. . . ."

In the next paragraph is the question: "Is the plaintiff, then, precluded from claiming the assistance of equity to correct the mistake, considering it as such on his part?" The court answered the question by compelling reconveyance of the homestead.

The judgment of the circuit court should be modified and judgment of cancellation entered upon condition that the plaintiff execute and file with the clerk of the court for the defendant a lease in form and terms of the lease he intended to sign and deliver. This will restore the status quo and place the parties in the precise situation they would have been had the mistake not been made.

The appellant should recover his costs.

By the Court.—The original mandate is vacated and the cause remanded with directions to modify the judgment as indicated in this opinion.

FRITZ, J., dissents.

153 F.2d 757
RICKETTS
v.
PENNSYLVANIA R. CO.
No. 122.
Circuit Court of Appeals, Second Circuit.
January 10, 1946.

[758] Ray Rood Allen and Burlingham, Veeder, Clark & Hupper, all of New York City (G. Hunter Merritt, of New York City, of counsel), for appellant.

Robert Leon Horn, of New York City (Harold Bloom, of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and FRANK, Circuit Judges.

L. HAND, Circuit Judge. The defendant appeals from a judgment awarding damages to the plaintiff — a waiter upon one of its dining cars — for injuries suffered while in its service on February 16, 1943. The action was brought under the Federal Employers' Liability Act, §§ 51-60, Title 45 U.S.C.A.; but the only question raised upon this appeal concerns the validity of two releases, dated August 23, 1943, by which the plaintiff released all claims against the defendant upon the payment of $600. The plaintiff had already executed a release for $150 in the same words on March 19, 1943, and one of the two releases of August 23, recited a payment of $750, the sum of the two payments; but, as that release plays no part in the result we shall ignore it and speak as though only the second release had been given in August. The plaintiff testified that he executed the first release after a talk with one, Brown, the defendant's claim agent, who told him that the payment of $150 was only for the tips and wages which he had lost; and that, relying upon this representation, he did not read the release, but signed it as Brown told him to do. Between that time and July he made some efforts to work but still felt incapacitated; and towards the end of that month, or early in August, he went again to Brown asking for more money. They could not agree, and he left, saying to Brown: "Well, I will have to get somebody to get all my tips and everything, my salary, because that is what I am getting." He then went to an attorney named Reich, who, after talking to Brown on the telephone, later brought to the plaintiff the release drawn on the defendant's form and told him: "I was just to sign a receipt for the amount of money that I got for the time I was off, my tips also included, to go back to work and they won't have anything against you . . . he had the word from the Pennsylvania that I will be taken care of." On his redirect he somewhat amplified this. Reich had told him:

“the $600 is just for my earnings and my tips, because that would be better such and such. He said he did not want to sue. He said that would be better, and the company wants you to sign. That is big money. If you do, they won't have anything against you. Since you stay in the company, you have eligibility to be retired. You will have full retirement pay."

Relying upon this, and again not reading the release, he signed it and the defendant paid him $600. The plaintiff's wife also testified that Reich had said that "the money was for his back pay and tips."

This version of the transaction the defendant denied. It called Reich, who said that Brown, when Reich consulted him, agreed to pay $600 for a complete release; and that all this Reich explained to the plaintiff when the release was executed. The judge charged the jury that, if the plaintiff executed the release "without fraud or misrepresentation, and understanding what he was doing," it bound him, but that if he "signed these papers as receipts for wages, if it was as his understanding that that was all he was signing, that he did not sign any general release, then, of course you take up the question of damages." Again: "Was it represented to the plaintiff by his lawyer that the papers he signed on August 23, 1943, were releases of all claims or only for lost wages?" The defendant made several requests to charge, but in none of them did it suggest that the jury should find whether the plaintiff retained Reich to settle all claims he had against the railroad, or whether — as the plaintiff testified — Reich's retainer was limited to collecting wages and tips.

The right of action here in suit was created by act of Congress, and it is abundantly settled that its interpretation is a matter of federal law and not governed by state decisions, even when it speaks in the words of the common-law. Chesapeake & Ohio R. Co. v. Kuhn, 284 U.S. 44, 52 S.Ct. 45, 76 L.Ed. 157. It would not inevitably follow that, after such a right had come into existence, the legal effect upon it of a transaction within a state — as here, of a release — was also to be treated as matter of federal law; conceivably, its fate might be left to the law of the state. However, as we read Garrett v. Moore-McCormack Co., 317 U.S. 239, 63 S.Ct. 246, 87 L.Ed. 239, this is not so. The right of action was there under the Jones Act, but the action had been brought in a state court, which had held that the burden of proof of establishing a release was governed by the law of Pennsylvania. This the Supreme Court denied, holding that the admiralty rule controlled; and it would seem to follow that the validity of the release at bar is to be decided by the common-law, to be gathered from the same sources which, before Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, we used to employ in cases depending on diversity of citizenship.

Although the law was at one time otherwise, at least in this country (Friedlander v. Texas & Pacific R. Co., 130 U.S. 416, 9 S.Ct. 570, 32 L.Ed. 991), it is now settled both in the federal system (Gleason v. Seaboard Airline R. Co., 278 U.S. 349, 49 S.Ct. 161, 73 L.Ed. 415), and in England (Lloyd v. Grace, Smith & Co., 1912 A.C. 716), that an agent does not cease to be acting within the scope of his authority when he is engaged in a fraud upon a third person. That has probably always been the more generally accepted doctrine. Fifth Avenue Bank v. Forty-Second Street & G. St. Ferry R. Co., 137 N.Y. 231, 33 N. E. 378, 19 L.R.A. 331, 33 Am.St.Rep. 712; Ripon Knitting Works v. Railway Express Agency, 207 Wis. 452, 240 N.W. 840; Tollett v. Montgomery Real Estate & Insurance Co., 238 Ala. 617, 622, 193 So. 127; Restatement of Agency, § 262. We can see no distinction in principle between that situation and one in which the agent deceives, not the third person, but his principal. The reason in each case for holding the principal is that the third person has no means of knowing that the agent is acting beyond his authority, and it is a matter of entire indifference whether the agent adds deception of his principal to deception of the third person; for it is obviously true that for the agent consciously to exceed his powers is to deceive the third person. Hence we may assume in the case at bar that, if the plaintiff had retained Reich to settle any claim he might have against the defendant, the plaintiff would have been bound, if Reich had procured the execution of the release by deceiving him as to its contents.

On the other hand, if the plaintiff retained Reich merely to collect his wages and tips, as to which he had failed to come to a satisfactory agreement with Brown in July or early August, the release was invalid; for, whatever may be the law in England, it is well settled in this [760] country that an attorney has no implied authority to compromise a claim. Holker v. Parker, 7 Cranch 436, 452, 453, 3 L.Ed. 396; United States v. Beebe, 180 U.S. 343, 351, 352, 21 S.Ct. 371, 45 L.Ed. 563; Glover v. Bradley, 4 Cir., 233 F. 721, Ann.Cas. 1917A, 921; McFarland v. Curtin, 4 Cir., 233 F. 728; Barber-Colman Co. v. Magnano Corp., 1 Cir., 299 F. 401; Jacob v. City of New York, 2 Cir., 119 F.2d 800 (reversed as to a different cause of action in Jacob v. City of New York, 315 U.S. 752, 62 S. Ct. 854, 86 L.Ed. 1166); Countryman v. Breen, 241 App.Div. 392, 394, 271 N.Y.S. 744, affirmed 268 N.Y. 643, 198 N.E. 536. The release would still be invalid even though the plaintiff signed it without reading it, for he would have been justified in relying upon what his lawyer told him of the contents. The theory upon which a document binds one who signs it, but who does not read it, is that either he accepts it whatever may be its contents, or that he has been careless in choosing his informant. Foster v. Mackinnon, L.R. 4 C.P. 704; Pimpinello v. Swift & Co., 253 N.Y. 159, 170 N.E. 530; Chapman v. Rose, 56 N.Y. 137, 15 Am.Rep. 401; Williston, § 95A. In the case at bar, whatever we may think about the correctness of the verdict on the facts, the jury could have interpreted the plaintiff's testimony to mean that he only told Reich to collect his wages and tips; which incidentally was consistent with his parting words to Brown. Indeed, it was not really possible to believe the words which he put in Reich's mouth, unless he had retained him for that limited purpose. At any rate, if the defendant had meant to raise the question whether Reich had been broadly commissioned, it should have done so by a proper request. This it did not do; and the result is that upon this, the turning point in the case — the extent of Reich's authority — the only question that remains upon this appeal is of the sufficiency of the evidence to support a verdict. It is true that the plaintiff did not offer to return the money received in March and in August, 1943; since however the defendant did not raise this point either in its answer, at the trial, or in this court, we have not considered it.

Judgment affirmed.

FRANK, Circuit Judge (concurring). Plaintiff, as a result of a railroad accident which occurred while he was working as an employee of the Pennsylvania Railroad Company, suffered personal injuries which turned out to be so serious that the jury returned a verdict in his favor for $7,500, which the Railroad Company does not contest — except on one ground, i. e., that his claim was barred by a release he gave the company on payment to him of one-tenth that sum, or $750. That smaller sum represents merely the approximate amount of his lost earnings up to the date of the release. When he signed the release, he could not read it because of the effects of the accident, and without negligence on his part — since he relied on his own lawyer who misinformed him — he understood that it purported to be only a receipt for payment of those lost earnings.

Judge HAND says (and I entirely agree) that the evidence sufficiently shows that the lawyer acted beyond his authority. Accordingly, it is as if a non-lawyer, carefully selected by plaintiff, had erroneously interpreted the release to him. The case thus comes within the category, described by Williston,^[1] of non-negligent unilateral mistakes preventing the formation of valid contracts. Accepting Williston's analysis, Judge HAND'S rationale seems to me to be impregnable.

But I am not content to rest the decision on that analysis, because I think that that analysis leads to needless complexities which will confront us in future cases. The Supreme Court recently, in a case (cited by Judge HAND) relating to a release by a seaman, Garrett v. Moore-McCormack Co., 317 U.S. 239, at page 248, 63 S.Ct. 246, 87 L.Ed. 239, note 17, has broadly hinted that the courts should treat non-maritime employees, with respect to releases of personal injury claims, just as they treat seamen. I think we should take that hint, and, in doing so, should reject many of the finespun distinctions made by Williston and expressed in the Restatement of Contracts. Since I believe that not only is an important social policy involved but also that a good opportunity offers itself to uncomplicate an excessively complicated set of legal rules, I shall state, in some detail, my reasons for this conclusion.

In the early days of this century a struggle went on between the respective proponents of two theories of contracts, (a) the "actual intent" theory — or "meeting of the minds" or "will" theory — and [761] (b) the so-called "objective" theory.^[2] Without doubt, the first theory had been carried too far: Once a contract has been validly made, the courts attach legal consequences to the relation created by the contract, consequences of which the parties usually never dreamed — as, for instance, where situations arise which the parties had not contemplated.^[3] As to such matters, the "actual intent" theory induced much fictional discourse which imputed to the parties intentions they plainly did not have. But the objectivists also went too far. They tried (1) to treat virtually all the varieties of contractual arrangements in the same way, and (2), as to all contracts in all their phases, to exclude, as legally irrelevant, consideration of the actual intention of the parties or either of them, as distinguished from the outward manifestation of that intention. The objectivists transferred from the field of torts that stubborn anti-subjectivist, the "reasonable man";^[4] so that, in part at least, advocacy of the "objective" standard in contracts appears to have represented a desire for legal symmetry, legal uniformity, a desire seemingly prompted by aesthetic impulses.^[5] Whether (thanks to the "subjectivity" of the jurymen's reactions and other factors) the objectivists' formula, in its practical workings, could yield much actual objectivity, certainty, and uniformity may well be doubted.^[6] At any rate, the sponsors of [762] complete "objectivity" in contracts^[7] largely won out in the wider generalizations of the Restatement of Contracts^[8] and in some judicial pronouncements.^[9] Influenced by their passion for excessive simplicity and uniformity, many objectivists have failed to give adequate special consideration to releases of claims for personal injuries, and especially to such releases by employees to their employers. Williston, the leader of the objectivists, insists that, as to all contracts, without differentiation, the objective theory is essential because "founded upon the fundamental principle of the security of business transactions".^[10]

He goes to great lengths to maintain this theory, using a variety of rather desperate verbal distinctions to that end. Thus he distinguishes between (1) a unilateral non-negligent mistake in executing an instrument (i. e., a mistake of that character in signing an instrument of one kind believing it to be of another kind) and (2) a similar sort of mistake as to the meaning of a contract which one intended to make.^[11] The former, he says, renders the contract "void";^[12] the latter does not prevent the formation of a valid contract. Yet in both instances "the fundamental principle of the security of business transactions" is equally at stake, for there has been the same "disappointment of well-founded expectations."^[13] More than that, Williston concedes that a mistaken idea of one party as to the meaning of a valid contract (Williston's second category) "may, under certain circumstances, be ground for relief from enforcement of the contract." But he asserts that (a) such a contract is not "void" but "voidable," and (b) that the granting of such relief is no exception to the objective theory, because this relief "is in its origin equitable," and "equity" does not deny the formation of a valid contract but merely acts "by subsequently . . . rescinding" it.^[14] His differentiation, moreover, of "void" and "voidable" has little if any practical significance: He says that a "voidable" contract will be binding unless the mistaken party sets up the mistake as a defense;^[15] but the same is obviously [763] true of agreements which (because of unilateral mistakes affecting their "validity") he describes as "wholly void."^[16]

It is little wonder that a considerable number of competent legal scholars have criticized the extent to which the objective theory, under Williston's influence, was carried in the Restatement of Contracts.^[17] One of them, Whittier, says that the theory, in its application to the formation of contracts, is a generalization from the exceptional cases; he points out that the theory of "actual mutual assent" explains the great majority of the decisions, so that it would be better, he believes, to adhere to it, creating an exception for the relatively few instances where one party has reasonably relied on negligent use of words by the other. "Why not," asks Whittier, "say that actual assent communicated is the basis of `mutual assent' except where there is careless misleading which induces a reasonable belief in assent?"^[18] There may be much in that notion: Williston admits that "the law generally is expressed in terms of subjective assent, rather than of objective expressions . . .";^[19] and that "a doctrine which permits the rescission of a contract on account of a unilateral mistake approaches nearly to a contradiction of the objective theory . . ."^[20] As able a judge as Cuthbert Pound said, not long ago, "The meeting of minds which establishes contractual relations must be shown."^[21]

Another critic^[22] suggests that, in general, Williston, because he did not searchingly inquire into the practical results of [764] many of his formulations, assumed, unwarrantably, without proof, that those results must invariably have a general social value, although (as Williston admits as to the objective theory) they are "frequently harsh."^[23]

In other realms of thought, attempted over-simplification has yielded complexities in practice.^[24] So here, as appears from the following.

Fortunately, most judges are too common-sensible to allow, for long, a passion for aesthetic elegance, or for the appearance of an abstract consistency, to bring about obviously unjust results.^[25] Accordingly, courts not infrequently have departed [765] from the objective theory when necessary to avoid what they have considered an unfair decision against a person who, for a small sum, signed a release without understanding either the seriousness of his injury or the import of the words of the release, provided (1) he was not "negligent" and (2) the other party (the releasee) had not, in reliance on the release, importantly "changed his position."^[26] Some courts, in some of the mistake cases, frankly abandon the "objective" test, saying boldly that a non-negligent unilateral mistake justifies cancellation or rescission of a contract.^[27] As New York, a lively center of commerce, at least to some extent allows relief for such unilateral mistakes,^[28] it should be obvious that, contrary to Williston & Co., any deviation from the objective theory is not fatal to the functioning of business.

Some courts, however, escape marring the verbal symmetry of the objective theory, while actually abandoning it, thus: They say that a mistake by one party about a striking fact (sometimes called "palpable")^[29] must be deemed to have been known to the other party, that, even if the evidence fails to show that he knew it, yet he had "reason to know it" and is therefore to be treated as if he did; so that there results, by this device, which comes close to a fiction, a "mutual mistake of fact."^[30] This court, in pre-Erie-Tompkins [766] days, in effect adopted that rule in a case where the plaintiff, before executing the release, had consulted her own physician.^[31] That thesis has been utilized especially when an employee has given a release to his employer^[32] of all claims for an injury in consideration of a sum which approximates his lost wages (or his lost wages and medical expenses) and no more. Many courts have said that, on such a state of facts, it is impossible to believe that the releasor and releasee had in mind serious consequences of the injury which became apparent after the release was given, and therefore there was a "mutual mistake of fact."^[33]

Williston, realizing the desire of the courts to escape the objective theory in such cases, describes them as follows: "Thus, where a release is given by one injured in an accident and more serious injuries develop than were supposed to exist at the time of settlement, it is a question of fact whether the parties assumed as a basis of the release the known injuries, or whether the intent was to make a compromise for whatever injuries from the accident might exist whether known or not. On a fair interpretation not only of the language of the instrument, but of the intention of the parties, the latter position is more likely, but presumably out of tenderness for injured plaintiffs some courts have gone very far in accordance with the former possibility."^[34] (In the instant case, plaintiff's lawyer testified that he had received the report of a physician to the effect that plaintiff's injury was not serious. The evidence was, then, probably sufficient to bring this case within the mutual mistake rule; but I think the trial judge's instructions were such as not to leave that issue to the jury.)

Two approaches have been suggested which diverge from that of Williston and the Restatement but which perhaps come closer to the realities of business experience. (1) The first utilizes the concept of an "assumption of risk": The parties to a contract, it is said, are presumed to undertake the risk that the facts upon the basis of which they entered into the contract might, within a certain margin, prove to be non-existent; accordingly, one who is mistaken about any such fact should not, absent a deliberate assumption by him of that risk, be held for more than the actual expenses caused by his conduct. Otherwise, [767] the other party will receive a windfall to which he is not entitled.^[35] (2) The second suggestion runs thus: Business is conducted on the assumption that men who bargain are fully informed as to all vital facts about the transactions in which they engage; a contract based upon a mistake as to any such fact as would have deterred either of the parties from making it, had he known that fact, should therefore be set aside in order to prevent unjust enrichment to him who made the mistake; the other party, on this suggestion also, is entitled to no more than his actual expenses.^[36] Each of those suggestions may result in unfairness, if the other party reasonably believing that he has made a binding contract, has lost the benefit of other specific bargains available at that time but no longer open to him.^[37] But any such possibility of unfairness will seldom, if ever, exist in the case of a release of liability for personal injury whatever the nature of the mistake (i. e., whether it fits into one or the other of Williston's categories).

In short, the "security of business transactions" does not require a uniform answer to the question when and to what extent the non-negligent use of words should give rise to rights in one who has reasonably relied on them. That the answer should be favorable to the relier when the words are used in certain kinds of contracts, does not mean that it should also be when they are used in a release of a claim for personal injury; and there may be still further reasons for an unfavorable answer when the claim is by an employee against his employer.

In all likelihood, it is because the courts have sensed the differentiated character of releases of personal injury claims that the "modern trend," as Wigmore describes it, "is to . . . develop a special doctrine . . . for that class of cases, liberally relieving the party who signed the release."^[38] Surely much is to be said for that liberality, especially in a case where an employee has given a release of personal injury liability, without the fullest comprehension of what he was about, for a relatively small sum which turns out to be wholly inadequate.

In the admiralty cases, such relief has long been accorded seamen; the courts, calling them "wards of admiralty," have regarded them, in many of their dealings with their employers, as necessitous persons, under strong economic pressures, who, because of their helplessness, are to be protected from hard bargains,^[39] just as "equity," for similar reasons, protects mortgagors and beneficiaries of spendthrift trusts. The usual non-maritime employees, because they are under similar economic pressures, are no less helpless in their trafficking with their employers. It can truthfully be said of them what the admiralty decisions say of seamen: "They are," remarked Mr. Justice Story, "considered as placed under the dominion and influence of men, who have naturally acquired a mastery over them; and as they have little of the foresight and caution belonging to persons trained in other pursuits of life,^[40] the most rigid scrutiny is instituted into the terms of every contract, in which they engage. If there is any undue inequality in the terms, any disproportion in the bargain, any sacrifice of rights of one side which are not compensated by extraordinary benefits on the other, the judicial interpretation of the transaction is that the bargain is unjust and unreasonable, that advantage has been taken of the situation of the weaker party, and that pro tanto the bargain ought to be set aside as inequitable.^[41] To men like plaintiff here, the following comment about seamen fully applies: "They are . . . placed too much in the power of the owners i. e., employers [768] to be able to negotiate with them on equal terms.”^[42]

It is not surprising, then, that many courts — although without such direct expressions as those which adorn the seaman cases — have in fact in the release cases manifested, although obliquely, a not dissimilar guardianship of employees of large corporations. As already noted, the Supreme Court recently gave a broad hint that the admiralty doctrine is not as exceptional as is sometimes supposed; see Garrett v. Moore-McCormack Co., 317 U.S. 239, 248, 63 S.Ct. 246, 87 L.Ed. 239; note 17.^[43] For reasons previously indicated, I think we should take that hint. It seems to me that the time has come to give up the elaboration of distinctions found in the judicial opinions relieving non-admiralty employees of their releases.^[44] I believe that the courts should now say forthrightly that the judiciary regards the ordinary employee as one who needs and will receive the special protection of the courts when, for a small consideration, he has given a release after an injury. As Mr. Justice Holmes often urged, when an important issue of social policy arises, it should be candidly, not evasively, articulated.^[45] In other contexts, the courts have openly acknowledged that the economic inequality between the ordinary employer and the ordinary individual employee usually means the absence of "free bargaining."^[46] I think the courts should do so in these employee release cases.^[47] And the federal [769] courts, I think, should so hold in respect to liability pursuant to the Federal Employers' Liability Act.^[48] I think, therefore, that we should treat the plaintiff here as we would if he were a seaman.^[49]

Such a ruling will not produce legal uncertainty but will promote certainty — as anyone can see who reads the large number of cases in this field, with their numerous intricate methods of getting around the objective theory.^[50] Such a ruling would simply do directly what many courts have been doing indirectly. It is fairly clear that they have felt, although they have not said, that employers should not, by such releases, rid themselves of obligations to injured employees, obligations which society at large will bear — either, by taxes, through the government or, by donations, through private charitable organizations.

The Pennsylvania Railroad Company warns us that, if a release given by an employee, advised by his own lawyer, is disregarded in a case like this, in the absence of fraud on the part of the employer, then employers will never hereafter settle with their employees who, to their grave disadvantage, will always in the future be forced to sue even for minor personal injury claims. That is a glib prediction based upon no evidence and intended to frighten the court. Sometimes judges have been persuaded by such prophecies which later events have shown to have been unfounded. So Choate, in Pollock v. Farmers' Loan & Trust Co., 1895, 157 U.S. 429, 532, 15 S.Ct. 673, 39 L.Ed. [759], seemingly alarmed the majority of the Court by his forecast that a federal income tax would usher in a communist regime in this country. And it is well to recall Lord Abinger's dire prediction when in 1837 he enunciated the fellow-servant rule which the Employers Liability Act has wiped out: "If the master be liable to the servant in this action, the principle of liability will be found to carry us to an alarming extent . . . The inconvenience, not to say the absurdity of these consequences, afford a sufficient [770] argument against the application of this principle to the present case . . . In fact, to allow this action to prevail would be an encouragement to the servant to omit that diligence and caution which he is in duty bound to exercise on the behalf of his masters, to protect him against the misconduct of others who serve him, and which diligence and caution, while they protect the master, are a much better security against any injury the servant may sustain by the negligence of others engaged under the same master, than any recourse against his master for damages could possibly afford."^[51] Certainly, that prophecy went astray.

In New York, the rule as to releases is precisely that to which the Pennsylvania Railroad here objects; yet I venture to guess that thousands of settlements yearly are made in New York by employers who take the risk that, on a proper showing, the releases will be judicially disregarded.^[52] Where the amount paid in settlement is relatively small, very likely most employers are willing to take such a risk.

One need not be highly imaginative or unduly cynical^[53] to surmise that the Pennsylvania Railroad, in seeking here to be rid of a liability of $7,500^[54] to this employee for a payment of $750, is not too strongly motivated by a philanthropic regard for its other employees.

SWAN, Circuit Judge (dissenting).

As I understand Judge HAND'S opinion he differentiates between the case where a lawyer is engaged by an injured plaintiff to settle any and all claims arising out of the accident and the case where the lawyer is engaged to settle only a claim for loss of wages due to the accident; in the former case a release signed by the plaintiff will bind him even though the lawyer represented to him that it was only a receipt for wages, in the latter it will not. So far I agree with my brother. But I cannot agree to affirmance of the judgment on the ground that the jury found that the plaintiff engaged Mr. Reich under a limited retainer. I think that affirmance on this ground rests upon an issue not argued by the parties, not submitted to the jury and not supported by the evidence. It appears from the plaintiff's own testimony, as well as from Mr. Reich's, that after the latter was retained he caused the plaintiff to be examined by a doctor to ascertain the extent of his injuries. This seems wholly inconsistent with the present theory that Mr. Reich was to present to the defendant only a claim for wages and tips. When an injured employee engages his own attorney, and the latter has a doctor investigate the extent of the injuries, and then makes a complete settlement and gets his client to sign a release in full, that ought to end the matter, unless the employer practiced fraud on the attorney. In my opinion the judgment should be reversed and the cause remanded for a new trial in which the issue of what claims the attorney was authorized to settle shall be clearly submitted to the jury.

[1] Williston, Contracts (Rev. Ed.) § 95A.

[2] Some adherents of the objective theory have suggested that the "actual intent" theory was undesirably transplanted into the common law, in the 19th century, from Roman-law dominated continental sources. See, e. g., Williston, Contracts (Rev. ed. 1936) §§ 20, 21, 94; cf. Patterson, Equitable Relief for Unilateral Mistake, 28 Col. L. Rev. (1928) 859, 861, 862, 888-890. The historical accuracy of that suggestion seems somewhat questionable to one who reads a 16th century English decision like Thoroughgood's Case, 1582, 2 Co.Rep. 9a, 76 Eng.Reprint 408, relating to a unilateral mistake. Sponsors of the "objective" theory did not, however, rest their case primarily on chauvinistic common law distaste for continental attitudes. Nor could they consistently have done so. For the "reasonable man," dear to the objectivists, seems to have been imported into the common law. Cf. Beidler & Bookmyer, Inc., v. Universal Insurance Co., 2 Cir., 134 F.2d 828, 830.

The "actual intent" theory, said the objectivists, being "subjective" and putting too much stress on unique individual motivations, would destroy that legal certainty and stability which a modern commercial society demands. They depicted the "objective" standard as a necessary adjunct of a "free enterprise" economic system. In passing, it should be noted that they arrived at a sort of paradox. For a "free enterprise" system is, theoretically, founded on "individualism"; but, in the name of economic individualism, the objectivists refused to consider those reactions of actual specific individuals which sponsors of the "meeting-of-the-minds" test purported to cherish. "Economic individualism" thus shows up as hostile to real individualism. This is nothing new: The "economic man" is of course an abstraction, a "fiction." See Doehler Metal Furniture Co. v. United States, 2 Cir., 149 F.2d 130, 132; cf. Standard Brands v. Smidler, 2 Cir., 151 F.2d 34, 38, notes 6 and 7. Patterson (loc. cit. 878 note) says that the "direct ancestry of the objective theory goes back to Paley . . . a theological utilitarian, a contemporary of Adam Smith."

[3] See Beidler & Bookmyer, Inc., v. Universal Insurance Co., supra; Kulukundis Shipping Co. v. Amtorg Trading Co., 2 Cir., 126 F.2d 978, 991, and note 43; United States v. Forness, 2 Cir., 125 F. 2d 928, note 26; Zell v. American Seating Co., 2 Cir., 138 F.2d 641, 647.

[4] As to the lack of real objectivity attained through the use of that personage in the field of torts, and the vagueness of his personality, see the following articles by Dean Leon Green; The Duty Problem, 28 Col. L. Rev. 1014 (1928) and 29 Col. L. Rev. 255 (1929); The Negligence Issue, 37 Yale L.J. 1029 (1928); Rules of Causation, 77 Un. of Pa.L.Rev. 601 (1929). See these and other articles in his book, Judge and Jury (1930). Cf. Aikens v. Wisconsin, 195 U.S. 194, 204, 25 S.Ct. 3, 49 L.Ed. 154.

[5] See, e. g., Wolfson, Aesthetics In and About the Law, 33 Ky. L.J. (1944) 33; Cohen, Transcendental Nonsense and The Functional Approach, 35 Col.L.R. 809, 845; Cf. Becker, Some Problems of Legal Analysis, 54 Yale L.J. 809 (1945).

[6] See Zell v. American Seating Co., supra, 2 Cir., 138 F.2d at pages 641, 647, 648; In re J. P. Linahan, Inc., 2 Cir., 138 F.2d 650, 652, 653. Perhaps the most fatuous of all notions solemnly voiced by learned men who ought to know better is that when legal rules are "clear and complete" litigation is unlikely to occur. See, e. g., Kantorowicz, Some Rationalism about Realism, 43 Yale L.J. (1934) 1240, 1241; Dickinson, Legal Rules, 79 Un. of Pa. L.Rev. (1931) 833, 846, 847. Such writers surely cannot be unaware that thousands of decisions yearly turn on disputes concerning the facts, i.e., as to whether clear-cut legal rules were in fact violated. It is the uncertainty about the "facts" that creates most of the unpredictability of decisions. See Frank, If Men Were Angels (1942) Chaps. VI and VII and Appendices II and V. Cf. Maine, Early History of Institutions (1875) 48-50; Maine, Village Communities (4th ed. 1881) 311-312, 318; Zell v. American Seating Co., 138 F.2d at pages 647, 648; cf. In re J. P. Linahan, 138 F.2d at pages 652-654.

[7] Williston, Contracts (Rev. ed.) § 35.

[8] See, e.g., Rest. §§ 70, 71 and 503.

[9] See, e.g., Hotchkiss v. National City Bank, D.C., 200 F. 287, 293.

[10] Williston, Contracts (Rev. ed.) § 23. He cites § 21, with approval, Holland's Jurisprudence; Holland (13th ed.) 262, says that "when the law enforces a contract, it does so to prevent disappointment of well-founded expectations, which, though they usually arise from expressions truly representing intention, yet may occasionally arise otherwise." (Emphasis added.)

[11] § 1541.

[12] Ibid, §§ 94, 95A, 1535, 1541.

[13] See quotation from Holland, supra, note 10.

[14] Section 22, 94, 1537.

[15] §§ 15, 20, 1538. Williston refused to concede that the mutual-mistake doctrine does not jibe with the "objective" theory. He perhaps had in mind this comment of Wigmore's on the reformation of a contract for such a mistake: "The theory of reformation is to make the instrument state, objectively and in appearance to others, what it did subjectively state to the parties themselves . . ." Wigmore, Evidence, § 2418; cf. § 2417. Williston, to whom all subjectivity was anathema, insisted that "the external expression" of the parties' "will," no matter how mistaken, results in a contract which "equity" recognizes as a contract but which, when the mistake is mutual, it sets aside because "it is just to do so." See Williston, The Formation of Contracts, 14 Ill. L. Rev. (1919) 85, 92, 94. However (in part because of the formal "merger" of "law" and "equity" but even in jurisdictions where no such merger has occurred) the "law" courts have often refused to enforce such contracts.

Williston, undoubtedly a master, takes a position here which seems highly casuistical: Since "equity" — whether administered in a separate court or in a court of "law" — departs from the objective appearance, the objective theory, for all practical purposes, cannot be said to be consistently applied in our legal system. It is far more helpful to acknowledge frankly that there exist important exceptions to that theory. Cf. Patterson, The Restatement of The Law of Contracts, 33 Col. L. Rev. (1933) 397, 407-408; Robinson, Law — An Unscientific Science, 44 Yale L.J. 235, 259-261. There is a danger, that through the merger of "law" and "equity," the latter may lose its desirable elasticity. See Emmerglick, A Century of The New Equity, 23 Tex. L.R. (1945) 244. That danger may be augmented if, via the Restatement, the "objective" theory of contracts is not recognized as subject to exceptions.

[16] § 20. In § 1538, Williston concedes that his distinction between "void" and "voidable" will "be generally unimportant for the defendant from a practical standpoint . . ."

[17] See, e.g., Sharp, Williston on Contracts, 4 Un. of Chi. L. Rev. (1936) 30; Oliphant, Book Review, 19 Mich. L. Rev. (1938) 358; Whittier, The Restatement of Contracts and Mutual Assent, 17 Calif. L. Rev.(1929) 441; Cf. Patterson, The Restatement of The Law of Contracts, 33 Col. L. Rev. (1933) 397, 407-408; Robinson, Law — An Unscientific Science, 44 Yale L. J. (1934) 235, 259-261; Clark, The Restatement of The Law of Contracts, 42 Yale L.J. (1933) 643; Pound, An Introduction to the Philosophy of Law (1922) 282, 283.

[18] Whittier, loc. cit. 441, 443. Whittier cogently remarks (442 note 5): "All non-consensual legal obligations need not have identical bases either as to culpability or damage."

[19] § 1536; see also § 1538.

[20] § 1579.

[21] 300 West End Ave. Corp. v. Warner, 250 N.Y. 221, 227, 228, 165 N.E. 271, 273.

[22] F. S. Cohen says that Williston, "a master of classical jurisprudence," in many of his formulations "has in mind neither the question of . . . prediction which the practical lawyer faces nor the question of values which the conscientious judge faces. If he had in mind the former question, his studies would no doubt reveal the extent to which courts actually enforce various types of contractual obligation. His conclusions would be in terms of probability and statistics. On the other hand, if Professor Williston were interested in the ethical aspects of contractual liability, he would undoubtedly offer a significant account of human values, and social costs involved in different types of agreement and in the means of their enforcement. In fact, however, the discussions of a Williston oscillate between a theory of what courts actually do and a theory of what courts ought to do, without coming to rest either on the plane of social realities or on the plane of values long enough to come to grips with significant problems. This confused wandering between the world of fact and the world of justice vitiates every argument and every analysis." Cohen, Transcendental Nonsense and The Functional Approach, 25 Col. L. Rev. (1935) 809, 840, 841. Cf. Fuller and Perdue, The Reliance Interest in Contract Damages, 47 Yale L.J. (1936) 52.

[23] Loc. cit. § 35.

[24] See, e.g., Swan, What is Science? in Essays in Research in The Social Sciences (1931) 11. The desperate efforts of Williston & Co. verbally to reconcile the decisions so as to avoid the appearance of exceptions recall Francis Bacon's remarks: "The human understanding, from its peculiar nature, easily supposes a greater degree of order and equality than it really finds . . . The human understanding, when any proposition has been once laid down (either from general admission or from the pleasure it affords), forces everything else to add fresh support and confirmation; and although most cogent and abundant instances exist to the contrary, yet either does not observe or despises them, or gets rid of and rejects them by some distinction, with violent and injurious prejudice, rather than sacrifice the authority of its first conclusions . . . The human understanding is most excited by that which strikes and enters the mind at once and suddenly, and by which the imagination is immediately filled and inflated. It then begins almost imperceptibly to conceive and suppose that everything is similar to the few objects which have taken possession of the mind, while it is very slow and unfit for the transition to the remote and heterogenous instances by which axioms are tried as by fire . . . " Bacon, Novum Organum (1620) Bk. 1, §§ 45-47. It should not be forgotten that Bacon was well acquainted with legal thinking. Indeed, it has been suggested that Bacon, in furthering the logic of discovery or invention in the natural sciences was extending the logic used in the courts; see McKeon, Democracy, Scientific Method, and Action, 55 Ethics (1945) 235.

For a modern restatement of similar views, see Bridgman, The Intelligent Individual and Society (1938) 7, 8, 18-20, 22, 40-43, 54, 82-85, 96, 97, 108, 109, 190. Bridgman says (54): "In general, the complete meaning of any concept is determined by the complex of its behavior when subjected to every possible operation. The complete meaning is of hopeless complexity, so that we are compelled to simplify and to approximate it . . . But in practice this reduction to a few simple key operations is usually carried too far. We have over-simplified our conceptual situations, and a necessary task before we can hope for adequate understanding is to recover some of the primitive complexity." Whitehead suggests as a working rule, "Seek simplicity and distrust it." Cf. Tocqueville. Democracy in America (Bradley ed. 1945) II, First Bk., Chaps. 3 and 4, especially p. 17 as to the tendency to arrange "hastily . . . under one formula."

[25] Although some physicists, in their philosophic writings, display a burning passion for consistency, in practice the desire for consistency is not carried to excess in the physical sciences. "This important fact of the priority of the concrete material as test is graphically illustrated by familiar instances in the physics of light and of atomic nuclear structure where abstractly incompatible algebras, geometries, and theories of light are employed by the experimenter in order to achieve the concrete transformations at which his experiment aims. If in experimental inquiry consistency functioned as the fundamental test, then each experimenter would line up in one of (at least) two schools and refuse to investigate any phenomenon which could be approached only with the theory of the competing school. This does not mean that the physicist will not have his preferences or his favorite horse. But it does mean that until the specific difficulty has been resolved he will not let the lure of consistency interfere with any experiment which appears promising." Fries, Science and The Foundations of Freedom, 41 J. of Philosophy (1944) 113, 116-117. Cf. Schuetz, On Multiple Realities, 5 Phil. and Phenom. Research (1945) 533.

"That principle, theory or 'law' is dignified as scientific which best promotes the actual attainment or control of concrete transformations. To this end the experimenter will use Euclidean or non-Euclidean geometries, geometries of four dimensions and of six, ordinary algebra and systems in which ab does not equal ba; he will employ a quantum theory where it promises results along with an undulatory theory where it is productive." Fries, Liberty and Science, 3 Pub. Adm.Rev. (1943) No. 3.

[26] Sharp, in Williston on Contracts, 4 Un.Chi.L.Rev. (1936) 30, 36, 37, and in Notes on Contract Problems and Comparative Law, 3 Un. of Chi.L.Rev. (1936) 277, 282-285, questions whether negligence should bar rescission of any contract for unilateral or mutual mistake of fact; he suggests that the party resisting the relief should merely receive compensation for any actual loss he has suffered.

[27] In re Clark's Estate, 233 App.Div. 487, 253 N.Y.S. 524; Seidman v. New York Life Ins. Co., 162 Misc. 560, 296 N.Y.S. 55, 56; Rosenblum v. Manufacturers Trust Co., 270 N.Y. 79, 85, 200 N.E. 587, 105 A.L.R. 947; Harper, Inc., v. City of Newburgh, 159 App.Div. 695, 145 N.Y.S. 59; City of New York v. Seely-Taylor Co., 149 App. Div. 98, 133 N.Y.S. 808, affirmed on opinion below 208 N.Y. 548, 101 N.E. 1098; Meade v. Brown, 218 Mich. 556, 188 N.W. 514; Brown v. Lamphear, 35 Vt. 252; Murray et al. v. Sanderson, 62 Wash. 477, 114 P. 424.

[28] See New York Annotations to the Restatement of Contracts (1933) § 503.

[29] As to "palpable" mistakes, in non-release cases, see, e.g., Moffett, H. & C. Co. v. Rochester, 178 U.S. 373, 20 S. Ct. 957, 44 L.Ed. 1108; Armour & Co. v. Renaker, 6 Cir., 202 F. 901; State of Connecticut v. F. H. McGraw & Co., D.C., 41 F.Supp. 369; Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749; St. Nicholas Church v. Kropp, 135 Minn. 115, 160 N.W. 500, L.R.A.1917D, 741; Tyra v. Cheney, 129 Minn. 428, 152 N. W. 835; Lubell, Unilateral, Palpable and Impalpable Mistakes in Construction Contracts, 16 Minn. L. Rev. 137; Patterson, article cited in note 2, supra; Williston, § 1578.

[30] This is the verbal device of the objectivists who formulated the Restatement of Contracts: § 503, Comment a and Illustration 1, says that a transaction is voidable even if one party only is under a mistake where the other party "has reason to know that there is a mistake when the transaction is entered into." (Emphasis added.) The phrase "reason to know" is not defined in this Restatement. But in Restatement of Restitution § 10 comment d we are told to find the meaning of that phrase in the Restatement of Agency § 9. There, in comment c, "reason to know" is defined to include not merely the reaction of "a person of ordinary intelligence" but also of one who has "the superior intelligence" of the particular person in question.

However, Restatement of Restitution § 10(a) refers to the person's knowledge of facts or that "he suspected their existence"; and comment d says that "suspicion imports an advertence to the facts" and therefore an element of "bad faith" as distinguished from "reason to know"; the comment adds, "Suspicion cannot profitably be defined in more precise terms." Compare Williams, Language and The Law, 61 L.Q. Rev. (1945), 179, 191, 192: "The upshot is that the words we use, though they have a central core of meaning that is relatively fixed, are of doubtful application to a considerable number of marginal cases. In general, we try in our language to sharpen our distinctions beyond what is warranted by the facts of the case. It is a necessary feature of language that we should have to make this effort, and thus it is inevitable that our linguistic distinctions should constantly break down . . . A wag once inquired whether the difference between a difference of kind and a difference of degree is itself a difference of kind or a difference of degree. The answer . . . is that it is a difference of degree. A difference of kind is merely a violent difference of degree."

[31] Scheer v. Rockne Motors Corp., 2 Cir., 68 F.2d 942.

[32] Or an insurer of the employer.

[33] Some courts seem to intimate that, on such facts, there is the equivalent of "fraud." Cf. Restatement of Contracts, 503 comment a, which, in discussing "reason to know," refers to § 472(b) where lack of privilege of nondisclosure is discussed; § 471(c) defines "fraud" to include "nondisclosure where it is not privileged, by any person intending or expecting thereby to cause a mistake by another to exist or to continue, in order to induce the latter to enter into or refrain from entering into a transaction . . ." For federal cases, see, e.g., Robert Hind, Ltd., v. Sylva, 9 Cir., 75 F.2d 74, 77; Great Northern R. Co. v. Fowler, 9 Cir., 136 F. 118; Montgomery Ward & Co. v. Callahan, 10 Cir., 127 F.2d 32, 35; Southwest, etc., Co. v. Jones, 8 Cir., 87 F.2d 879, 881, 882; Atlantic Greyhound Lines v. Metz, 4 Cir., 70 F.2d 166, 168; Chicago, M., St. P. & P. R. Co. v. Busby, 9 Cir., 41 F.2d 617, 619; Shook v. Illinois Cent. R. Co., 5 Cir., 115 F. 57. For cases in divers state courts, see 59 A.L.R. 809; Rosenblum v. Manufacturers Trust Co., 270 N.Y. 79, 200 N.E. 587, 105 A.L.R. 950; Serr v. Biwabik Concrete Aggregate Co., 202 Minn. 165, 278 N.W. 355, 117 A.L.R. 1022; L.R.A. 1916B, 785.

See, as to release cases of divers kinds in New York, Dominicis v. United States Casualty Co., 132 App.Div. 553, 116 N. Y.S. 975; Harvey v. Georgia, 148 Misc. 633, 266 N.Y.S. 168, 170; Seidman v. New York Life Ins. Co., 162 Misc. 560, 296 N.Y.S. 55, 56; Landau v. Hertz, etc., Co., 237 App.Div. 141, 260 N.Y.S. 561; Le Francois v. Hobart College, Sup., 31 N.Y.S.2d 200, 202; Barry v. Lewis, 259 App.Div. 496, 20 N.Y.S.2d 88, 91. In Backhous v. Wagner, 234 N. Y. 429, 138 N.E. 82, there was no showing that the releasor turned out to be more seriously injured than he had supposed when he gave the release. In McNamara v. Eastman Kodak Co., 232 N.Y. 18, 133 N.E. 113, plaintiff had sworn to a petition to the surrogate which stated the nature of her claim and asked approval of the settlement, which the surrogate had given.

[34] § 1551. Emphasis added.

[35] See Note, 5 Un. of Chi.L.Rev. (1938) 446, 448; Sharp, Notes on Contract Problems and Comparative Law, 3 Un. of Chi.L.Rev. (1936) 277; Sharp, Williston on Contracts, 4 Un. of Chi.L. Rev. (1936) 30. As to the "windfall," cf. Lord Sumner in Jones v. Waring, 1926 A. C. 670, 696.

[36] See citations in the preceding footnote.

[37] See Note, 5 Un. of Chi.L.Rev. (1938) at 449 and note 18. Cf. Fuller and Perdue, loc. cit., passim; they suggest that that element in the theory of contracts is disclosed in the rule that the plaintiff must, after the defendant's breach, take steps to mitigate damages.

[38] Wigmore, Evidence § 2416.

[39] Garrett v. Moore McCormack Co., 317 U.S. 239, 63 S.Ct. 246, 87 L.Ed. 239; Hume v. Moore-McCormack Lines, 2 Cir., 121 F.2d 336.

[40] Note how aptly that description fits the plaintiff here.

[41] Harden v. Gordon, 1823, Fed. Cas. No. 6,047.

[42] The David Pratt, 1839, Fed. Cas. No. 3,597.

[43] See Hume v. Moore-McCormack Lines, supra, 121 F.2d at pages 337-346 for an attempt to discover the historic reasons for the differentiation made by the courts, during much of the 19th century, between seamen and other employees.

[44] As Patterson (28 Col.L.Rev. at 893) observes, "The courts have been quite willing to find fraud, innocent misrepresentation, or material mistake in these cases." They have indeed; they have found such facts, in the release cases, on very slight evidence, evidence which in many other types of cases they would consider insufficient. See, e.g., Miller v. Spokane International R. Co., 82 Wash. 170, 143 P. 981, 982; St. Louis-San Francisco R. Co. v. Cauthen, 112 Okl. 256, 241 P. 188, 48 A.L.R. 1462, 1517; Serr v. Biwabik Concrete Aggregate Co., 202 Minn. 165, 278 N.W. 355, 117 A.L.R. 1022, 1033ff. And they have been quick, too, to seize on words in the releases in order to construe them most narrowly; Texas & P. R. Co. v. Dashiell, 198 U.S. 521, 527, 25 S.Ct. 737, 49 L.Ed. 1150; 48 A.L. R. at pages 1524, 1525; 117 A.L.R. at pages 1043-1045; L.R.A.1916B at pages 780, 781. Patterson (loc.cit. 877) refers to the judicial use of "unconscionable" as an "emotive epithet."

[45] See, e.g., the following writings by Holmes: Common Carriers and The Common Law, 13 Am.L.Rev. (1879) 609, 630, 631; The Common Law (1881) 1, 5, 35, 36, 68, 116, 204, 205; The Path of The Law, 10 Harv. L. Rev. (1897) 457, 466, 467; Frankfurter, The Early Writings of O. W. Holmes, Jr., 44 Harv. L.Rev. (1931) 717, 719, 774, 779, 781, note, 791; Vegelahn v. Guntner, 167 Mass. 92, 104, 106, 44 N.E. 1077, 35 L.R.A. 722, 57 Am. St. Rep. 443; Hudson County Water Co. v. McCarter, 209 U.S. 349, 355, 28 S.Ct. 529, 52 L.Ed. 828, 14 Ann.Cas. 560. See also Pound, Interpretations of Legal History (1923) 60ff; Cohen, loc. cit., at 834.

[46] See, e.g., Chief Justice Taft in American Steel Foundries v. Tri-City Central Trades Council, 257 U.S. 184, 209, 42 S.Ct. 72, 66 L.Ed. 189, 27 A.L. R. 360; Chief Justice Hughes in National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 33, 57 S.Ct. 615, 81 L.Ed. 893, 108 A.L.R. 1352, and in Amalgamated Utility Workers v. Consolidated Edison Co., 309 U.S. 261, 263, 264, 60 S.Ct. 561, 84 L.Ed. 738. Cf. West Coast Hotel Co. v. Parrish, 300 U.S. 379, 393-397, 57 S.Ct. 578, 81 L.Ed. 703, 108 A.L.R. 1330; Holden v. Hardy, 169 U.S. 366, 397, 18 S.Ct. 383, 42 L.Ed. 780.

[47] It has been suggested that the courts should recognize the inequality of bargaining strength in connection with other kinds of releases of personal injuries given for comparatively small sums: "But it is believed that in many cases the individual tort claimant being solicited to release his claims is not in a position to defend his own interests even in the absence of coercive or fraudulent conduct on the part of his obligor, especially where that obligor is a powerful business organization, such as a railroad or insurance company. The prospect of a long and costly legal battle with such an opponent, often commanding almost unlimited resources, is enough to deter all but the most courageous or the most vindictive from taking action, especially where a tempting compromise settlement is offered in consideration of a release. It is conceivable that relief might be obtained in equity where gross inadequacy of benefits received or other circumstances render the agreement so unconscionable as to warrant equitable action." Adoption judicially of such a doctrine is a bold step which I would hesitate to recommend that this court should take, although it does seem to be the unexpressed rationale of many decisions. See, e.g., Union Pac. R. Co. v. Harris, 158 U.S. 326, 15 S.Ct. 843, 39 L.Ed. 1003, and the comment thereon in Texas & P. R. Co. v. Dashiell, 198 U.S. 521, 529, 25 S.Ct. 737, 49 L.Ed. 1150, and in Garrett v. Moore-McCormack Co., 317 U.S. 239, 248, 63 S.Ct. 246, 87 L.Ed. 239, note 17.

[48] Duncan v. Thompson, 315 U.S. 1, 7, 62 S.Ct. 422, 86 L.Ed. 575, suggests that compromises of claims under that Act are to be most carefully scrutinized. Significant, too, is the citation of the Duncan case in Garrett v. Moore-McCormack Co., 317 U.S. 239, 248, 63 S.Ct. 246, 87 L.Ed. 239, note 17, where the court speaks of "cases involving releases for personal injuries arising from non-maritime torts" as "somewhat comparable" with cases involving releases of seamen's claims.

[49] Sitchon v. American Export Lines, 2 Cir., 113 F.2d 830, would not stand in the way; for in that case there was not the slightest evidence that plaintiff's lawyer mis-stated to him the nature of the release or that plaintiff did not thoroughly understand its meaning.

I am not unmindful that there is this seeming inconsistency in my position: I said above that legal rules, no matter how valuable the policy they embody, are often at the mercy of the fact-determinations in particular cases, and that those fact-determinations often involve ineradicable subjective factors; see In re J. P. Linahan, Inc., 2 Cir., 138 F. 2d 650, 652, 653. The remedy for that defect lies, I think, in improved methods of fact finding; cf. United States v. Forness, 2 Cir., 125 F.2d 928, 942, 943. As improvement in fact-finding is slow in developing and, at best, cannot be a complete remedy, it might be argued that it is silly to bother about the legal rules. The answer, briefly, is that one should not be thoroughly defeatist as to the efficacy of legal rules. They frequently do play an important role, even if often not the controlling role, in litigation. Wherefore, the courts should strive to bring those rules (within the limits allowed by proper respect for stare decisis) into line with intelligent social policy.

[50] 59 A.L.R. 809; St. Louis-San Francisco R. Co. v. Cauthen, 112 Okl. 256, 241 P. 188, 48 A.L.R. 1462; Serr v. Biwabik Concrete Aggregate Co., 202 Minn. 165, 278 N.W. 355, 117 A.L.R. 1022; McIsaac v. McMurray, 77 N.H. 466, 93 A. 115, L.R.A.1916B, 776.

[51] Priestly v. Fowler, 1837, 3 M. & W. 1, 5.

[52] We know, from the cases, that ship-owners have often made settlements for relatively small sums, procuring releases from seamen who were not advised by their own lawyers, despite the decisions that such settlements, on a proper showing, will be ignored by the courts. That goes to show that employers are willing to make such settlements in the face of the risk that they may be set aside.

[53] "Judges are apt to be naif, simpleminded men, and they need something of Mephistopheles." Holmes, Collected Legal Papers (1920) 295.

[54] In fact, the liability was for $7,500 plus $750, or $8,250, of which $750 was paid.

66 Mich. 568
THEODORE C. SHERWOOD
v.
HIRAM WALKER ET AL.

Sale—Mistake—Rescission.

1. A party who has given an apparent consent to a contract of sale may refuse to execute it, or may avoid it after it has been completed, if the consent was founded, or the contract made, upon the mistake of a material fact,—such as the subject-matter of the sale, the price, or some collateral fact materially inducing the agreement; and this can be done when the mistake is mutual.

2. Where, in such a case, the thing actually delivered or received is different in substance from the thing bargained for and intended to be sold, there is no contract; but if it be only a difference in some quality or accident, even though the mistake may have been the actuating motive to the purchaser or seller, or both of them, the contract remains binding.

3. Where a cow was contracted to be sold upon the understanding of both parties that she was barren and useless for breeding purposes, and it appeared that such was not the case,—

Held, that the vendors had a right to rescind the contract, and refuse to deliver the property.

Error to Wayne. (Jennison, J.) Argued May 3 and 4, 1887. Decided July 7, 1887.

Replevin. Defendants bring error. Reversed. The facts are stated in the opinion.

William Aikman, Jr. (D. C. Holbrook, of counsel), for appellants.

C. J. Reilly, for plaintiff.

MORSE, J. Replevin for a cow. Suit commenced in justice's court. Judgment for plaintiff. Appealed to circuit court of Wayne county, and verdict and judgment for plaintiff in that court. The defendants bring error, and set out 25 assignments of the same.

[569] The main controversy depends upon the construction of a contract for the sale of the cow.

The plaintiff claims that the title passed, and bases his action upon such claim.

The defendants contend that the contract was executory, and by its terms no title to the animal was acquired by plaintiff.

The defendants reside at Detroit, but are in business at Walkerville, Ontario, and have a farm at Greenfield, in Wayne county, upon which were some blooded cattle supposed to be barren as breeders. The Walkers are importers and breeders of polled Angus cattle.

The plaintiff is a banker living at Plymouth, in Wayne county. He called upon the defendants at Walkerville for the purchase of some of their stock, but found none there that suited him. Meeting one of the defendants afterwards, he was informed that they had a few head upon this Greenfield farm. He was asked to go out and look at them, with the statement at the time that they were probably barren, and would not breed.

May 5, 1886, plaintiff went out to Greenfield and saw the cattle. A few days thereafter, he called upon one of the defendants with the view of purchasing a cow, known as "Rose 2d of Aberlone." After considerable talk, it was agreed that defendants would telephone Sherwood at his home in Plymouth in reference to the price. The second morning after this talk he was called up by telephone, and the terms of the sale were finally agreed upon. He was to pay five and one-half cents per pound, live weight, fifty pounds shrinkage. He was asked how he intended to take the cow home, and replied that he might ship her from King's cattle-yard. He requested defendants to confirm the sale in writing, which they did by sending him the following letter:

[570] “WALKERVILLE, May 15,1886.
"T.C. SHERWOOD,
President, etc.,—
“Dear Sir: We confirm sale to you of the cow Rose 2d Aberlone, lot 56 of our catalogue, at five and a half cents per pound, less fifty pounds after shrink.  We inclose herewith order on Mr. Graham for the cow. You might leave check with him, or mail to us here, as you prefer.
“Yours truly,
"HlRAM WALKER & SONS."

The order upon Graham inclosed in the letter read as follows:

“WALKERVILLE, May 15, 1886.
“George Graham: You will please deliver at Kings cattle-yard to Mr. T.C. Sherwood, Plymouth, the cow Rose 2d of Aberlone, lot 56 of our catalogue. Send halter with cow, and have her weighed.
"Yours truly,
"HIRAM WALKER & SONS."

On the twenty-first of the same month the plaintiff went to defendants' farm at Greenfield, and presented the order and letter to Graham, who informed him that the defendants had instructed him not to deliver the cow. Soon after, the plaintiff tendered to Hiram Walker, one of the defendants, $80, and demanded the cow. Walker refused to take the money or deliver the cow. The plaintiff then instituted this suit.

After he had secured possession of the cow under the writ of replevin, the plaintiff caused her to be weighed by the constable who served the writ, at a place other than King's cattle-yard. She weighed 1,420 pounds.

When the plaintiff, upon the trial in the circuit court, had submitted his proofs showing the above transaction, defendants moved to strike out and exclude the testimony from the case, for the reason that it was irrelevant, and did not tend to show that the title to the cow passed, and that it showed [571] that the contract of sale was merely executory. The court refused the motion, and an exception was taken.

The defendants then introduced evidence tending to show that at the time of the alleged sale it was believed by both the plaintiff and themselves that the cow was barren and would not breed; that she cost $850, and if not barren would be worth from $750 to $1,000; that after the date of the letter, and the order to Graham, the defendants were informed by said Graham that in his judgment the cow was with calf, and therefore they instructed him not to deliver her to plaintiff, and on the twentieth of May, 1886, telegraphed to the plaintiff what Graham thought about the cow being with calf, and that consequently they could not sell her. The cow had a calf in the month of October following.

On the nineteenth of May, the plaintiff wrote Graham as follows:

"PLYMOUTH, May 19, 1886.”
MR. GEORGE GRAHAM,
"Greenfield, —
"Dear Sir: I have bought Rose or Lucy from Mr. Walker, and will be there for her Friday morning, nine or ten o'clock. Do not water her in the morning.
"Yours, etc.,
"T. C. SHERWOOD."

Plaintiff explained the mention of the two cows in this letter by testifying that, when he wrote this letter, the order and letter of defendants were at his house, and, writing in a hurry, and being uncertain as to the name of the cow, and not wishing his cow watered, he thought it would do no harm to name them both, as his bill of sale would show which one he had purchased. Plaintiff also testified that he asked defendants to give him a price on the balance of their herd at Greenfield, as a friend thought of buying some, and received a letter dated May 17, 1886, in which they named the price of five cattle, including Lucy at $90, and Rose 2d at $80. When he received the letter he called defendants up by tele [572] phone, and asked them why they put Rose 2d in the list, as he had already purchased her. They replied that they knew he had, but thought it would make no difference if plaintiff and his friend concluded to take the whole herd.

The foregoing is the substance of all the testimony in the case.

The circuit judge instructed the jury that if they believed the defendants, when they sent the order and letter to plaintiff, meant to pass the title to the cow, and that the cow was intended to be delivered to plaintiff, it did not matter whether the cow was weighed at any particular place, or by any particular person; and if the cow was weighed afterwards, as Sherwood testified, such weighing would be a sufficient compliance with the order; if they believed that defendants intended to pass the title by the writing, it did not matter whether the cow was weighed before or after suit brought, and the plaintiff would be entitled to recover.

The defendants submitted a number of requests, which were refused. The substance of them was that the cow was never delivered to plaintiff, and the title to her did not pass by the letter and order; and that under the contract, as evidenced by these writings, the title did not pass until the cow was weighed and her price thereby determined; and that, if the defendants only agreed to sell a cow that would not breed, then the barrenness of the cow was a condition precedent to passing title, and plaintiff cannot recover. The court also charged the jury that it was immaterial whether the cow was with calf or not. It will therefore be seen that the defendants claim that, as a matter of law, the title to this cow did not pass, and that the circuit judge erred in submitting the case to the jury, to be determined by them, upon the intent of the parties as to whether or not the title passed with the sending of the letter and order by the defend- ants to the plaintiff.

This question as to the passing of title is fraught with dif [573] ficulties, and not always easy of solution. An examination of the multitude of cases bearing upon this subject, with their infinite variety of facts, and at least apparent conflict of law, ofttimes tends to confuse rather than to enlighten the mind of the inquirer. It is best, therefore, to consider always, in cases of this kind, the general principles of the law, and then apply them as best we may to the facts of the case in hand.

The cow being worth over $30, the contract of sale, in order to be valid, must be one where the purchaser has received or accepted a part of the goods, or given something in earnest or in part payment, or where the seller has signed some note or memorandum in writing. How. Stat. § 6186.

Here there was no actual delivery, nor anything given in payment or in earnest, but there was a sufficient memorandum signed by the defendants to take the case out of the statute, if the matter contained in such memorandum is sufficient to constitute a completed sale. It is evident from the letter that the payment of the purchase price was not intended as a condition precedent to the passing of the title. Mr. Sherwood is given his choice to pay the money to Graham at King's cattle-yard, or to send check by mail.

Nor can there be any trouble about the delivery. The order instructed Graham to deliver the cow, upon presentation of the order, at such cattle-yard. But the price of the cow was not determined upon to a certainty. Before this could be ascertained, from the terms of the contract, the cow had to be weighed; and, by the order inclosed with the letter, Graham was instructed to have her weighed. If the cow had been weighed, and this letter had stated, upon such weight, the express and exact price of the animal, there can be no doubt but the cow would have passed with the sending and receipt of the letter and order by the plaintiff.

Payment was not to be a concurrent act with the delivery, and therein this case differs from Case v. Dewey, 55 Mich. [574] 116. Also, in that case, there was no written memorandum of the sale, and a delivery was necessary to pass the title of the sheep; and it was held that such delivery could only be made by a surrender of the possession to the vendee, and an acceptance by him.

Delivery by an actual transfer of the property from the vendor to the vendee, in a case like the present, where the article can easily be so transferred by a manual act, is usually the most significant fact in the transaction to show the intent of the parties to pass the title, but it never has been held conclusive. Neither the actual delivery, nor the absence of such delivery, will control the case, where the intent of the parties is clear and manifest that the matter of delivery was not a condition precedent to the passing of the title, or that the delivery did not carry with it the absolute title. The title may pass, if the parties so agree, where the statute of frauds does not interpose, without delivery, and property may be delivered with the understanding that the title shall not pass until some condition is performed.

And whether the parties intended the title should pass before delivery or not is generally a question of fact to be determined by the jury. In the case at bar the question of the intent of the parties was submitted to the jury. This submission was right, unless from the reading of the letter and the order, and all the facts of the oral bargaining of the parties, it is perfectly clear, as a matter of law, that the intent of the parties was that the cow should be weighed, and the price thereby accurately determined, before she should become the property of the plaintiff.

I do not think that the intent of the parties in this case is a matter of law, but one of fact. The weighing of the cow was not a matter that needed the presence or any act of the defendants, or any agent of theirs, to be well or accurately done. It could make no difference where or when he was weighed, if the same was done upon correct [575] scales, and by a competent person. There is no pretense but what her weight was fairly ascertained by the plaintiff. The cow was specifically designated by this writing, and her delivery ordered, and it cannot be said, in ray opinion, that the defendants intended that the weighing of the animal should be done before the delivery even, or the passing of the title. The order to Graham is to deliver her, and then follows the instruction, not that he shall weigh her himself, or weigh her, or even have her weighed, before delivery, but simply, “Send halter with the cow, and have her weighed."

It is evident to my mind that they had perfect confidence in the integrity and responsibility of the plaintiff, and that they considered the sale perfected and completed when they mailed the letter and order to plaintiff. They did not intend to place any conditions precedent in the way, either of payment of the price, or the weighing of the cow, before the passing of the title. They cared not whether the money was paid to Graham, or sent to them afterwards, or whether the cow was weighed before or after she passed into the actual manual grasp of the plaintiff. The refusal to deliver the cow grew entirely out of the fact that, before the plaintiff called upon Graham for her, they discovered she was not barren, and therefore of greater value than they had sold her for.

The following cases in this Court support the instruction of the court below as to the intent of the parties governing and controlling the question of a completed sale, and the passing of title: Lingham v. Eggleston, 27 Mich. 324; Wilkinson v. Holiday, 33 Id. 386; Grant v. Merchants' and Manufacturers' Bank, 35 Id. 527; Carpenter v. Graham, 42 Id. 194; Brewer v. Michigan Salt Ass'n, 47 11 534; Whitcomb v. Whitney, 24 Id. 486; Byles v. Colier, 54 Id. 1; Scotten v. Sutter, 37 Id. 526, 532; Ducey Lumber Co. v. Lane, 58 Id. 520, 525; Jenkinson v. Monroe Bros. & Co., 61 Id. 454.

[576] It appears from the record that both parties supposed this cow was barren and would not breed, and she was sold by the pound for an insignificant sum as compared with her real value if a breeder. She was evidently sold and purchased on the relation of her value for beef, unless the plaintiff had learned of her true condition, and concealed such knowledge from the defendants. Before the plaintiff secured possession of the animal, the defendants learned that she was with calf, and therefore of great value, and undertook to rescind the sale by refusing to deliver her. The question arises whether they had a right to do so.

The circuit judge ruled that this fact did not avoid the sale, and it made no difference whether she was barren or not. I am of the opinion that the court erred in this holding. I know that this is a close question, and the dividing line between the adjudicated cases is not easily discerned. But it must be considered as well settled that a party who has given an apparent consent to a contract of sale may refuse to execute it, or he may avoid it after it has been completed, if the assent was founded, or the contract made, upon the mistake of a material fact,—such as the subject-matter of the sale, the price, or some collateral fact materially inducing the agreement; and this can be done when the mistake is mutual, 1 Benj. Sales, §§ 605, 606; Leake, Cont. 339; Story, Sales (4th ed.), §§ 148, 377. See, also, Cutts v. Guild, 57 H. Y. 229; Harvey v. Harris, 112 Mass. 32; Gardner v. Lane, 9 Allen, 492; S. C. 12 Allen, 44; Huthmacher v. Harris' Adm'rs, 38 Penn. St. 491; Byers v. Chapin, 28 Ohio St. 300; Gibson v. Pelkie, 37 Mich. 380, and cases cited; Allen v. Hammond, 11 Pet. 63, 71.

If there is a difference or misapprehension as to the substance of the thing bargained for, if the thing actually delivered or received is different in substance from the thing bargained for and intended to be sold, then there is no contract; but if it be only a difference in some quality or acci [577] dent, even though the mistake may have been the actuating motive to the purchaser or seller, or both of them, yet the contract remains binding.

"The difficulty in every case is to determine whether the mistake or misapprehension is as to the substance of the whole contract, going, as it were, to the root of the matter, or only to some point, even though a material point, an error as to which does not affect the substance of the whole consideration."

Kennedy v. Panama, etc., Mail Co., L. E. 2 Q. B. 580, 588.

It has been held, in accordance with the principles above stated, that where a horse is bought under the belief that he is sound, and both vendor and vendee honestly believe him to be sound, the purchaser must stand by his bargain, and pay the full price, unless there was a warranty.

It seems to me, however, in the case made by this record, that the mistake or misapprehension of the parties went to the whole substance of the agreement. If the cow was a breeder, she was worth at least $750; if barren, she was worth not over $80. The parties would not have made the contract of sale except upon the understanding and belief that she was incapable of breeding, and of no use as a cow. It is true she is now the identical animal that they thought her to be when the contract was made; there is no- mistake as to the identity of the creature. Yet the mistake was not of the mere quality of the animal, but went to the very nature of the thing. A barren cow is substantially a different creature than a breeding one. There is as much difference between them for all purposes of use as there is between an ox and a cow that is capable of breeding and giving milk. If the mutual mistake had simply related to the fact whether she was with calf or not for one season, then it might have been a good sale; but the mistake affected the character of the animal for all time, and for her present and ultimate use. She was not in fact the animal, or the kind of animal, the defendants intended to sell or the plaintiff to buy. She was not a barren cow, and, if this fact had been known, there would have been no contract. The mistake affected the substance of the whole consideration, and it must be considered that there was no contract to sell or sale of the cow as she actually was. The thing sold and bought had in fact no existence. She was sold as a beef creature would be sold; she is in fact a breeding cow, and a valuable one.

The court should have instructed the jury that if they found that the cow was sold, or contracted to be sold, upon the understanding of both parties that she was barren, and useless for the purpose of breeding, and that in fact she was not barren, but capable of breeding, then the defendants had a right to rescind, and to refuse to deliver, and the verdict should be in their favor.

The judgment of the court below must be reversed, and a new trial granted, with costs of this Court to defendants.

CAMPBELL, C.J., and CHAMPLIN, J., concurred.

SHERWOOD, J. (dissenting). I do not concur in the opinion given by my brethren in this case. I think the judgments before the justice and at the circuit were right.

I agree with my Brother MORSE that the contract made was not within the statute of frauds, and that payment for the property was not a condition precedent to the passing of the title from the defendants to the plaintiff. And I further agree with him that the plaintiff was entitled to a delivery of the property to him when the suit was brought, unless there was a mistake made which would invalidate the contract; and I can find no such mistake.

There is no pretense that there was any fraud or concealment in the case, and an intimation or insinuation that such a thing might have existed on the part of either of the parties would undoubtedly be a greater surprise to them than anything else that has occurred in their dealings or in the case.

As has already been stated by my brethren, the record shows that the plaintiff is a banker, and farmer as well, carrying on a farm, and raising the best breeds of stock, and lived in Plymouth, in the county of Wayne, 23 miles from Detroit; that the defendants lived in Detroit, and were also dealers in stock of the higher grades; that they had a farm at Walkerville, in Canada, and also one in Greenfield, in said county of Wayne, and upon these farms the defendants kept their stock. The Greenfield farm was about 15 miles from the plaintiff's.

In the spring of 1886 the plaintiff, learning that the defendants had some "polled Angus cattle" for sale, was desirous of purchasing some of that breed, and, meeting the defendants, or some of them, at Walkerville, inquired about them, and was informed that they had none at Walkerville, "but had a few head left on their farm in Greenfield, and they asked the plaintiff to go and see them, stating that in all probability they were sterile and would not breed." In accordance with said request, the plaintiff, on the fifth day of May, went out and looked at the defendants' cattle at Greenfield, and found one called "Rose 2d," which he wished to purchase, and the terms were finally agreed upon at five and one-half cents per pound, live weight, 50 pounds to be deducted for shrinkage. The sale was in writing, and the defendants gave an order to the plaintiff directing the man in charge of the Greenfield farm to deliver the cow to plaintiff. This was done on the fifteenth of May. On the twenty-first of May plaintiff went to get his cow, and the defendants refused to let him have her; claiming at the time that the man in charge at the farm thought the cow was with calf, and, if such was the case, they would not sell her for the price agreed upon.

The record further shows that the defendants, when they sold the cow, believed the cow was not with calf, and barren; that from what the plaintiff had been told by defend [580] ants (for it does not appear he had any other knowledge or facts from which he could form an opinion) he believed the cow was farrow, but still thought she could be made to breed. The foregoing shows the entire interview and treaty between the parties as to the sterility and qualities of the cow sold to the plaintiff. The cow had a calf in the month of October.

There is no question but that the defendants sold the cow representing her of the breed and quality they believed the cow to be, and that the purchaser so understood it. And the buyer purchased her believing her to be of the breed represented by the sellers, and possessing all the qualities stated, and even more. He believed she would breed. There is no pretense that the plaintiff bought the cow for beef, and there is nothing in the record indicating that he would have bought her at all only that he thought she might be made to breed. Under the foregoing facts,—and these are all that are contained in the record material to the contract,—it is held that because it turned out that the plaintiff was more correct in his judgment as to one quality of the cow than the defendants, and a quality, too, which could not by any possibility be positively known at the time by either party to exist, the contract may be annulled by the defendants at their pleasure. I know of no law, and have not been referred to any, which will justify any such holding, and I think the circuit judge was right in his construction of the contract between the parties.

It is claimed that a mutual mistake of a material fact was made by the parties when the contract of sale was made. There was no warranty in the case of the quality of the animal. When a mistaken fact is relied upon as ground for rescinding, such fact must not only exist at the time the contract is made, but must have been known to one or both of the parties. Where there is no warranty, there can be no mistake of fact when no such fact exists, or, if in existence, [581] neither party knew of it, or could know of it; and that is precisely this case. If the owner of a Hambletonian horse had speeded him, and was only able to make him go a mile in three minutes, and should sell him to another, believing that was his greatest speed, for $300, when the purchaser believed he could go much faster, and made the purchase for that sum, and a few days thereafter, under more favorable circumstances, the horse was driven a mile in 2 min. 16 sec., and was found to be worth $20,000, I hardly think it would be held, either at law or in equity, by any one, that the seller in such case could rescind the contract. The same legal principles apply in each case.

In this case neither party knew the actual quality and condition of this cow at the time of the sale. The defendants say, or rather said, to the plaintiff, "they had a few head left on their farm in Greenfield, and asked plaintiff to go and see them, stating to plaintiff that in all probability they were sterile and would not breed." Plaintiff did go as requested, and found there three cows, including the one purchased, with a bull. The cow had been exposed, but neither knew she was with calf or whether she would breed. The defendants thought she would not, but the plaintiff says that he thought she could be made to breed, but believed she was not with calf. The defendants sold the cow for what they believed her to be, and the plaintiff bought her as he believed she was, after the statements made by the defendants. No conditions whatever were attached to the terms of sale by either party. It was in fact as absolute as it could well be made, and I know of no precedent as authority by which this Court can alter the contract thus made by these parties in writing, and interpolate in it a condition by which, if the defendants should be mistaken in their belief that the cow was barren, she should be returned to them, and their contract should be annulled.

[582] It is not the duty of courts to destroy contracts when called upon to enforce them, after they have been legally made. There was no mistake of any such material fact by either of the parties in the case as would license the vendors to rescind. There was no difference between the parties, nor misapprehension, as to the substance of the thing bargained for, which was a cow supposed to be barren by one party, and believed not to be by the other. As to the quality of the animal, subsequently developed, both parties were equally ignorant, and as to this each party took his chances. If this were not the law, there would be no safety in purchasing this kind of stock.

I entirely agree with my brethren that the right to rescind occurs whenever "the thing actually delivered or received is different in substance from the thing bargained for, and intended to be sold; but if it be only a difference in some quality or accident, even though the misapprehension may have been the actuating motive" of the parties in making the contract, yet it will remain binding. In this case the cow sold was the one delivered. What might or might not happen to her after the sale formed no element in the contract.

The case of Kennedy v. Panama, etc., Mail Co., L. R. 2 Q. B. 588, and the extract cited therefrom in the opinion of my brethren, clearly sustain the views I have taken. See, also, Smith v. Hughes, L. E. 6 Q. JB. 597; Carter v. Crick, 4 Hurl. & N. 416.

According to this record, whatever the mistake was, if any in this case, it was upon the part of the defendants, and while acting upon their own judgment. It is, however, elementary law, and very elementary, too, "that the mistaken party, acting entirely upon his own judgment, without any common understanding with the other party in the premises as to the quality of an animal, is remediless if he is injured [583] through his own mistake." Leake, Cont. 338; Torrance v. Bolton, L. K. 8 Ch. App. 118; Smith v. Hughes, L. K 6 Q. B. 597.

The case cited by my brethren from 37 Mich. (Gibson v. Pelkie) I do not think sustains the conclusion reached by them. In that case the subject-matter about which the contract was made had no existence, and in such case Mr. Justice GRAVES held there was no contract; and to the same effect are all the authorities cited in the opinion. That is certainly not this case. Here the defendants claim the subject-matter not only existed, but was worth about $800 more than the. plaintiff paid for it.

The case of Huthmacher v. Harris' Adm'rs, 38 Penn. St. 491, is this: A party purchased at an administrator's sale a drill-machine, which had hid away in it by the deceased a quantity of notes, to the amount of about $3,000, money to the amount of over $500, and two silver watches and a pocket compass of the value of $60.25. In an action of trover for the goods, it was held that nothing but the machine was sold or passed to the purchaser, neither party knowing that the machine contained any such articles.

In Cutts v. Gulid, 57 N. Y. 229, the defendant, as assignee, recovered a judgment against D. & H. He also recovered several judgments in his own name on behalf of the T. Co. The defendant made an assignment of and transferred the first judgment to an assignee of the plaintiff,—both parties supposing and intending to transfer one of the T. Co. judgments,—and it was held that such contract of assignment; was void, because the subject-matter contained in the assignment was not contracted for.

In the case of Byers v. Chapin, 28 Ohio St. 300, the defendant sold the plaintiffs 5,000 oil barrels. The plaintiffs paid $5,000 upon their purchase, and took some of the barrels. The barrels proved to be unfit for use, and the contract was rescinded by consent of the parties. The defendant, [584] instead of returning all the money paid to the purchasers, retained a portion and gave plaintiffs his note for the remainder. The plaintiffs brought suit upon this note. The defendant claimed that, under the contract of sale of the barrels, they were to be glued by the plaintiffs, which the plaintiffs properly failed to do, and this fact was not known to defendant when he agreed to rescind and gave the note, and therefore the note was given upon a mistaken state of facts, falsely represented to the defendant, and which were known to the plaintiffs. On the proofs, the jury found for the defendant, and the verdict was affirmed.

In Gardner v. Lane, 9 Allen, 492, it is decided that if, upon a sale of No. 1 mackerel, the vendor delivers No. 3 mackerel, and some barrels of salt, no title to the articles thus delivered passes.

Allen v. Hammond, 11 Pet. 63, decides that if a life-estate in land is sold, and at the time of the sale the estate is terminated by the death of the person in whom the right vested, a court of equity will rescind the purchase.

In Harvey v. Harris, 112 Mass. 32, at an auction two different grades of flour were sold, and a purchaser of the second claimed to have bought a quantity of the first grade, under a sale made of the second, and this he was not allowed to do, because of the mutual mistake; the purchaser had not in fact bought the flour he claimed. In this case, however, it is said it is true that, if there is a mutual agreement of the parties for the sale of particular articles of property, a mistake or misapprehension as to the quality of the articles will not enable the vendor to repudiate the sale.

The foregoing are all the authorities relied on as supporting the positions taken by my brethren in this case. I fail to discover any similarity between them and the present case; and I must say, further, in such examination as I have been able to make, I have found no adjudicated case going to the extent, either in law or equity, that has been held in this case. [585] In this case, if either party had superior knowledge as to the qualities of this animal to the other, certainly the defendants had such advantage.

I understand the law to be well settled that "there is no breach of any implied confidence that one party will not profit by his superior knowledge as to facts and circumstances" equally within the knowledge of both, because neither party reposes in any such confidence unless it be specially tendered or required, and that a general sale does not-imply warranty of any quality, or the absence of any; and if the seller represents to the purchaser what he himself believes as to the qualities of an animal, and the purchaser buys relying upon his own judgment as to such qualities, there is no warranty in the case, and neither has a cause of action against the other if he finds himself to have been mistaken in judgment.

The only pretense for avoiding this contract by the defend- ants is that they erred in judgment as to the qualities and value of the animal. I think the principles adopted by Chief Justice CHRISTIANCY in Williams v. Spurr, 24 Mich. 335, completely cover this case, and should have been allowed to control in its decision. See, also, Story, Sales, §§174, 175, 382, and Benj. Sales, § 430.

The judgment should be affirmed.

84 CLR 377
HCA 79; (1951)

McRae
v.
Commonwealth Disposals Commission

 HIGH COURT OF AUSTRALIA.
(27 August 1951).

Webb J.(1)

Dixon(2), McTiernan(3) and Fullagar(2) JJ.

HEARING

Melbourne, 1950, March 20-24, 27, 28;
Sydney, 1950, May 8;
Melbourne, 1950, May 23. 23:5:1950
Melbourne, 1951, February 23, 26-28; March 1, 2, 5; August 27. 27:8:1951
APPEAL from Webb J.

DECISION

[378] 1950, May 8.

WEBB J. delivered the following written judgment:—

The plaintiffs claim against the defendants damages for breach of contract, the plaintiffs by the defendant Commonwealth Disposals Commission in April 1947.

[379] The defendants offered to deliver to the plaintiffs an oil barge as being the oil tanker sold, but the plaintiffs refused to accept delivery of it as not being an oil tanker. The defendants submit that a barge is an oil tanker, or alternatively, that if it is not an oil tanker, then there was a misdescription of the thing sold, and the defendants are not liable under the conditions of tender and the conditions of the sales advice note. In the further alternative the defendants submit that, if there was not a misdescription, then there had been a mutual mistake as to the identity of the subject matter, and therefore no contract. They also denied deceit and negligence.

I find that sometime before April 1945 an oil barge was wrecked on a reef surrounding Jomard Islands. Its position on the reef was latitude eleven degrees sixteen minutes forty seconds south, longitude one hundred and fifty-two degrees eight minutes east. It was still in that position when the defendants offered to give delivery of it to the plaintiffs. It was a steel vessel two hundred feet six inches long, forty feet broad and fourteen feet deep. It contained four tanks for the carriage of liquid cargo. It was not self-propelled. It was inspected by a salvage officer on behalf of the Commonwealth on 9th April 1945. Nos. 1 and 4 tanks were then dry and Nos. 2 and 3 contained about 1,000 tons of oil. On 11th April 1945 the Commonwealth endeavoured to salvage the vessel by lightening the buoyance by discharging some of the oil and towing the vessel off the reef. As a result the transverse bulkheads were strained and Nos. 2, 3 and 4 tanks contained about the same amount of oil; the hull was straining badly, and on 20th April there was a constant oil slick spreading.

[380] In October 1946 one Jarrett, an officer of the civil administration in New Guinea, told Bowser, who was then regional manager in New Guinea for the defendant Commission, that he wanted to make an offer for an oil tanker, which he said was within a radius of 200 miles of Samarai. He would not give Bowser a more precise position. Jarrett made an offer of 50 pounds. This offer was chiefly for the oil, but was for the tanker as well. Bowser told Jarrett the offer appeared too low, and that he could not consider it until Jarrett could tell him where the tanker was. Bowser suggested that Jarrett should see Sheehan, who was then the district superintendent of the defendant Commission at Port Moresby. Jarrett then saw Sheehan and told him he knew of an oil tanker and wanted to buy it; that it was outside Samarai, and that only he, Jarrett, knew where it was, and that it contained oil. Sheehan asked Jarrett what price he was offering. Jarrett asked Sheehan what he thought would be a fair price. Sheehan said he did not know. Then Jarrett asked whether 50 pounds would be a fair price. Sheehan again said he did not know. Jarrett said he was not particularly interested in the boat; that he was more interested in the oil. Sheehan suggested to Jarrett that he should make an offer. Jarrett agreed and dictated one. In this written offer Jarrett described the goods as "Contents of wrecked vessel situated at Jormound Islands — Fuel oil". Sheehan told Jarrett he would not approve of the sale, as he did not know whether the offer was reasonable, and would have to try to trace the oil tanker in the office lists. The next day Jarrett told Sheehan it was an American vessel as far as he knew. Sheehan replied that if it was it would not be on the Commission's lists. Sheehan, however, had authority to sell it even if it were an American vessel. He did not find it on the lists. He then sent a signal to the district officer at Samarai (Exhibit 6), stating that an application had been received for the purchase of "fuel oil said to be on reef at Jormound Islands" and asking whether the district officer knew anything about it. On 7th November 1946 one McMullen, who was the defendant Commission's liaison officer in New Guinea, told Sheehan he knew of a wrecked tanker on Jomard Island. Sheehan replied that he had received an offer of 50 pounds for its contents. McMullen inquired whether Sheehan meant "that American tanker". He promised Sheehan he would see what he could find out about it. Later he told Sheehan he did not get any information. In the same month, November 1946, one Davis, the general manager of the defendant Commission, was in New Guinea and wrote a memorandum to Bowser reading: "I discussed with Mr. McMullen this morning the question of the tanker lying on a reef about a hundred miles north of Samarai. Mr. McMullen was good enough to indicate that he would send out a party and I suggest that Mr. Strange go with this party to establish whether she is worthwhile for sale as a salvage job. If there is equipment of value on her, she could be offered for sale at the termination of the Rabaul Sale whilst the buyers from the South who will be interested in such vessels as the Naroota are still in the area."

Bowser believed Davis was referring to the same vessel as Jarrett. Bowser then spoke to McMullen, who said he was sending signals to the district officers.

In December 1946 Bowser took up a position in the Melbourne headquarters of the defendant Commission in charge of clearance of goods declared but not cleared in New Guinea.

On 5th January 1947 Sheehan wrote to the Australian Broadcasting Commission at Port Moresby arranging for the broadcasting on 7th, 8th and 9th January of the following announcement:—

"The Commonwealth Disposals Commission invites tenders for an oil tanker wrecked on Jourmaund Reef approximately 100 miles north Samarai. The vessel is said to contain oil. . . . Tenders should be lodged not later than 25th January 1947."

A copy of this letter was sent by Sheehan to the defendant Commission in Melbourne.

[381] On 13th February 1947 Bowser sent a signal to Sheehan at Port Moresby asking whether "the vessel containing oil and approximately 200 miles off Samarai" had been sold, and he received a reply that no offers had been made.

On 10th March 1947 Sheehan again wrote to the Australian Broadcasting Commission arranging for a similar announcement to be made on 12th, 13th and 14th March.

Bowser referred to Currie, who was the sales superintendent of the defendant Commission in Melbourne, the copy of the Port Moresby announcement received from Sheehan. Tenders were then advertised for in the Melbourne papers from about 7th March. There were three such advertisements, the last being on 29th March. Whether the advertisements in Melbourne were all in the same terms as the Port Moresby announcement does not appear; but the following advertisement appeared in the Melbourne Argus of 29th March 1947:— "Tenders are invited for the purchase of an oil tanker lying on Jourmaund Reef, which is approximately 100 miles North of Samarai. The vessel is said to contain oil. Offers to purchase the vessel and its contents should be submitted to the Commonwealth Disposals Commission . . . and should be lodged not later than 2 p.m. March 31, 1947."

[382] About the middle of March the plaintiff F. E. McRae, who is a Melbourne merchant dealing in metals and chemicals in partnership with the other plaintiff Keith McRae, as McRae Trading Company, and two other men saw Currie at the Commission's office in Melbourne. McRae said he had seen an advertisement regarding a "wrecked tanker" and would like to get additional information. Currie told him he had no further information than appeared in the advertisement, but that Bowser might know something. Currie also told McRae that from the very limited information available he did not think any considerable tender would be warranted. He then introduced McRae and the men with him to Bowser. Currie told Bowser that McRae was interested in the tanker on the Jourmaund Reef and would like additional information. Bowser said he was sorry he could not add to the information already given to McRae. He added that when he was in New Guinea he received an offer for "the wreck and contents" and that it was refused. McRae told Bowser either that he was going or thought of going to New Guinea. He asked what surplus goods were available there, and if there were any other wrecks. Bowser replied there were wrecks in New Guinea, but he was not sure whether they had been sold, and that McRae should talk to Sheehan about them when he reached New Guinea.

Before tendering McRae looked at maps and could not find Jourmaund Reef but he found Jomard Reef. He took this to be the one with which he was concerned.

Bowser next saw the plaintiff F. E. McRae about 2 p.m. on 31st March 1947, when the latter put an envelope on the typiste's table in the defendant Commission's Melbourne office. Bowser asked McRae whether he had managed to get to New Guinea. McRae replied that he had not. He added "that one often had a couple of hundred pounds on a horse on a Saturday and I might as well have a gamble on this". The plaintiff's tender was as follows:— "Offer for Vessel on Jourmaund Reef by McRae Trading Co. 345 Exhibition Street, Melbourne. 1 oil tanker as advertised 'Age' 29.3.47, 'Argus' 29.3.47. Lying on the Jourmaund Reef off Samarai. Price 285 pounds. Cheque enclosed deposit 20% 28 pounds 10.0."

On 11th April the Commission wrote a letter to the plaintiff informing him that his tender had been accepted. The letter also stated that a sales advice note to cover the transaction would be forwarded in the course of the next few days. On 15th April the sales advice note was sent to the plaintiffs by the defendant Commission. It states inter alia "your offer to purchase, the general conditions contained in Form O, and this acceptance shall constitute the contract". Form O contains four conditions, including Condition 3, which reads:— "Condition of property: The property shall be sold as and where it lies, with all faults, (if any), and save as expressly notified to the purchaser no warranty or condition whatsoever is given by the Commonwealth. While every effort shall be made to describe property correctly, the Commonwealth shall not be liable for compensation or otherwise by reason of any misdescription or alleged variation of property delivered, from sample or property inspected. Where, however, any purchaser considers himself prejudiced by reason of any alleged misdescription or variation from sample or property inspected, the Commonwealth, at its discretion may make such adjustment as is fair and reasonable."

[383] During the first half of April 1947 native craft had been wrecked or blown out of their course by storms in the vicinity of the Solomons. Shortly after, Sheehan met Campbell, the Harbour Master at Port Moresby, and asked him how far along the coast the storms would extend. Sheehan added that the defendant Commission had "a wrecked tanker for sale up Jomard way". Campbell replied that it could be blown off or washed off the reef, but he could not say definitely. On 14th April Sheehan sent a signal to the district officer Samarai (Exhibit X) reading:— "Would appreciate urgent reply details oil tanker Jourmaund Reef. Understand vessel now moved under water and contents nil. Can this be confirmed."

Actually Sheehan had no information except what Campbell gave him. He had no understanding that a vessel had moved under water and that the contents were nil. He said he sent the signal in this form for the sake of brevity, and, with some hesitation, I believe him. I can suggest no reason why he should be disbelieved. The barge had not moved under water, and it is common ground that there was in fact no oil tanker there. To this signal Sheehan received the following reply on 17th April (Exhibit Y):—

"Large approx. 100 ft. barge type tanker carrying oil machinery etc. apparently drifted on reef Jomard Entrance high water during 1944. When inspected . . . 1945 large hole stern admitted sea. Machinery ruined. Understand oil still in hold but quantity unknown. Vessel exposed low tide. Only partly submerged high tide. Can inspect when district vessel available. . . . . D.O. Misima"

Apparently Sheehan's signal to Samarai was referred to the assistant district officer Misima.

[384] On 15th April McRae asked Bowser whether he could give him a better position of the vessel, as otherwise he might spend some days searching for it. McRae mentioned that Jomard was more east of Samarai than north. Bowser said he would try to get some more information and would wire the district superintendet at Port Moresby, who Bowser said he assumed would obtain information from the district officers at Samarai and Misima. He also told McRae they were the people who would assist him in finding the locality. McRae asked Bowser whether he could give the name and size of the tanker. Bowser replied that he could not. Bowser then suggested that what McRae was endeavouring to get was the latitude and longitude. McRae assented. Bowser then sent a signal to Sheehan at Port Moresby. On receipt of this signal Sheehan took it to the Harbour Master, Campbell, and asked Campbell whether he could give the information. Campbell replied that he could, and appeared to work out bearings from a map and read them to Sheehan. Sheehan telegraphed them to Melbourne on 17th April. In this telegram the latitude was given as eleven degrees sixteen and a half minutes south and longitude one hundred and fifty-one degrees fifty-eight minutes east. The contents of this telegram were telephoned to the plaintiffs and then confirmed by letter on 18th April. On 19th April Sheehan wrote to the Melbourne office confirming his telegram of 17th April and enclosing a copy of the reply he had received from the assistant district officer Misima about the vessel on the reef at Jomard Entrance and the ruined condition of its machinery. This letter was received in the defendant Commission's Melbourne office on 22nd April.

On 23rd April the plaintiffs paid the balance of the purchase money, 256 pounds 10s. 0d.

On receipt by the plaintiffs of the particulars of location the Gippsland, which was then being altered for the King Island trade, was refitted for service in the tropics. A diver was engaged and salvage equipment obtained.

On 24th April Sheehan received a letter from the general manager of the defendant Commission stating that payment for the oil tanker had been effected and that a copy of the sales advice note had been forwarded to Port Moresby. Sheehan then advised the assistant district officer, Misima, that the vessel had been sold, and that the inspection referred to in the latter's telegram to Sheehan of 17th April, was not required.

In May 1947 Lindsay McRae, a brother of the plaintiffs, produced a copy of the sales advice note to Sheehan at Port Moresby. He had flown there with one Johnstone. Lindsay McRae said he had bought the tanker. Sheehan told him he could not personally deliver the tanker as he had never seen it, and that Lindsay McRae would have to go down to the district officer at Samarai or Misima and show him the sales advice note. He also told Lindsay McRae that Jarrett had made an offer earlier, but that he did not know where Jarrett was. Further conversation followed, which is now rejected. It was admitted under the impression at the time that the McRae who produced the sales advice note to Sheehan was one of the plaintiffs. Lindsay McRae asked for the bearings of the tanker and Sheehan showed him the letter he had sent to Melbourne on 19th April containing the bearings. He told Lindsay McRae he had obtained them from Campbell, and introduced him to Campbell.

[385] On 28th June the Gippsland left Sydney for Port Moresby and foundered on 24th July. The plaintiffs were on board, but they and the master and crew reached Port Moresby, where the Betty Joan was chartered by the plaintiffs for salvage operations. On 15th August 1947 Johnstone and Lindsay McRae proceeded in the Jessie from Port Moresby to the location given by the defendant Commission. They went ashore and walked around the reef there. They saw no boat or ship or any sign of wreckage; but they saw a log sixty feet long.

In October plaintiff F.E. McRae saw Bowser at the latter's office in Melbourne and told him a cable had been received from New Guinea that a through search had been made for the tanker at the location given by the defendant Commission; and that only a log was found; but that there was a barge eleven or twelve miles away to the east. Bowser said he would signal New Guinea and endeavour to get some information. He then sent the following signal to Civil Administration Port Moresby, dated 17th October (Exhibit E):— "Commission sold oil tanker located Jourmaund Reef to McRae Trading Company Melbourne. Grateful you check bearing supplied by District Officer Misima April 1947, latitude eleven degrees sixteen and half minutes south longitude one hundred and fifty one degrees fifty eight minutes east. Previous advices indicated location approximately one hundred miles north Samarai. Firm alleges thorough search made for oil tanker in area specified but unable locate. Understand barge containing oil and machinery located approximately twelve miles from bearing specified. Appreciate advice indicating whether barge was confused with oil tanker and any further details enable firm locate oil tanker. . . . Disposals".

On 11th December 1947 the acting general manager of the defendant Commission wrote to the plaintiffs (Exhibit I) setting out the following information received from the Acting Administrator of the Territory in reply to the defendant Commission's signal:— "Investigation into the matter contained in the attached signal has disclosed that on the last maintenance trip to Jomard Reef Light on 29.7.47, a search was made for the tanker in question. The search was carried out by Mr. B.M. Ritchie of this Department and Lieut, Salisbury, R.A.N.R. (S) of H.M.A.S. Tarangau. No trace of the wreck was found, but a number of objects resembling ship's frames were sighted in the position given by the District Officer Misima, and, as the barge (which is in fact an L.S.T. loaded with oil drums) was also sighted in its accepted position, there seems no doubt that the tanker has disintegrated and slipped into deeper water. There has been definitely no confusion between barge and tanker."

[386] After some correspondence between the solicitors for the parties the Commonwealth Crown Solicitor for the defendants wrote to the plaintiff's solicitors on 29th October 1948 (Exhibit R) stating that at the date of sale the vessel was located approximately in the position mentioned in the defendant Commission's letter to the plaintiffs of 18th April 1947 and that it was still there in May 1948. The letter proceeded to say the confusion that might have arisen from the Acting Administrator's letter of 11th December was regretted and that the defendants were prepared to make a refund or to make the vessel available.

[387] However, I do not think that this oil barge was an oil tanker as that term was understood in shipping circles in Melbourne and by the parties. In the American book by Day, published in 1923, there is a glossary of terms used in the petroleum industry, and the term "oil tanker" is defined to include an oil barge. This book was said by Johnstone, an expert witness for the plaintiffs, to be authoritative, although Johnstone did not agree with that definition. But whatever may have been the meaning of "oil tanker" in America in 1923 I am satisfied that in 1947 in Australia an oil tanker was understood to be a vessel not merely specially constructed for the carriage of oil in bulk but also self-propelled and ocean-going. Currie thought an oil tanker would be self-propelled. When Bowser on 17th October inquired whether the oil tanker had been confused with the barge he indicated his understanding that they were different types of vessel. Therefore the defendants cannot rely on the barge being an oil tanker. Nor can they set up that the barge was sold but was misdescribed as an oil tanker and that they are expressly exempted from liability for misdescription under the conditions of contract. If the defendants, knowing what the vessel they advertised was like, yet wrongly described it as a barge, it might be a case of misdescription, because an oil tanker and an oil barge are vessels and also have in common the feature of special construction for the carriage of oil in bulk, although a barge is not self-propelled or ocean-going. But neither Bowser nor Currie, nor any other servant of the defendants having any power or duty in connection with this transaction, thought that an oil barge was an oil tanker. What both the plaintiffs and the defendants had in mind throughout was an oil tanker as distinct from an oil barge. But there was no oil tanker to sell, and so there was no contract (Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065)). It was conceded by counsel for the plaintiffs that, if Jarrett had told the plaintiffs and the defendants that there was an oil tanker on the reef at Jomard Islands and thereupon the plaintiffs and the defendant Commission agreed on a sale, there would be no contract. But counsel also submitted that this was not the position because on 15th April 1947 the plaintiffs asked for the location of the vessel, and it was pin-pointed by giving Latitude and longitude. Counsel submitted that the plaintiffs could assume from this that there was something valuable at the location, and that, as the plaintiffs acted upon this information to their prejudice, the defendants were estopped from denying the existence of an oil tanker there. But, to furnish ground for an estoppel the statement must have been made as an inducement. It was not made to induce a contract, as the tender had then been accepted. The inducement, if any, could only have been to pay the balance of purchase money, which was still unpaid on 15th April, and to proceed to take delivery of the vessel at the location given. But I find that the only purpose the plaintiffs had in asking for the exact location, and that the defendant Commission had in giving it, was to save the time of the plaintiffs in looking for the vessel on the reef. The plaintiff, F.E. McRae, told Bowser as much on 15th April 1947. He admitted he had a conversation with Bowser on those lines.

Then as to the claim for damages for deceit or neglect of duty: The plaintiffs submit that the information in the telegram from the assistant district officer Misima to Sheehan on 17th April, stating that the vessel was a 100 ft. barge-type tanker and its machinery ruined, should have been disclosed to the plaintiffs forthwith or at latest on 22nd April 1947 when it was received in Melbourne. The balance of the purchase money was not paid until 23rd April. This information revealed that the vessel was not an oil tanker of a type the parties had in mind. Bowser then had a duty to inform the plaintiffs on 22nd April of the mutual mistake of the parties. But he remained silent and has failed to give a satisfactory explanation why he did so. Even if he thought that the plaintiff F.E. McRae had gone to New Guinea he could still have communicated with him or with the other plaintiff or with the office of the McRae Trading Company in Melbourne. The natural consequence of his silence was that the plaintiffs paid the balance of the purchase money, and went to the expense of searching for the oil tanker. But the refitting and equipment of the Gippsland and her dispatch to the wreck before it was surveyed was not a natural consequence. I find that Bowser, in keeping silent, intended these natural consequences, and that the defendant Commission is liable for the resulting damages to the plaintiffs. I assess the damages at 756 pounds 10s. 0d.

I find no further deceit or negligence.

I give judgment for the plaintiffs for 756 pounds 10s. 0d. As to the costs I desire to give the parties an opportunity of being heard. I will hear argument if necessary in Melbourne on May 23rd at 9.30 a.m.

[388] His Honour awarded the plaintiffs half the costs of the action.

From the above decision in so far as it was unfavourable to them the plaintiffs appealed to the Full Court of the High Court, and the defendants cross-appealed.  

[393] O.J. Gillard K.C. (with him L.S. Lazarus) for the appellants. 1. The Commission agreed to sell and the plaintiffs agreed to purchase "an oil tanker lying on Jourmaund Reef" for the sum of 285 pounds on the terms and conditions indorsed on the tender form on Exhibit B. 2. The agreement is comprised of the following documents:— (a) Advertisement in Argus 29/3/47, incorporated by reference in Exhibit B. (b) Tender Form, Exhibit B. (c) Letter dated 11th April 1947 from the Commission to the plaintiffs. 3. (a) The Court is bound to look at the whole correspondence between the parties to discover if and when the parties entered into contractual relations (Hussey v. Horne-Payne (1879) 4 App Cas 311; Williams v. Brisco (1882) 22 Ch D 441, at p 448, per Jessel M.R.). (b) But, there being a clear acceptance of the tender by letter dated 11th April 1947, any correspondence thereafter was otiose (Perry v. Suffields Ltd. (1916) 2 Ch 187; Lennon v. Scarlett & Co. [1921] HCA 42;(1921) 29 CLR 499). (c) If any new term were intended to be introduced into the contract by reference to the "sales advice note" so as to defeat the clear acceptance of the tender, then the expression of such intention should have been clear and unambiguous (Proprietors &c. of the English & Foreign Credit Co. Ltd. v. Arduin (1871) LR 5 HL 64, at p 79, per Lord Westbury). (d) The mere reference in the letter of 11th April to the forwarding of a sales note was at the most an ambiguous introduction of a new term into the contractual relations. (e) By the letter a definite contract of sale consisting of an accepted tender, the notification of acceptance thereof and the conditions therein set out was expressly established. 4. The contract so established requires the Commission to deliver "an oil tanker", and a failure to do so is a breach of condition, at least (Couchman v. Hill (1947) KB 554): cf. s. 18 of the Goods Act 1928 (Vict.). 5. The exonerating clause in clause 8, Exhibit B, only covers "warranty or guarantee", not "condition", and accordingly does not exonerate the Commission from delivering "an oil tanker" (Wallis, Son & Wells v. Pratt & Haynes (1911) AC 394; Baldry v. Marshall (1925) 1 KB 260; Andrews Bros. (Bournemouth) Ltd. v. Singer & Co. Ltd. (1934) 1 KB 17; Nicholson & Venn v. Smith Marriott (1947) 177 LT 189: cf. Hope v. R.C.A. Phototone of Australia Pty. Ltd. [1937] HCA 90; (1937) 59 CLR 348; L'Estrange v. F. Graucob Ltd. (1934) 2 KB 394. 6. The provision that the goods are sold "as and where they lie with all faults (if any)" means "an oil tanker" with all faults and does not exonerate the Commission from delivering "an oil tanker" (Shepherd v. Kain (1821) 5 B & Ald 240 (106 ER 1180); Taylor v. Bullen [1850] EngR 844; (1850) 5 Ex 779, at p 784 [1850] EngR 844; (155 ER 341, at p 343); Cowdoy v. Thomas (1877) 36 LT 22; Robert A. Munro & Co. Ltd. v. Meyer (1930) 2 KB 312, at p 327, per Wright J.): cf. Champanhac & Co. Ltd. v. Waller & Co. Ltd. (1948) 2 All ER 724, at p 726, per Slade J. 7. Alternatively by the terms of reference in the letter of 11th April 1947 the contract is comprised of the documents mentioned in clause 2 above, together with the sales advice note. 8. In the absence of proof the plaintiffs received or knew of Form O, it is submitted that they are not bound by the conditions. There was no proof that Form O was ever sent to or received by the plaintiffs, and until the conclusion of the case no reliance was placed on this document in the pleadings. (He referred to Cheshire & Fifoot, Law of Contracts, 1st ed. (1945), p. 87; Olle v. Marlborough Court Ltd. (1949) 1 KB 532, at p 549.) 9. If Form O is incorporated, then:— (a) In order to relieve the Commission from liability for non-delivery, it must be expressed in clear and unambiguous terms. "An ambiguous document is no protection" (per Lord Macnaghten in Elderslie S.S. Co. Ltd. v. Borthwick (1905) AC 93, at p 96 ): see also Wallis, Son & Wells v. Pratt & Haynes (1910) 2 KB 1003, at p 1016, per Fletcher Moulton L.J.; s.c. in House of Lords (1911) AC 394 ; Chartered Bank of India, Australia & China v. British India Steam Navigation Co. Ltd. (1909) AC 369, at p 375; Szymonowski & Co. v. Beck & Co. (1923) 1 KB 457, at pp 464, 466; (1924) AC 43, at p 48. (b) Form O was devised alio intuitu and was never intended to relieve the Commission from its responsibility to carry out the fundamental condition of delivering an oil tanker: see Vigers Bros. v. Sanderson Bros. (1901) 1 KB 608; J. Aron & Co. v. Comptoir Wegimont (1921) 3 KB 435; Szymonowski's Case (1923) 1 KB, at p 467; Green v. Arcos (1931) 47 TLR 262, at p 336; Wilensko &c. v. Fenwick & Co. (West Hartlepool) Ltd. (1938) 3 All ER 429. 10. To evade responsibility to deliver an oil tanker the defendants over there is no contract because— (a) the parties were under a mutual mistake of fact as to the existence of an oil tanker on Jourmaund Reef, or (b) alternatively it was an implied condition that there was an oil tanker lying on the reef. 11. As to the mutual mistake:— (a) There was no mutual mistake on the facts. There was a vessel which the Commission and Bowser chose to describe as an oil tanker, and this was the subject of the contract. The nature of the vessel which Bowser or Currie intended to sell is irrelevant; the vendor was the Commission (or Commonwealth). (He referred to Clare v. Lamb (1875) LR 10 CP 334, at p 338; Barker v. Janson (1868) LR 3 CP 303.) (b) The defendants Bowser and Currie and the Commission were negligent in representing that there was an oil tanker on Jourmaund Reef which induced the plaintiffs to enter into contract; they cannot rely upon any mistake induced by their own carelessness (Anson on Contracts, 19th ed. (1945), p. 159; Pollock on Contracts, 12th ed. (1946), pp. 400-402). Bowser on behalf of the Commission assumed the risk of the ability of the Commonwealth to perform the contract entered into with the plaintiffs. (He referred to Williston, Law of Contracts (1938), vol. 1, p. 31. s. 20; Smith v. Hughes (1871) LR 6 QB 597, at p 606; Raffles v. Wichelhaus (1864) 2 H & C 906 (159 ER 375); Scott v. Littledale (1858) 8 El & Bl 815, at p 821 [1858] EngR 226; (120 ER 304, at p 306).) (c) Assuming that there was no contract initially, then after the representation implied in the letter of 18th April 1947 written by the defendant Currie on behalf of the Commission and the conversation with Bowser at that time, the Commission is estopped from denying the existence of the contract or of the oil tanker (Low v. Bouverie (1891) 3 Ch D 82, at p 111, per Kay L.J.; Cornish v. Abington (1859) 4 H & N 549, at p 556 [1859] EngR 512; (157 ER 956); Smith v. Hughes (1871) LR 6 QB 597, at pp 606, 607; Sullivan v. Constable (1932) 48 TLR 267, at p 369; Balkis Consolidated Co. Ltd. v. Tomkinson (1893) AC 396, at pp 407, 410, 412; Consensus & Estoppel, by Prof. Hughes, 54 L.Q.R. 370; Cheshire and Fifoot, Law of Contracts (1945), pp. 194-196: Salmond & Williams, Law of Contracts, 2nd ed. (1945), p. 239; Pollock, Principles of Contract, 12th ed. (1946), pp. 421, 501). (d) Since Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161 the proper analysis of the law is that the fact of non-existence does not bring about an avoidance on the ground of mistake, but results in non-performance of an implied condition as to the continued existence of the subject matter (per Denning L.J. in Solle v. Butcher (1950) 1 KB 671, at p 691): cf. Barr v. Gibson (1838) 3 M & W 390, at pp 399, 400 [1836] EngR 984; (150 ER 1196, at pp 1200, 1201); and Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065); ss. 11, 12, Goods Act. The test is: On what basis did the parties intend to contract? Here Bowser and the Commission intended to sell the vessel on the reef of Jourmaund Island and represented it as an oil tanker. The plaintiffs purchased the vessel so described. No implication can be made in these circumstances that it was fundamental to the contract, or there was a condition precedent thereto, that an oil tanker existed. 12. The duty of the Commission or the Commonwealth was to deliver an oil tanker. What was tendered was an oil barge, not an oil tanker. Even if there was formal delivery of the barge qua tanker at Port Moresby, the plaintiffs are not to be taken to have accepted until they have had a reasonable opportunity of examining the vessel (ss. 39 and 41, Goods Act 1928 (Vict.)). 13. The plaintiffs are entitled to the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract (s. 55(2), Goods Act 1928). 14. In the alternative, the plaintiffs sue for damages for deceit arising out of— (a) the advertisement Exhibit A; (b) the letter Exhibit D. 15. The Commission and the Commonwealth were vicariously guilty of deceit through their officers, as at least McMullen knew of the oil barge and deliberately described it as an oil tanker. The others were so ignorant of the true position that with the knowledge they possessed they could not reasonably have believed that "an oil tanker" was lying on Jourmaund Reef 100 miles north of Samarai. (He referred to Derry v. Peek (1889) 14 App Cas 337, at p 376 , per Lord Herschell; Kerr on Fraud and Mistake, 6th ed. (1929), p. 33.) They were recklessly careless as to whether the statement was true or false. 16. In the alternative, knowledge of the true facts must be imputed to the Commonwealth, which (having this knowledge) made a false representation to induce persons to purchase an oil tanker. See Pearson & Son Ltd. v. Dublin (1907) AC 381; London County Freehold & Leasehold Properties Ltd. v. Berkeley Property & Investment Co. Ltd. (1936) 2 All ER 1039. 17. "There is a duty upon a seller to disclose to a buyer the fact that material representations true when made have become false before final consummation of the sale" (Williston, Law of Contracts (1938), vol. 5, p. 4187, s. 1499; Davies v. London & Provincial Marine Insurance Co. (1878) 8 Ch D 469, at p 475; Dalgety & Co. Ltd. v. Australian Mutual Provident Society [1908] VicLawRp 70; (1908) VLR 481, at p 506; [1908] VicLawRp 70; 14 ALR 299, at p 308; Brownlie v. Campbell (1880) 5 App Cas 925, at pp 949, 950; With v. O'Flanagan (1936) Ch 575 ; Bradford Third Equitable Benefit Building Soc. v. Borders (1941) 2 All ER 205, at p 220; Robertson & Moffat v. Belson (1905) VLR 555; Salmond & Williams, Law of Contracts, 2nd ed. (1945), p. 247; Cheshire and Fifoot, Law of Contracts (1945), p. 173). See also per Romer L.J. in Scott v. Coulson (1903) 2 Ch 249, at p 252; cf. Arkwright v. Newbold (1879) 17 Ch D 301. 18. As to damages for deceit, the plaintiffs are entitled to such expenses as they have incurred by reason of the misrepresentation, setting off any benefit gained by them (Halsbury, 2nd ed., vol. 23, p. 60; Mullett v. Mason (1866) LR 1 CP 559; Nicholls v. Taylor [1939] VicLawRp 20; (1939) VLR 119; Neal v. Ayers [1940] HCA 21; (1940) 63 CLR 524; Potts v. Miller [1940] HCA 43; (1940) 64 CLR 282, at p 294; McAllister v. Richmond Brewing Co. N.S.W. Pty. Ltd. (1942) 42 SR (NSW) 187; 59 WN 147; Milne v. Marwood [1855] EngR 181; (1855) 15 CB 778 (139 ER 632); Burrows v. Rhodes (1899) 1 QB 816, at p 834; Barley v. Walford [1846] EngR 7; [1846] EngR 7; (1846) 9 QB 197 (115 ER 1249)). 19. As to the action for negligence, it is submitted that, because of the relationship created by the tender and its acceptance, both parties were under a duty to co-operate in doing such things as were necessary to carry out the terms of the contract (Mackay v. Dick (1881) 6 App Cas 251, at p 263, per Lord Blackburn; Marshall v. Colonial Bank of Australasia [1904] HCA 31; (1904) 1 CLR 632, at pp 647, 652; Mona Oil Equipment & Supply Co. v. Rhodesia Railways Ltd. (1949) 2 All ER 1014, at p 1017; Luxor (Eastbourne) Ltd. v. Cooper (1941) AC 108, at p 118 , per Viscount Simon L.C.). As there was great doubt as to the true location of the subject matter, the Commission, in order to give effectual delivery, was under a duty to give a better location than set out in the advertisement and sales advice note. 20. In carrying out this co-operation the law would treat the Commission and the plaintiffs as "neighbours", thereby requiring the Commission to exercise proper care in giving the location of the subject matter of the contract. Heaven v. Pender (1883) 11 QBD 503; M'Alister (or Donoghue) v. Stevenson [1931] UKHL 3; (1932) AC 562; Le Lievre v. Gould (1893) 1 QB 491 and Old Gate Estates Ltd. v. Toplis (1939) 3 All ER 209 are distinguishable. (He referred to Grant v. Australian Knitting Mills (1936) AC 85, at p 103.). See also Winfield, Law of Tort, 3rd ed. (1946), pp. 377-379; International Products Co. v. Erie R.R. Co. (1927) 244 NY 331. Cf. Courteen Seed Co. v. Hong Kong & Shanghai Banking Corporation (1927) 245 NY 377; Halsbury, 2nd ed., vol. 7, p. 147. 21. As to damages for breach of contract, omnia praesumuntur contra spoliatorum (Wilson v. Northampton & Banbury Junction Railway Co. (1874) LR 9 Ch App 279 ). 22. What was purchased and sold was an oil tanker, and the plaintiffs should be compensated for the failure to deliver, remembering that the contract provided for delivery at some far distant place, thereby requiring the plaintiffs to incur expense (Monarch S.S. Co. Ltd. v. Karlshamns Oljefabriker(1948) AC 196, at pp 204, 210; Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949) 2 KB 528 ). Assuming "foreseeability" to be necessary for an award of substantial damages (see per Denning J. in Minister of Pensions v. Chennell (1947) KB 250 , the nature of the contract required the plaintiffs to take delivery, involving salvage operations. The plaintiffs were bound to accept delivery, which required them to undertake expensive provision therefor. It was "on the cards" that the plaintiffs, having acquired such a valuable thing cheaply, would make all preparations to recover it. 23. Difficulty in assessing damages is no reason for refusing substantial damages. It is necessary to distinguish between cases where there is no proof of loss at all and those in which there is difficulty in proving the value of the loss (Chaplin v. Hicks (1911) 2 KB 786; Howe v. Teefy (1927) 27 SR (NSW) 301; 44 WN 102: Cf. Sapwell v. Bass (1910) 2 KB 486 ; Fink v. Fink [1946] HCA 54; [1946] HCA 54; (1946) 74 CLR 127.

[395] J.B. Tait K.C. (with him P. Murphy), for the respondents. Logically the first question is whether any enforceable contract arose out of the circumstances of this case. It is submitted, in the first place, that — unless the barge is to be regarded as a "tanker"— Webb J. was right to the extent to which he decided, on the authority of Couturier v. Hastie [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065), that the purported contract was void. If, however, it must be assumed that there was a contract, the conditions of the sales advice note are necessarily a part of it. It may be that the letter of 11th April 1947 advising the plaintiffs that their tender was accepted fixes the day of acceptance; but this letter refers to the sales advice note. It is submitted, therefore, that the note fixes the date; and this note is not pleaded as part of the contract. It may well be that great difficulty could occur in reconciling and applying provisions of the various documents which would have to be looked at as constituting the contract; but the parties themselves (including the plaintiffs) are to blame for that. If they will incorporate documents in stereotyped form which are not appropriate and then add further provisions by correspondence, they take on themselves the burden of difficulties of interpretation; but that does not mean that, when they do incorporate a particular document which presents difficulty, the Court can treat it as not being part of the contract. If there was a contract, the sale was by description, and what the plaintiffs' got was an "oil tanker" within the description of the thing sold. The test is whether the thing delivered (or tendered) differs so greatly from the thing described that they are really different things. That is not so here. There is no implication that what is sold is of any substantial value; indeed, the tender price suggests otherwise. The only implication is, under the Goods Act (Vict.), that the thing sold shall be of merchantable quality. Whatever provisions of the documents may be inappropriate, the exception relating to misdescription is certainly not so. It precisely meets this case. If the barge was not a "tanker", then the exception applies. Such an exception is clearly intended to put the responsibility on the buyer. It is the sort of provision one would expect to find in contracts of sale made by the Disposals Commission. The proper measure of damages for non-delivery of the thing contracted to be sold is the estimated loss directly and naturally resulting in the ordinary course of events (Pollock on Contracts, 12th ed. (1946), p. 529). Regard must be had to such consequences as may reasonably be supposed to be in the contemplation of the parties at the time the contract was made. The buyer is entitled to be put in the position in which he would have stood if the thing sold had been delivered (Williams Bros. v. Ed. T. Agius Ltd. (1914) AC 510; Benjamin on Sale, 7th ed. (1931), p. 1001; Goods Act (Vict.), s. 51(3)). See also Hasell v. Bagot Shakes & Lewis Ltd. [1911] HCA 62; (1911) 13 CLR 374, at p 381. The true practical measure of damages here on the assumption that there was non-delivery is at most the sum the plaintiffs were prepared to pay for what they expected to get — the tender price of 285 pounds. An objection to many of the items of damage claimed by the plaintiffs is that they were not proved in the sense of having been shown to flow from the non-delivery. Moreover, the loss of the ship Gippsland could not have been within the contemplation of the parties. As to the expense of the salvage expedition as a whole, it does not appear that this was lost because there was no tanker at the place specified. If there had been a tanker there but it had proved not worth the expense of salvage, the plaintiffs would have had the same loss, but it would not have been due to any breach of contract. As to deceit, it is submitted that there is no warrant in the evidence for the decision of Webb J. against the defendants. The most that appears from the evidence is innocent — not fraudulent — misrepresentation. As to the claim on the basis of negligence, it does not appear that at the relevant time the defendants were under any duty of care in relation to the plaintiffs. See Charlesworth on Negligence, 2nd ed. (1938), p. 14. In any event the observation already made as to the loss of the expense of the salvage expedition would apply similarly on the question of damages under this head. (He referred to Mayne on Damages, 11th ed. (1946), at pp. 75 et. seq., and, in particular, as to damages in tort, to Re An Arbitration between Polemis and Furness, Withy & Co. Ltd. (1921) 3 KB 560; Weld-Blundell v. Stephens (1920) AC 956, at pp 983, 984.) There is no parallel between this case and Chaplin v. Hicks (1911) 2 KB 786 . In the latter it was certain that a prize of fixed value would go to someone. In the present case it cannot be shown that the plaintiffs would have received anything of value under the contract.

O.J. Gillard K.C., in reply.

Cur. adv. vult.

1951, August 27.

The following written judgments were delivered:—

DIXON AND FULLAGAR JJ. This is an appeal from a judgment of Webb J. in an action in which the plaintiffs claimed damages on three causes of action alleged alternatively — breach of contract, deceit and negligence. The judgment, as passed and entered, was in favour of the plaintiffs against the Commonwealth Disposals Commission for 756 pounds 10s. 0d. as damages for deceit, and his Honour awarded the plaintiffs one-half of the costs of the action. The plaintiffs appeal, asserting that they are entitled to damages far in excess of 756 pounds 10s. 0d. The defendants cross-appeal, asserting that the maximum amount recoverable by the plaintiffs on any view of the case was 285 pounds. The amounts actually claimed by the statement of claim were, on the basis of one set of allegations, some 250,000 pounds, and, on the basis of another set of allegations, some 10,000 pounds.

[396] The case presents serious difficulties, the facts being in some respects of an extraordinary character. Some aspects of them are probably not fully explained by anything that appears in the evidence. They are summarized chronologically in the judgment of Webb J., and that summary need not be repeated here. Though it may be necessary for some purposes to go back in point of time, we think that, for the purposes of this appeal, the proper starting-point is the acceptance by the Commission of a tender by the plaintiffs for the purchase from the Commission of a wrecked or stranded oil tanker. It would be premature to speak of that acceptance as creating a contract, because the defendants have contended throughout that the "contract" was "void", or, in other words, that no contract was ever made. Only one thing need be said before proceeding to the starting point. In the assumed background of the case lay the facts that during the war a considerable number of ships, including "oil tankers", became wrecked or stranded in the waters adjacent to New Guinea, that after the war the Commission had the function of disposing of these as it thought fit, and that a purchaser from the Commission of any of these wrecked or stranded vessels might, but not necessarily would, make a very large profit by salving and selling the vessel, or the materials of her hull and equipment, or her cargo. The realization of a profit in this way (and the evidence suggests that a purchaser would not contemplate a realization of profit by an immediate resale of what he had bought as such) could, of course, only be achieved after the expenditure of large sums of money. Such a purchaser would naturally regard himself as acquiring, at best, a chance of making a profit. But he would not regard himself as acquiring a certainty of making a loss.

[397] In the Melbourne newspapers, Age and Argus, of 29th March 1947, appeared an advertisement inserted by the Commission. The advertisement read:— "Tenders are invited for the purchase of an OIL TANKER lying on JOURMAUND REEF, which is approximately 100 miles NORTH OF SAMARAI. THE VESSEL IS SAID TO CONTAIN OIL. OFFERS TO PURCHASE THE VESSEL AND ITS CONTENTS should be submitted to the COMMONWEALTH DISPOSALS COMMISSION, Nicholas Building, 37 Swanston Street, Melbourne, indorsed 'OFFER FOR VESSEL ON JOURMAUND REEF', and should be lodged not later than 2 p.m., March 31, 1947." In response to this advertisement, the plaintiffs, who are brothers trading in partnership, submitted a tender dated 31st March 1947. The tender was on a printed form. It was headed "Offer for vessel on Jourmaund Reef". The form was divided into columns. In a column headed "Description of Goods" the words "1 oil tanker lying on Jourmaund Reef as advertised Age, Argus, 29/3/47" were inserted. In the next column, which was headed "Location of Goods" the words "On Jourmaund Reef, off Samarai" were inserted. The price quoted was 285 pounds, and a cheque for 28 pounds 10s. 0d. being the required deposit of ten per cent, was forwarded with the tender. Indorsed on the printed form of tender were a number of conditions. On 11th April 1947 the Commission wrote to the plaintiffs a letter saying:— "With reference to your tender of 31st March 1947, I desire to advise that your offer of 285 pounds net has been accepted. A sales advice note to cover this transaction will be forwarded in the course of the next few days." This letter was followed by another letter of 15th April 1947, which says:— "I wish to inform you that your offer to purchase dated 31.3.47 is accepted for the quantities, the items, and at the price set out hereunder and/or in the attachment hereto bearing the same sales advice number as this acceptance". Below appear the words "One (1) Oil Tanker including Contents wrecked on Jourmaund Reef approximately 100 miles north of Samarai. Price 285 pounds." Then come some provisions as to payment and delivery, followed by the signature on behalf of the Commission. After the signature come the words "Your offer to purchase, the general conditions contained in Form O, and this acceptance, shall constitute the contract. Kindly acknowledge receipt of this communication by return post". Finally, certain further "terms" are set out. The plaintiffs apparently did not, by return post or otherwise, acknowledge in writing the receipt of this remarkable "communication". Form O is a printed form which contains a number of "conditions of sale", most of which are entirely inappropriate to the particular case.

[398] The contention of the Commission that no contract ever came into existence between itself and the plaintiffs was based on extrinsic facts which will have to be considered in a moment. It was not denied that, apart from those facts, a contract would have been made, and, on the assumption that a contract was made, a good deal of argument took place as to what were the terms of that contract. It will be convenient to deal with this matter at this stage. No less than five documents are involved — the advertisement, the tender, the letter of 11th April, the letter of 15th April, and "Form O". Mr. Gillard, for the plaintiffs, contended that the terms of the contract made were to be found in the first three documents only. He said that the letter of 11th April was an unequivocal acceptance of the offer contained in the tender, that the reference to "sales advice note" was not to be understood as contemplating the addition of further terms so as to make the letter in effect a counter-offer, and that the letter of 15th April was merely an ineffective attempt to add further terms to a contract which was concluded on the receipt of the plaintiffs' letter of 11th April. He referred to a well-known line of cases of which Bellamy v. Debenham (1890) 45 Ch D 481 and Lennon v. Scarlett & Co. [1921] HCA 42; (1921) 29 CLR 499 are good examples. Mr. Tait, for the Commission, contended that the plaintiffs must be taken to have accepted the terms set out and referred to in the second letter, and that the terms of the contract were to be found in all five of the documents. He admitted that in the terms so found there was overlapping and inconsistency, and that some of those terms were entirely inappropriate to the subject matter of the contract, but he said that these facts merely meant that difficult problems of construction might arise. We are disposed to accept the view put by Mr. Gillard, but the question does not seem to us to matter, and for this reason. The only condition on which Mr. Tait affirmatively relied was a condition which is contained in clause 8 of the terms indorsed on the tender form. That clause provides that the goods "are sold as and where they lie with all faults" and that no warranty is given as to "condition description quality or otherwise". This clause cannot, in our opinion, help the Commission in this case. What the Commission sold was an "oil tanker". It was, therefore, a condition of the contract that what was supplied should conform to the description of an oil tanker, and it is settled that such a clause as clause 8 has no application to such a condition: see, e.g., Wallis, Son & Wells v. Pratt & Haynes (1911) AC 394 and Robert A. Munro & Co. Ltd. v. Meyer (1930) 2 KB 312; and cf. Shepherd v. Kain (1821) 5 B & Ald 240 (106 ER 1180).

[399] There was, however, another communication from the Commission to the plaintiffs, which is of considerable importance. The accepted tender described the subject matter as an "oil tanker lying on Jourmaund Reef as advertised Age, Argus, 29/3/47". The advertisement described her as "lying on Jourmaund Reef, which is approximately 100 miles North of Samarai". Now there appears to be no reef anywhere in the locality which is charted or officially known as "Jourmaund Reef". There is a channel between two islands or reefs charted as "Jomard Entrance", and a few miles to the east of that channel is an island or reef charted as "Jomard Island". Jomard Island, however, is not approximately 100 miles from Samarai, but approximately 170 miles from Samarai, and its bearing from Samarai is not North but a little South of East. The plaintiffs, having bought as they thought, their tanker, looked for "Jourmaund Reef" on a map. They, of course, failed to find it, but they found Jomard Island, and thereupon, not unnaturally, asked the Commission to give them the precise latitude and longitude of the tanker. The Commission gave a latitude and longitude by telephone on 18th April, and confirmed this by a letter written on the same day. The letter read:— "Confirming our telephone conversation of this morning, in connection with the location of the Oil Tanker on Jourmond" (sic) "Reef, I wish to advise it is located as follows:— Latitude 11 degrees 16 1/2 minutes South: Longitude 151 degrees 58 minutes East". The result of this letter was to resolve any ambiguity in the description of the locality of the tanker and to identify with precision, as against the defendant Commission, the place referred to in the relevant documents as the place where the thing which they were purporting to sell was lying.

Now, the simple fact is that there was not at any material time any oil tanker lying at or anywhere near the location specified in the letter of 18th April. There was, at a point about eleven miles east of the location specified, a wrecked vessel described as an "oil barge". Some years before 1947 strenuous but unavailing efforts to salve this vessel had been made by a fully equipped expedition sent out by the Commonwealth Salvage Board. It was contended before Webb J., and also, though faintly, before us, that this vessel was a tanker and that delivery of her to the plaintiffs would constitute performance of the contract by the Commission. Webb J. rejected this contention, and the evidence clearly establishes that a "tanker", according to common understanding, is a self-propelled, ocean-going vessel, fully equipped both for navigation and for the carriage of oil in bulk. A barge is merely a floating repository for oil, adapted to be towed, but not otherwise capable of movement under control. The existence of the wrecked barge in question here is not, we think, a directly relevant factor in the case, though it may serve to explain to some extent how a rumour that there was a wrecked tanker somewhere began to circulate in the offices of the Commission.

[400] We say advisedly that such a rumour began to circulate, because there was indeed no better foundation for any supposition on the part of the officers of the Commission that they had a tanker to sell. They had no more definite information than was derived from an offer by a man named Jarrett to buy for 50 pounds the contents of a wrecked vessel, which he said was within a radius of 200 miles from Samarai, and from what can be quite fairly described as mere gossip. The reckless and irresponsible attitude of the Commission's officers is clearly indicated by the description in the advertisement of the locality of the tanker. In an even worse light appears an attempt which was made later, without any foundation whatever, to suggest that at the time of the making of the contract there had been a tanker in the place specified but that she had since been washed off the reef in a storm. Unfortunately the plaintiffs, for their part, took the matter seriously. They believed, and there is evidence that they had some reason for believing, that an oil tanker wrecked at the place indicated was likely to prove a profitable proposition, and accordingly they paid on 23rd April the balance of their purchase money, and then proceeded to fit up a small ship, which they owned, with diving and salvage equipment, and they engaged personnel, and proceeded from Melbourne to New Guinea. It is sufficient at this stage to say that they expended a large sum of money in discovering that they had bought a non-existent tanker.

The plaintiffs, as has been said, based their claim for damages on three alternative grounds. They claimed, in the first place, for damages for breach of a contract to sell a tanker lying at a particular place. Alternatively they claimed damages for a fraudulent representation that there was a tanker lying at the place specified. In the further alternative, they claimed damages for a negligent failure to disclose that there was no tanker at the place specified after that fact became known to the Commission. The second and third of these alleged causes of action depend wholly or partly on certain further facts which have not so far been mentioned. On 19th April 1947 a telegram was sent from the District Officer at Misima to the Port Moresby office of the Commission, which read: "Your S4382 stop Large approx. 100 ft. barge type tanker carrying oil machinery etc. apparently drifted on reef, Jomard Entrance high water during 1944 stop When inspected by Lieut. Middleton 1945 large hole stern admitted sea Machinery ruined stop Understand oil still in hold but quantity unknown Vessel exposed low tide only partly submerged high tide Can inspect when district vessel available". This unquestionably refers to the wrecked barge. How and why this telegram came to be sent is one of the minor mysteries of this case: no Port Moresby message numbered S4382 was produced. It seems reasonable to infer that the plaintiffs' request for a precise "fix" for their tanker prompted the making of inquiries which ought to have been made much earlier, and that the missing "S4382" was a belated attempt to find out whether the Commission had really had anything to sell to the plaintiffs. On 14th April the Port Moresby office of the Commission had telegraphed the District Officer at Samarai, saying:— "S4392 Would appreciate urgent reply details oil tanker Jourmaund Reef stop Understand vessel now moved under water and contents nil stop Can this be confirmed?" It seems quite possible that one of the quoted numbers is a mistake for the other, and that the telegram of 17th April is really in response to that of 14th April, which had been passed on from Samarai to Misima. Anyhow, the telegram of 17th April was set out in a letter of 19th April from the Port Moresby office to the Melbourne office of the Commission. The letter was minuted by Bowser, one of the officers of the Commission who were mainly responsible for the "selling" of the "tanker", as follows:—

"Received 21/4/47. McRae (successful tenderer) already advised and confirmed by letter location of vessel". In the meantime Port Moresby had replied to Misima, saying:— "Appreciate report stop Vessel sold Melbourne syndicate Inspection not required".

[401] The plaintiffs put their claim in deceit in this way. They said, first, that there was a false and fraudulent representation in the original advertisement. They said, secondly, that, even if the original representation as to the existence of a tanker was innocent, the representation was a continuing representation and the Commission knew, on 21st April at the latest, that it was false. By thereafter allowing the plaintiffs, on the faith of the truth of the representation, to pay the balance of purchase money and incur expenditure, they rendered themselves liable in deceit. The plaintiffs put their final alternative claim in this way. They said that, when the Commission was asked for the precise location of the vessel, they owed to the plaintiffs a duty to exercise reasonable care in obtaining the information required. The duty arose from the position of the parties. They at least believed that they were contractually bound. It must have been obvious to the Commission that the plaintiffs were likely to spend real money in reliance on the information supplied. So far from exercising any sort of care in the matter, they merely obtained a rough estimate of the latitude and longitude of Jomard Entrance and gave the result to the plaintiffs. The grossness of the negligence is emphasised by the fact that, on the very day (17th April) on which the latitude and longitude were telegraphed from Port Moresby to Melbourne, the Port Moresby office of the Commission received the telegram from Misima which should, the plaintiffs say, have made it plain to them that there was no tanker at Jomard Entrance.

[402] Webb J. held that the contract for the sale of a tanker was void — in other words, that no contract for the sale of a tanker was ever made. He considered that the well-known case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065) compelled him to this conclusion. His Honour held, however, as we read his judgment, that the plaintiffs had made out their case on the second aspect of their claim in deceit. He assessed damages on the basis that the plaintiffs were entitled to the return of the price paid plus an amount (necessarily, of course, approximate only) representing what it would have cost (without any preparations for salvage operations) to inspect the locality and ascertain that there was no tanker there. His Honour has not expressly stated the basis of his assessment, but it was common ground before us that this was the basis on which he proceeded.

The first question to be determined is whether a contract was made between the plaintiffs and the Commission. The argument that the contract was void, or, in other words, that there was no contract, was based, as has been observed, on Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065). It is true that Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) has been commonly treated in the text-books as a case of a contract avoided by mutual mistake, and it is found cited in the company of such cases as Gompertz v. Bartlett [1853] EngR 970; (1953) 2 El & Bl 849 (118 ER 985) and Strickland v. Turner [1852] EngR 199; (1852) 7 Ex 208 (155 ER 919). Section 7 of the English Sale of Goods Act 1893 is generally regarded as expressing the effect of the case. The case has not, however, been universally regarded as resting on mistake, and Sir Frederick Pollock, in his preface to vol. 101 of the Revised Reports, at p. vi, says:— "Couturier v. Hastie shows how a large proportion of the cases which swell the rubric of relief against mistake in the textbooks (with or without protest from the text-writer) are really cases of construction". And in Solle v. Butcher (1950) 1 KB, at p 691 Denning L.J. observed that the cases which it had been usual to classify under the head of "mistake" needed reconsideration since the decision of the House of Lords in Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161. No occasion seems to have arisen for a close examination of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 120 (156 ER 43); (1856) 5 HLC 673(10 ER 1065), but such an occasion does now arise.

[403] The facts of the case were simple enough. A question of del credere agency was involved, which has no relevance to the present case, and the facts may be stated without reference to that question. A sold to B "1,180 quarters of Salonica Indian corn of fair average quality when shipped, at 27/- per quarter f.o.b., and including freight and insurance, to a safe port in the United Kingdom, payment at two months from date upon handing over shipping documents." At the date of the contract the vessel containing the corn had sailed from Salonica, but, having encountered very heavy weather, had put in at Tunis. Here the cargo had been found to have become so heated and fermented that it could not be safely carried further. It had accordingly been landed at Tunis and sold there. These facts were unknown to either party at the date of the contract. On discovering them, B repudiated the contract. After the expiration of the two months mentioned in the contract, A, being able and willing to hand over the shipping documents, sued B for the price. The case came on for trial before Martin B. and a jury. Martin B. directed the jury that "the contract imported that, at the time of the sale, the corn was in existence as such, and capable of delivery" (1852) 8 Ex, at p 47 (155 ER, at pp 1253, 1254). The jury found a verdict for the defendant, and the plaintiff had leave to move. The Court of Exchequer (Parke B. and Alderson B., Pollock C.B. dissenting) made absolute a rule to enter a verdict for the plaintiff. This decision was reversed in the Court of Exchequer Chamber, and the House of Lords, after consulting the Judges, affirmed the decision of the Exchequer Chamber, so that the defendant ultimately had judgment.

[404] In considering Couturier v. Hastie [1852] EngR 774; (1952) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) it is necessary to remember that it was, in substance, a case in which a vendor was suing for the price of goods which he was unable to deliver. If there had been nothing more in the case, it would probably never have been reported: indeed the action would probably never have been brought. But the vendor founded his claim on the provision for "payment upon handing over shipping documents". He was not called upon to prove a tender of the documents, because the defendant had "repudiated" the contract, but he was able and willing to hand them over, and his argument was, in effect, that by handing them over he would be doing all that the contract required of him. The question thus raised would seem to depend entirely on the construction of the contract, and it appears really to have been so treated throughout. In the Court of Exchequer, Pollock C.B., in the course of argument, said (1852) 8 Ex, at p 49 (155 ER, at p 1254):— "The question is purely one of construction. I certainly think that the plain and literal meaning of the language here used imports that the thing sold, namely the cargo, was in existence and capable of being transferred." This was, in effect, what Martin B. had told the jury, and what it means is that the plaintiff had contracted that there was a cargo in existence and capable of delivery. Parke B., in giving the judgment of the majority of the Court (1852) 8 Ex, at p 54 (155 ER, at p 1256), said:—

"It is very true that, when there is a sale of a specific chattel, there is an implied undertaking that it exists; and, if there were nothing in this case but a bargain and sale of a certain cargo on the 15th May, there would be an engagement by the vendor, or a condition, that the cargo was in existence at that time." He went on to say, however, that there was very much more in the contract, and that there was enough to make it plain "that the true meaning of the contract was that the purchaser bought the cargo if it existed at the date of the contract, but that, if it had been damaged or lost, he bought the benefit of insurance but no more" (1852) 8 Ex, at p 55 (155 ER, at p 1257).

[405] The judgment of the Exchequer Chamber was delivered by Coleridge J. The view that the contract was void is probably derived from certain expressions which were used in the course of this judgment. But it does seem clear that again the question of construction was regarded as the fundamental question in the case. In stating the question for decision Coleridge J. (1853) 9 Ex, at p 106 (156 ER, at p 45) refers first to the direction of Martin B. to the jury, and says that the Lord Chief Baron had agreed with the opinion of Martin B. whereas the other learned Barons had differed from him. The judgment below, he says (1853) 9 Ex, at p 107 (156 ER, at pp 45, 46), "turned entirely on the meaning of the contract", and he proceeds to set out its terms in full. "The question", he says, "turns entirely upon the terms of the contract". The argument for the defendant is then put as including the proposition "that a vendor of goods undertakes that they exist", and (1853) 9 Ex, at p 108 (156 ER, at p 46) the argument for the plaintiff as being "that this was not a mere contract for the sale of an ascertained cargo, but that the purchaser bought the adventure, and took upon himself all risks from the shipment of the cargo". The final conclusion reached is expressed at the end of the judgment (1853) 9 Ex, at p 110 (156 ER, at pp 46, 47) by saying that "the basis of the contract in this case was the sale and purchase of goods, and all the other terms in the bought note were dependent upon that, and we cannot give to it the effect of a contract for goods lost or not lost". In the light of these passages it seems impossible to regard the expressions (1853) 9 Ex, at p 109 (156 ER, at p 46) "If the contract for the sale of the cargo was valid" and "the contract failed as to the principal subject-matter of it" as meaning that the contract was treated as being void. All that the passages in which those expressions occur seem in their context to mean is that the principal subject matter of the contract was a cargo of goods, that the purchaser did not buy shipping documents representing non-existent goods, that the consideration to the purchaser had failed, and that he could not therefore be liable to pay the contract price.

In the House of Lords again the Lord Chancellor, in giving judgment (1856) 5 HLC, at p 681 (10 ER, at pp 1068, 1069), said:— "The whole question turns upon the meaning and construction of the contract". A little later he said:— "What the parties contemplated . . . was that there was an existing something to be sold and bought, and, if sold and bought, then the benefit of insurance should go with it." In other words, there was not an absolute obligation to pay the price on delivery of the shipping documents (as the plaintiff contended), but an obligation to pay on delivery of those documents only if they represented at the time of the making of the contract goods in existence and capable of delivery. And this is all that the Lord Chancellor really had in mind, we think, when later he says:—

"If the contract of the 15th May had been an operating contract, and there had been a valid contract at that time existing, I think the purchaser would have had the benefit of insurance in respect of all damage previously existing."

[406] In Bell v. Lever Bros. Ltd. [1931] UKHL 2; (1932) AC 161, at pp 218-222 Lord Atkin, though he does not mention Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R., 1065). itself, discusses Gompertz v. Bartlett [1853] EngR 970; (1853) 2 El & Bl 849 (118 ER 985) and Gurney v. Womersley [1854] EngR 845;[1854] EngR 845; (1854) 4 El & Bl 133 (119 ER 51) and other cases which have sometimes been regarded as turning on mistake avoiding a contract ab initio, and His Lordship concludes the discussion with a very important observation. He says (1932) AC, at p 222:— "In these cases I am inclined to think that the true analysis is that there is a contract, but that the one party is not able to supply the very thing, whether goods or services, that the other party contracted to take; and therefore the contract is unenforceable by the one if executory, while, if executed, the other can recover back money paid on the ground of failure of the consideration". This observation accords with the reasons actually given for the decisions in Gompertz v. Bartlett [1853] EngR 970; [1853] EngR 970; (1853) 2 El & Bl 849(118 ER 985) and Gurney v. Womersley (1854) 4 El & Bl 133 (119 ER 51) . In the former case, in which the action was for money had and received, Lord Campbell C.J. (1853) 2 El & Bl, at p 853 (118 ER, at p 987) said:— "The action is maintainable on the ground that the article does not answer the description of that which was sold." And Coleridge J. (1853) 2 El & Bl, at pp 854, 855 (118 ER, at pp 987, 988) said:— "The vendee is entitled to have an article answering the description of that which he bought". So in Gurney v. Womersley [1854] EngR 845; (1854) 4 El & Bl 133 (119 ER 51), where also the action was for money had and received, Wightman J. (1854) 4 El & Bl, at p 142 (119 ER, at p 55) said that the defendants had "professed to sell a genuine bill" and that the bill given "failed in what was the substance of the description". So again in Strickland v. Turner [1852] EngR 199; (1852) 7 Ex 208 (155 ER 919) the case is put by Pollock C.B., who delivered the judgment of the Court, entirely on the ground of failure of consideration. "The money which was paid", he said, "was paid wholly without consideration, and may be recovered back" (1852) 7 Ex, at p 219 (155 ER, at p 924). This language clearly imports the existence of a contract. If there were no contract, there could be no failure of consideration. The case of Scott v. Coulson (1903) 1 Ch 453; (1903) 2 Ch 249 stands on a different footing and belongs to a class of case in which relief is given on equitable grounds.

[408] The observation of Lord Atkin in Bell v. Lever Bros. Ltd. (1932) AC, at p 222 seems entirely appropriate to Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R. 1065). In that case there was a failure of consideration, and the purchaser was not bound to pay the price: if he had paid it before the truth was discovered, he could have recovered it back as money had and received. The construction of the contract was the vital thing in the case because, and only because, on the construction of the contract depended the question whether the consideration had really failed, the vendor maintaining that, since he was able to hand over the shipping documents, it had not failed. The truth is that the question whether the contract was void, or the vendor excused from performance by reason of the non-existence of the supposed subject matter, did not arise in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 E.R. 1065).  It would have arisen if the purchaser had suffered loss through non-delivery of the corn and had sued the vendor for damages. If it had so arisen, we think that the real question would have been whether the contract was subject to an implied condition precedent that the goods were in existence. Prima facie, one would think, there would be no such implied condition precedent, the position being simply that the vendor promised that the goods were in existence. That is the real meaning of the direction of Martin B. to the jury, and so the argument for the defendant, as has already been pointed out, included the proposition that "a vendor of goods undertakes that they exist and that they are capable of being tranferred, although he may not stipulate for their condition" (1853) 9 Ex, at p 107 (156 ER, at p 46). So in Barr v. Gibson [1836] EngR 984; (1838) 3 M & W 390 (150 ER 1196) , where the contract was for the sale of a ship, Parke B. (1838) 3 M & W, at pp 399, 400 (150 ER, at pp 1200, 1201) said:— "And therefore the sale in this case of a ship implies a contract that the subject of transfer did exist in the character of a ship". It should be noted in this connection that in Solle v. Butcher (1950) 1 KB 671, at pp 691, 692 Denning L.J. said that the doctrine of French law, as enunciated by Pothier, is no part of English law. His Lordship was without doubt thinking of the passage quoted from Pothier in a note to the report of the argument in the House of Lords in Couturier v. Hastie (1856) 5 HLC, at p 678 (10 ER, at pp 1067, 1068). Although we would not be prepared to assent to everything that is said by Denning L.J. in the course of this judgment, we respectfully agree with this observation. When once the common law had made up its mind that a promise supported by consideration ought to be performed, it was inevitable that the theorisings of the civilians about "mistake" should mean little or nothing to it. On the other hand, the question whether a promisor was excused from performance by existing or supervening impossibility without fault on his part was a practical every-day question of which the common law has been vividly conscious, as witness Taylor v. Caldwell (1863) 3 B & S 826 (122 ER 309), with its innumerable (if sometimes dubious) successors. But here too the common law has generally been true to its theory of simple contract, and it has always regarded the fundamental question as being: "What did the promisor really promise?" Did he promise to perform his part at all events, or only subject to the mutually contemplated original or continued existence of a particular subject-matter? So questions of intention or "presumed intention" arise, and these must be determined in the light of the words used by the parties and reasonable inferences from all the surrounding circumstances. That the problem is fundamentally one of construction is shown clearly by Clifford v. Watts (1870) LR 5 CP 577.

[409] If the view so far indicated be correct, as we believe it to be, it seems clear that the case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43);(1856) 5 HLC 673 (10 E.R. 1065). does not compel one to say that the contract in the present case was void. But, even if the view that Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 E.R. 1065). was a case of a void contract be correct, we would still think that it could not govern the present case. Denning L.J. indeed says in Solle v. Butcher (1950) 1 KB, at p 692:— "Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake. A fortiori if the other party did not know of the mistake, but shared it". But, even if this be not wholly and strictly correct, yet at least it must be true to say that a party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party. It does not seem possible on the evidence to say that Bowser or Sheehan was guilty of fraud in the sense that either knew at the date of the contract that the Commission had no tanker to sell. And even at the later stage, after the receipt of the message from Misima, it is difficult to impute to them actual knowledge that there was no tanker at Jomard Entrance. The message should have conveyed to them the fact that the only vessel lying in the vicinity was almost certainly worthless, and ordinary commonsense and decency would have suggested that the contents of the message ought to be communicated to the plaintiffs. But the message referred to a "barge type tanker", and it is quite possible that this description would fail to bring home to their minds that there was no tanker. A finding of actual knowledge that they had nothing to sell does not seem justified by the evidence, though it is difficult to credit them at the time of the publication of the advertisements with any honest affirmative belief that a tanker existed. The confusion as to locality in the description advertised is almost enough to exclude the inference of any such affirmative belief. But, even if they be credited with a real belief in the existence of a tanker, they were guilty of the grossest negligence. It is impossible to say that they had any reasonable ground for such a belief. Having no reasonable grounds for such a belief, they asserted by their advertisement to the world at large, and by their later specification of locality to the plaintiffs, that they had a tanker to sell. They must have known that any tenderer would rely implicitly on their assertion of the existence of a tanker, and they must have known that the plaintiffs would rely implicitly on their later assertion of the existence of a tanker in the latitude and longitude given. They took no steps to verify what they were asserting, and any "mistake" that existed was induced by their own culpable conduct. In these circumstances it seems out of the question that they should be able to assert that no contract was concluded. It is not unfair or inaccurate to say that the only "mistake" the plaintiffs made was that they believed what the Commission told them.

[410] The position so far, then, may be summed up as follows. It was not decided in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. Whatever might then have been held on the facts of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065), it is impossible in this case to imply any such term. The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: "Of course, if there is no tanker, there is no contract". They would have said: "We shall have to go and take possession of the tanker. We simply accept the Commission's assurance that there is a tanker and the Commission's promise to give us that tanker." The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified. The Commission contracted that there was a tanker there. "The sale in this case of a ship implies a contract that the subject of the transfer did exist in the character of a ship" (Barr v. Gibson (1838) 3 M& W, at pp 399, 400 (150 ER, at pp 1200, 1201)). If, on the other hand, the case of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) and this case ought to be treated as cases raising a question of "mistake", then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground. There was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there has been a breach of contract, and the plaintiffs are entitled to damages for that breach.

Before proceeding to consider the measure of damages, one other matter should be briefly mentioned. The contract was made in Melbourne, and it would seem that its proper law is Victorian law. Section 11 of the Victorian Goods Act 1928 corresponds to s. 6 of the English Sale of Goods Act 1893, and provides that "where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made the contract is void". This has been generally supposed to represent the legislature's view of the effect of Couturier v. Hastie [1852] EngR 774; [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065). Whether it correctly represents the effect of the decision in that case or not, it seems clear that the section has no application to the facts of the present case. Here the goods never existed, and the seller ought to have known that they did not exist.

The conclusion that there was an enforceable contract makes it unnecessary to consider the other two causes of action raised by the plaintiffs. As to each of these, the plaintiffs would have been, to say the least, faced with serious obstacles. We have already referred to the evidence bearing on the issue of fraud. And the claim based on negligence would have encountered the difficulties which were held by a majority of the Court of Appeal to be fatal to the plaintiff in Candler v. Crane Christmas & Co. (1951) 1 All ER 426.

[411] The question of damages, which is the remaining question, again presents serious difficulties. It is necessary first to arrive at the appropriate measure of damages. The contract was a contract for the sale of goods, and the measure of damages for non-delivery of goods by a seller is defined in very general terms by s. 55(2) of the Goods Act 1928 as being "the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract". This states, in substance, the general prima-facie rule of the common law as to the measure of damages for breach of contract. But, if we approach this case as an ordinary case of wrongful non-delivery of goods sold, and attempt to apply the ordinary rules for arriving at the sum to be awarded as damages, we seem to find ourselves at once in insuperable difficulties. There was obviously no market into which the buyers could go to mitigate their loss, and the rule normally applied would require us to arrive at the value of the goods to the buyer at the place where they ought to have been delivered and at the time when they ought to have been delivered. But it is quite impossible to place any value on what the Commission purported to sell. The plaintiffs indeed, on one basis of claim which is asserted in their statement of claim, assessed their damages on the basis of an "average-sized tanker, 8,000-10,000 ton oil tanker, valued at 1,000,000 pounds, allowing for the said tanker lying on Jourmaund Reef, valued at 250,000 pounds", and, for good measure, they added their "estimated value of cargo of oil" at the figure of 50,000 pounds. But this, as a basis of damages, seems manifestly absurd. The Commission simply did not contract to deliver a tanker of any particular size or of any particular value or in any particular condition, nor did it contract to deliver any oil.

[412] It was strongly argued for the plaintiffs that mere difficulty in estimating damages did not relieve a tribunal from the responsibility of assessing them as best it could. This is undoubtedly true. In the well-known case of Chaplin v. Hicks (1911) 2 KB 786, at p 792 Vaughan Williams L.J. said:— "The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract". That passage, and others from the same case, are quoted by Street C.J. in Howe v. Teefy (1927) 27 SR (NSW) 301, at pp 305-306; 44 WN 102, at pp 103, 104, but the learned Chief Justice (1927) 27 SR (NSW), at p 306; 44 WN, at p 104 himself states the position more fully. He says:— "The question in every case is: has there been any assessable loss resulting from the breach of contract complained of? There may be cases where it would be impossible to say that any assessable loss had resulted from a breach of contract, but, short of that, if a plaintiff has been deprived of something which has a monetary value, a jury is not relieved from the duty of assessing the loss merely because the calculation is a difficult one or because the circumstances do not admit of the damages being assessed with certainty". The present case seems to be more like Sapwell v. Bass (1910) 2 KB 486 than Chaplin v. Hicks (1911) 2 KB 786. And see Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143, per Dixon and McTiernan JJ. It does not seem possible to say that "any assessable loss has resulted from" non-delivery as such. In Chaplin v. Hicks (1911) 2 KB 786, if the contract had been performed, the plaintiff would have had a real chance of winning the prize, and it seems proper enough to say that that chance was worth something. It is only in another and quite different sense that it could be said here that, if the contract had been performed, the plaintiffs would have had a chance of making a profit. The broken promise itself in Chaplin v. Hicks (1911) 2 KB 786 was, in effect, "to give the plaintiff a chance": here the element of chance lay in the nature of the thing contracted for itself. Here we seem to have something which cannot be assessed. If there were nothing more in this case than a promise to deliver a stranded tanker and a failure to deliver a stranded tanker, the plaintiffs would, of course, be entitled to recover the price paid by them, but beyond that, in our opinion, only nominal damages.

[413] There is, however, more in this case than that, and the truth is that to regard this case as a simple case of breach of contract by non-delivery of goods would be to take an unreal and misleading view of it. The practical substance of the case lies in these three factors— (1) the Commission promised that there was a tanker at or near to the specified place; (2) in reliance on that promise the plaintiffs expended considerable sums of money; (3) there was in fact no tanker at or anywhere near to the specified place. In the waste of their considerable expenditure seems to lie the real and understandable grievance of the plaintiffs, and the ultimate question in the case (apart from any question of quantum) is whether the plaintiffs can recover the amount of this wasted expenditure or any part of it as damages for breach of the Commission's contract that there was a tanker in existence. In the opinion of Webb J. it would have been reasonable, and within the proper contemplation of the Commission, that the plaintiffs should take steps, but should do no more than take steps, to see whether there was a tanker in the locality given, and, if so, whether any and what things should be done to turn her to account. And his Honour estimated the reasonable cost of taking such steps at the sum of 500 pounds. This view, however, seems to assume that the plaintiffs would be, or ought to be, in doubt as to whether they really had succeeded in buying a tanker. But they were clearly entitled to assume that there was a tanker in the locality given. The Commission had not, of course, contracted that she or her cargo was capable of being salved, but it does not follow that the plaintiffs' conduct in making preparations for salvage operations was unreasonable, or that the Commission ought not to have contemplated that the course in fact adopted would be adopted in reliance on their promise. It would be wrong, we think, to say that the course which the plaintiffs took was unreasonable, and it seems to us to be the very course which the Commission would naturally expect them to take. There was evidence that salvage operations at the locality given would not have presented formidable difficulties in fair weather. The plaintiffs were, of course, taking a risk, but it might very naturally seem to them, as business men, that the probability of successful salvage was such as to make the substantial expense of a preliminary inspection unwarranted. It was a matter of business, of weighing one consideration with another, a matter of which business men are likely to be the best judges. So far as the purpose of the expenditure is concerned, the case seems to fall within what is known as the second rule in Hadley v. Baxendale [1854] EngR 296; (1854) 9 Ex 341 (156 ER 145). A fairly close analogy may be found in a case in which there is a contract for the sale of sheep, and the buyer sends a drover to take delivery. There are no sheep at the point of delivery. Sheep have not risen in price, and the buyer has suffered no loss through non-delivery as such. But he will be entitled to recover the expense which he has incurred in sending the drover to take delivery: cf. Pollock v. Mackenzie (1866) 1 QSCR 156 , and see also Foaminol Laboratories Ltd. v. British Ortid Plastics Ltd. (1941) 2 All ER 393, esp at p 397.

[414] There is, however, still another question. Mr. Tait not only strongly opposed the view so far expressed, but he also contended that, even if that view were accepted, it still could not be held that the alleged damage flowed from the alleged breach. Let it be supposed, he said in effect, that the plaintiffs acted reasonably in what they did, and let it be supposed that the Commission ought reasonably to have contemplated that they would so act. Still, he said, the plaintiffs are faced with precisely the same difficulty with which they are faced if the case is regarded as a simple and normal case of breach by non-delivery. Suppose there had been a tanker at the place indicated. Non constat that the expenditure incurred by the plaintiffs would not have been equally wasted. If the promise that there was a tanker in situ had been performed, she might still have been found worthless or not susceptible of profitable salvage operations or of any salvage operations at all. How, then, he asked, can the plaintiffs say that their expenditure was wasted because there was no tanker in existence?

The argument is far from being negligible. But it is really, we think, fallacious. If we regard the case as a simple and normal case of breach by non-delivery, the plaintiffs have no starting-point. The burden of proof is on them, and they cannot establish that they have suffered any damage unless they can show that a tanker delivered in performance of the contract would have had some value, and this they cannot show. But when the contract alleged is a contract that there was a tanker in a particular place, and the breach assigned is that there was no tanker there, and the damages claimed are measured by expenditure incurred on the faith of the promise that there was a tanker in that place, the plaintiffs are in a very different position. They have now a starting-point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that this expense would be wasted. The plaintiffs have in this way a starting-point. They make a prima-facie case. The fact that the expense was wasted flowed prima facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non-existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the Commission to complain.

[415] For these reasons we are of opinion that the plaintiffs were entitled to recover damages in this case for breach of contract, and that their damages are to be measured by reference to expenditure incurred and wasted in reliance on the Commission's promise that a tanker existed at the place specified. The only problem now remaining is to quantify those damages, but this is itself a most serious problem, because the evidence is left by the plaintiffs in a highly unsatisfactory state. Whether the evidence has been so left because of the loss of records or because of misplaced confidence in the view that any wrecked or stranded tanker must be worth something like a quarter of a million pounds need not be considered. Two things seem clear, for what they are worth. The first is that the plaintiffs did expend and waste a sum of money very considerably in excess of 500 pounds. The second is that the plaintiffs have, in their statement of claim, and also in their evidence, sought to exaggerate grossly the amount of their claim.

What actually happened may be summarized as follows. The plaintiffs owned a small steam vessel named the Gippsland. This vessel was, at the date of the making of the contract, being refitted in Sydney for trading between Melbourne and King Island. After the making of the contract the plan of refitting seems to have been modified in some respects with a view to making her suitable for salvage work. Certain salvage equipment was purchased and placed on board. A crew was engaged, and Mr. J.E. Johnstone, a shipwright and diver, and an acknowledged expert in salvage work, was also engaged. The ship sailed from Sydney for the supposed locality of the tanker on 28th June 1947. While she was on the voyage north, Mr. Johnstone and a brother of the plaintiffs proceeded together by air to Port Moresby. The ship foundered in the vicinity of Port Moresby on 24th July 1947. Why she took so long to reach this locality from Sydney is not explained, but she appears to have called at Brisbane and other northern ports. No lives were lost when she sank, and the ship's company landed at Port Moresby. Mr. F.E. McRae, one of the plaintiffs, entered into negotiations for the charter of a vessel named the Betty Joan, but in the meantime his brother and Mr. Johnstone went to Samarai and there chartered a boat named the Jessie for the purpose of looking for the tanker. They found, of course, no tanker, and returned to Port Moresby, where they informed Mr. McRae of the position.

[416] The plaintiffs make their claim on the basis of wasted expenditure under ten heads, several of which it is plainly impossible to support at all. The first claim is under the head of "equipment", and relates to certain equipment purchased for the Gippsland. This claim is wholly untenable. Some of the items in it, such as navigating lights and signalling lamps, are ordinary necessities of a ship's equipment, and some were purchased months before the date of the contract. But in any case this was all capital expenditure represented by acquired assets, and it is out of the question to claim it as damages. One would assume, though there is no clear evidence on the matter, that it was covered by insurance.

The second claim is under the head of "reconditioning", and refers to work done on the Gippsland herself. Again it is plain that this claim must be wholly disallowed. About one-third of the amount claimed proves to relate to work done long before the date of the contract, but again the whole of it is capital expenditure.

[417] The third claim is of a different character and does not relate to actual expenditure at all. It is made under the head of "loss of revenue", and represents the profit which the Gippsland might have been expected to make if she had not been devoted to the futile tanker enterprise. As framed, this claim was based on the profit anticipated as likely to accrue from the use of the vessel under a contract with a company called King Island Scheelite No Liability. In April 1947 no contract with that company had been concluded, but negotiations were proceeding for the use of the vessel in trading between King Island and Melbourne. Mr. Laird, the witness who gave evidence for the plaintiffs on these matters, said that in consultation with Captain Guthrie he had estimated that, if the last offer of the King Island company had been accepted, a profit of 75 pounds per week would have been realized, and he said or implied that that offer would have been accepted if better terms could not have been obtained. On this basis the claim ultimately put forward under this head was for 1,050 pounds, a sum which represents 75 pounds per week for fourteen weeks. Put baldly as a claim for this estimated loss of profit as such, the claim might be thought to be in its nature too remote, and in its amount conjectural to a degree. But the plaintiffs would be entitled to include in their damages the daily value of their vessel for a period which would not be excessively estimated as ten weeks, and the estimate based on Mr. Laird's calculations may be used as a basis — though it can only provide a rough and approximate basis — for arriving at this daily value. It would appear from cross-examination that the estimate was made after taking into account the obvious physical contingencies, but it has, we think, to be substantially discounted for the contingency of the ship being idle for part of the period. There is no evidence as to her earnings in the past. To allow 50 pounds per week does not seem unreasonable, and at that rate the plaintiffs should be allowed 500 pounds under this head.

The next four heads of claim are heads under which we think that the plaintiffs are entitled to recover damages. But, whereas one would have expected that the claim in each of these four cases would be capable, if not of precise computation, at least of a close approximation, we find that the evidence is for the most part of the vaguest kind. In most cases it is not possible to do more than make an estimate as best one can.

The fourth claim is made under the head of travelling expenses. It is difficult to avoid the conclusion that better evidence could have been given about this. It is said by Mr. Laird to include 200 pounds for the cost of searching for the wreck, and, as such, may be taken to include the cost incurred by McRae and Johnstone in going from Port Moresby to Samarai and the hire of the Jessie. We know also that McRae and Johnstone travelled by air from Melbourne to Port Moresby, and it seems proper to allow a further sum of 200 pounds in respect of this expense. Beyond this, either the evidence is too vague to justify any claim or it shows that the claim is unjustified or made under another head. The plaintiffs should recover 400 pounds under this head.

The fifth claim is made under the head of "Ship's Stores, etc." The plaintiffs would, we should think, be entitled to the value of coal and other stores consumed before the Gippsland foundered but not for what went down with the ship. So far as coal is concerned, an invoice in Exhibit NN shows that about sixty tons was loaded at Bowen at a cost of about 100 pounds, and a note on the invoice states that the balance on board when the ship went down was twenty-five tons. Since Bowen is about half-way between Sydney and Port Moresby, this probably justifies an estimate that the ship had used about seventy tons between leaving Sydney and foundering and an allowance of 120 pounds for coal consumed may be made. Beyond this, there is no real material on which to found any estimate. Exhibit NN consists simply of a mass of invoices, which include a host of articles which are not ship's stores in any relevant sense, and for which no claim could be made. The best that can be done seems to be to make a rough man-day estimate for two months, and allow (say) 720 pounds. We would allow 840 pounds under the fifth head of claim.

[418] The sixth head of claim relates to special expenses of Mr. Johnstone, which are itemised in Exhibit PP. The account has only been paid in part by the plaintiffs. Mr. Johnstone's travelling expenses have already been allowed at 100 pounds under the fourth head of claim. It is not clear why he spent eight weeks in Port Moresby, though the amount claimed in respect of these eight weeks seems moderate enough. He had some undefined financial interest in the venture, and no clear evidence was given as to his contract or arrangement with the plaintiffs. Mr. Johnstone, however, had very special qualifications and experience in matters of salvage. It was certainly reasonable to engage his services, and his claim cannot be narrowly scanned. The sum of 400 pounds should be allowed under this head of claim.

The seventh head of claim relates to "crew's wages". Here at last we get something like definite evidence, though it reveals that the amount of the claim is again exaggerated, and the evidence is still defective. However, it finally appeared from evidence given by Captain Guthrie that a total sum of 1,400 pounds was paid in wages. This sum apparently includes Captain Guthrie's own salary, and it covers a period commencing on 13th November 1946 and ending on the dates on which the members of the crew arrived back at their home ports. But, while this figure may be taken to represent the whole wages bill of the Gippsland for the period mentioned, it cannot be taken to mean that all the members of the crew who sailed from Sydney were paid from 13th November 1946, because Captain Guthrie gave the monthly rate of pay of each man, and, if every man were paid at the rate stated for the whole period mentioned, the total sum paid would be very much larger than 1,400 pounds. The monthly rates of pay given by Captain Guthrie seem reasonable and it seems proper to allow a wages bill at those rates for two months. On this basis we arrive at a figure of 768 pounds.

Nothing can be claimed under either of the next two heads of claim. The eighth is "Claims by Crew" and represents amounts claimed by the crew in respect of clothing and other property lost when the ship foundered. These claims appear to have been, in part at least, covered by insurance and met by the insurers, but the Commission cannot in any case be responsible for consequences of the sinking of the ship. The ninth claim is for insurance premiums. The carrying of insurance is an ordinary incident of the ownership and operation of a ship, whatever she is doing. The tenth and last claim is for 150 pounds for office expenses. It seems reasonable to suppose that some office expenses were incurred and wasted, and, though nothing much better than a guess is possible, it is probably fair enough to add 100 pounds for these.

[419] The total amount now arrived at is 3,008 pounds, and we may fairly take the figure of 3,000 pounds as representing, as nearly as can be estimated on the very defective evidence, the loss suffered by the plaintiffs for which damages are recoverable. To this must be added the sum of 285 pounds paid by the plaintiffs.

For convenience we have throughout treated the Commission as the party responsible to the plaintiffs. But, in our view, the cause of action lies in contract, and reg. 7 of the National Security (Disposal of Commonwealth Property) Regulations provides that the Commission may make contracts on behalf of the Commonwealth. Accordingly we think that the judgment should be against the Commonwealth.

The appeal should be allowed and the judgment of Webb J. set aside. In lieu thereof there should be judgment for the plaintiffs against the Commonwealth for the sum of 3,285 pounds as damages for breach of contract. There is no reason why the plaintiffs should not have the full costs of the appeal. With regard to the costs of the action, Webb J. gave no reasons for allowing the plaintiffs only one-half of their costs, but it was doubtless because he considered that the costs had been increased by the raising of matters (whether technically "issues" or not) on which the plaintiffs had failed and by the generally extravagant nature of their claim. We think that the costs may have been to some extent increased by the raising of unjustifiable claims. On the other hand, the whole case was one of very exceptional difficulty, the plaintiffs were fully justified in raising alternative bases of claim, and the extent to which costs were necessarily increased by the claim based on the supposed value of a tanker and by the unwarranted claims in respect of expenditure would be proportionately very small and hardly such as, in our opinion, to justify any attempt to apportion costs either by direct order or on taxation. It may be added that the conduct of the Commission's officers throughout, including their attitude when a claim was first made, is not such as would incline any court readily to exercise any discretion in favour of the defendants. We think that the plaintiffs should have their costs of the action. The cross-appeal should be dismissed with costs.

[420] McTIERNAN J. I concur in the conclusions that there was a contract, that it was not void for mistake and that the plaintiffs should recover from the Commonwealth Disposals Commission the sum mentioned in the order of the Court as damages for breach of the contract; that the appeal should be allowed and the cross-appeal dismissed, in each case with costs.

ORDER

Appeal allowed with costs. Discharge judgment of Webb J., and in lieu thereof adjudge that plaintiffs do recover from the defendant Commonwealth of Australia the sum of 3,285 pounds as damages for breach of contract. Order that defendant Commonwealth pay plaintiffs' taxed costs of action. Cross-appeal dismissed with costs.

Aleyn 26
82 Eng. Rep 897 (K.B. 1647)

PARADINE
v.
Jane.

King’s Bench Division.
March 26, 1647.

Debt.

In debt the plaintiff declares upon a lease for years rendering rent at the four usual feasts; and for rent behind for three years, ending at the Feast of the Annunciation, 21 Car. brings his action; the defendant pleads, that a certain German prince, by name Prince Rupert, an alien born, enemy to the King and kingdom, had invaded the realm with an hostile army of men; and with the same force did enter upon the defendant's possession, and him expelled, and held out of possession from the 19 of July 18 Car. till the Feast of the Annunciation, 21 Car. whereby he could not take the profits; whereupon the plaintiff demurred, and the plea was resolved insufficient.

1. Because the defendant hath not answered to one quarters rent.

2. He hath not averred that the army were all aliens, which shall not be intended, and then he hath his remedy against them; and Bacon cited 33 H. 6. 1. e. where the gaoler in bar of an escape pleaded, that alien enemies broke the prison, etc. and exception taken to it, for that he ought to shew of what countrey they were, viz. Scots, &c.

3. It was resolved, that the matter of the plea was insufficient; for though the whole army had been alien enemies, yet he ought to pay his rent. And this difference was taken, that where the law creates a duty or charge, and the party is disabled to perform it without any default in him, and hath no remedy over, there the law will excuse him. As in the case of waste, if a house be destroyed by tempest, or by enemies, the lessee is excused. Dyer, 33. a. Inst. 53. d. 283. a. 12 H. 4. 6. so of an escape. Co. 4. 84. b. 33 H. 6. 1. So in 9 E. 3. 16. a supersedeas was awarded to the justices, that they should not proceed in a cessavit upon a cesser during the war, but when the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. And therefore if the lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it. Dyer 33. a. 40 E. Ill. 6. h. Now the rent is a duty created by the parties upon the reservation, and had there been a covenant to pay it, there had been no question but the lessee must have made it good, notwithstanding the interruption by enemies, for the law would not protect him beyond his own agreement, no more than in the case of reparations; this reservation then being a covenant in law, and whereupon an action of covenant hath been maintained (as Roll said) it is all one as if there had been an actual covenant. Another reason was added, that as the lessee is to have the advantage of casual profits, so he must run the hazard of casual losses, and not lay the whole burthen of them upon his lessor; and Dyer 56. 6. was cited for this purpose, that though the land be surrounded, or gained by the sea, or made barren by wildfire, yet the lessor shall have his whole rent: and judgment was given for the plaintiff.

Case 215.—

SAVILE
versus
SAVILE

[1721]
Lord Chancellor Macclesfield.
2 Eq. Ca. Ab. 679, pl. 4.

Purchaser before a Master submitting to forfeit his deposit, not bound to proceed in the purchase.

In this cause there was a decree (inter al.) for the sale of Halifax-house in St. James's Square, to the best purchaser before the Master, and Thomas Frederick esq. was reported the best bidder at £10,500, having made £1000 deposit.

On the days of petitions after Hilary term it was prayed, that Mr. Frederick might compleat his purchase, and pay the remainder of the purchase-money; upon which Mr. Frederick by his counsel declared that he elected to lose his deposit.

But the Lord Nottingham grandfather and guardian to the young ladies the plaintiffs (who were the daughters and co-heirs of William late Lord Marquis of Halifax by Lady Mary Finch) insisted, that Mr. Frederick being the best bidder ought to pay the residue of the purchase-money, and being present himself, urged, that this contract, since it was made with the court in trust for the plaintiffs, could not (as he thought) be discharged upon any other terms, than payment of the residue of the purchase money: that had it been the case of a private contract between party and party, and so much money paid as earnest, there could be no reason to imagine, that because the intended purchaser paid so much by way of earnest, therefore he should be at liberty to get off from the bargain by losing his earnest; and surely the contract made with the [746] court was at least as strong as if made with the party; that if there had been no deposit, it would hardly have been a question but that the party should have been compelled to pay the whole purchase-money, and could it be imagined that the contract was the weaker because there was a deposit? This would be inverting the very sense and meaning of the parties, and to construe that a deposit should weaken instead of strengthening the contract: that forfeiting the deposit was surely the most unequal way that could be: for it made no alteration, whatever the deposit was, whether greater or smaller; and therefore in the case of Morrett v. Bennett,^[1] where the deposit was ten thousand pounds, the whole deposit was forfeited, and if in that case it had been but one thousand pounds, yet only so much as had been deposited could be forfeited; from whence it seemed, that as the deposit might bear a very great disproportion to the value of the estate, it could consequently be no proper measure of satisfaction to the seller, for the buyer's receding from his contract; that as the seller was bound to sell, so ought the tie to be mutual upon the buyer also.

Lord Chancellor took notice that more had been urged by the Lord Nottingham than he had ever heard on this subject, but that he had taken good advice and well considered before he made the like order in the other cases: that according to his apprehension, a court of equity ought to take notice under what a general delusion the nation was at the time when this contract was made by Mr. Frederick, when there was thought to be more money in the nation than there really was, which induced people to put imaginary values on [747] estates: that as upon a contract betwixt party and party, the contractor would not be decreed to pay an unreasonable price (see Day v. Newman, 2 Cox, 77) for an estate, so neither ought the court to be partial to itself, and do more upon a contract made with itself, or carry that farther, than it would a contract betwixt party and party. On the other hand the court might be said to have rather a greater power over a contract made with itself than with any other.

That the deposit was supposed to he a proper pledge for securing the seller in case the intended purchaser should afterwards go off; and had it not been sufficient, the other side might have moved to have such deposit increased; but being thought a sufficient pledge, it was punishment enough if the party that made it was to lose it, and satisfaction enough to the seller, if he was to have the benefit of keeping the deposit: that in this case the deposit was near a tithe of the purchase-money; so that if the seller could get as much within £1000 of any other purchaser, he would be no loser; and if he could not get so much within £1000 then it would appear to be dear sold; and consequently a bargain not fit to be executed by this court: that the court had made several orders in cases of this nature, attended with stronger circumstances; as where the estates were greatly incumbered, and the creditors would lose their debts if the bargains did not proceed; but an hardship ought not to be decreed against one, in order to prevent its falling upon another: and if those orders should be discharged, whereby others got off from contracts by losing their deposits, it would make great confusion; and their money must be brought again into court. The best way certainly was, for the court to be uniform in its resolutions.

[748] Wherefore it was ordered that Mr. Frederick should lose his deposit of £1000 and be discharged of his contract.^[2]

[1] Determined in this court some little time before; as was also the case of Dr. Tennison v. Lord Bulkley: in both which cases the best bidders upon losing their deposits were discharged of their contracts.

[2] But this is not the general law of the Court: and the decision was probably founded on the general delusion of the times, as taken notice of by Lord Macclesfield. Crutchley v. Jerningham, 2 Mer. 506. So where a bond is given for performance of a contract, the obligor cannot vacate his contract on payment of the penalty of his bond, Prebble v. Boghurst, 1 Swan 318.

El. Bl. & El. 765
120 Eng. Rep. 695
ISABELLA HALL
v.
GEORGE WRIGHT.
IN THE EXCHEQUER CHAMBER.
November 26th, 1859. 

For note see ante, p. 746.

[For note see El. Bl. & El. 746.]

The plaintiff having appealed against the above decision, the case was argued in the Exchequer Chamber in Hilary Vacation, 1859^[1].

[120 Eng. Rep 696] Mellish, for the appellant (plaintiff below). On the record and postea it must be taken that the plaintiff, at the expiration of a reasonable time, gave notice to the defendant of her readiness to marry him, and that he did, not, before the commencement of the action, give her any notice of his illness. Now the plea does not allege incurable illness. [Pollock C.B. What is the meaning of the words "unfit for the married state?”] The Judges of the Court of Queen's Bench interpreted those words in different senses. But the plea alleges only unfitness arising from disease producing bleeding from the lungs, and consequent incapacity for marriage without danger to the life of the defendant. A consumptive patient is frequently deceived as to the state of his health. The contract cannot be avoided by a fact not known to either of the contracting parties. But the plea does not shew that even the defendant, when he broke off the contract, knew of the facts alleged. [Pollock C. B. Where a contract is such that, from its nature, it is subject to implied exceptions, it need not be shewn that it was [El. Bl. & El. 766] made with such exceptions. Crowder J. If a man undertakes to paint a picture, and then becomes blind, is he not within such an exception?] Here nothing appears to raise more than an excuse for postponing performance. A man might be taken ill with the scarlet fever on the day immediately preceding the day fixed for the marriage; that might excuse the immediate performance, but would not justify a complete breach of the contract. Suppose a person engaged to sing at a theatre catches cold, so as to incapacitate him from singing, he may be excused from singing while the incapacity continues; hut this would not justify his renouncing the contract; and, if he did so renounce, the party with whom be contracted might sue immediately; Hochster v. De La Tour (2 E. & B. 678). The plea is, as Crompton J. pointed out, in confession and avoidance: it therefore admits an absolute breach: and it must justify all that could be proved under the declaration: and the declaration therefore cannot be understood as merely complaining of a breach at a particular time, nor the plea as pleaded in respect of such limited breach. And the justice of this construction appears from this: that, if the plea had addressed itself to a particular time, the plaintiff might have new assigned. The plaintiff had a right to require that the two should remain in the relation of engaged parties: it is a breach to destroy that relation. In Wild v. Harris (7 Com. B. 999) the record shewed that the parties contracted to marry in a reasonable time, and that, at the time of the contract, the defendant was married, which the plaintiff did not know: and it was held that the consideration was sufficient, inasmuch as the plaintiff had engaged to remain single, and that the action lay for [El. Bl. & El. 767] breach of the contract. Here, whatever right the plaintiff might have to put an end to the contract, the defendant had no such election. Suppose a master to call tract to navigate a ship in the English Channel and thence to the West Indies; and that he afterwards finds himself in a state which incapacitates him from navigating to the West Indies, but not from navigating in the Channel: the other contractor may, if he pleases, renounce the contract: but can he not call on the master to navigate in the Channel? The incapacity merely brings the case within the rule laid down in Paradine v. Jane (Aleyn, 26): a contractor may, by the common law, break his contract; but he must pay damages for doing so. Besides, it does not appear here but that the defendant brought the incapacity on himself: if so, he cannot set it up for a defence any more than he could set up his having been married to another woman at the time of the contract with the plaintiff, and the consequent inability to perform the contract. [Pollock G.B. In Wild v. Harris (7 Com. B. 999) was the action for not performing the contract, or for making it when defendant knew that he could not perform it?] It was for not performing the contract. [Bramwell B. It would be absurd to say that he had contracted subject to the condition of his not being married.] The law of England differs, as to the marriage contract, from the foreign law: this sufficiently appears from the comment of the Lord Chief Justice on the passage which he cites from Pothier. The law as to contracts in general is shewn by Barker v. Hodgson (3 M. & S. 267): the impossibility of performing a contract does not relieve the contractor from paying damages for the breach, though illegality would do so. There [El. Bl. & El. 768] are many decisions, all the subject of mercantile contracts, to the same effect. [Pollock C.B. Suppose the impediment; arose on the part of the plaintiff.] That would furnish an answer to the action. [Cockburn C. J. Suppose the woman broke the contract, on the ground that she had a disease which would make marriage fatal to her, though not one which would make her incompetent fur marriage.] Perhaps it might be said that she was not bound to destroy herself: but the excuse must at least be [120 Eng. Rep. 697] grounded on facts which would afford a valid cause for separation. On the other side, reliance is placed on Atchinson v. Baker (2 Peake's N. P. C. 103). There the defendant, a woman, refused to perform the contract of marriage because she discovered that the plaintiff had an abscess in his breast. The defendant, at her option, might insist on the objection. The decision, however, was simply on the ground of a variance. In 1 Rol. Abr. 450, Condition (G.), pl. 10, it is said: "Si home covenant de edifier un maison devant tiel jour, et puis Ie plague est la devant le jour, et continue la tanque apres le jour, ceo excusera luy del breach del covenant pur non fesans de ceo devant le jour, car la ley ne voilt luy compell a venture son vie pur ceo, mes il doit ceo faire apres;" and for this reference is made to a case of Hil. 8 Ja.; Lawrence v. Twentiman (1 Rol. Abr. 450). It may be doubted whether that is good law. The question was only as to the necessity of performing the contract at the time named: and it appears to have been held that time was not of the essence of the contract; but at common law it is so.

Edward James, contra. The contract of marriage is [El. Bl. & El. 769] peculiar; and no analogy is supplied by decisions upon commercial contracts. Indeed it seldom is made by express words. The question here is, What are the implied and inherent conditions of the contract? Is it not one of those conditions that, if either party becomes, by the act of God or of law, incapable of performing the contract, the performance is excused? The defendant does not ask to be exonerated from the contract: he says that the contract is not to marry under such circumstances. The condition is as much a part of the contract as the condition that the parties shall live. In Co. Lit. 205 b. Lord Coke, after stating that the intent and true meaning of conditions upon which feoffments are made shall be performed, goes on to distinguish them from a "condition of an obligation, recognizance or such like;" and he shews that, though an impossibility subsequently arising does not defeat an estate which has been vested by a conditional feoffment^[2], an obligation is saved by such subsequent impossibility. And the principle appears to be allowed, as applicable to contracts to marry, in the judgment of Lord Campbell C.J. below. I t is also in conformity with the authorities cited below by Erle J. [Martin B. A man cannot himself set up as a defence that he is of a brutal temper.] The reason of that is, that he is not allowed to take advantage of his own wrong, and therefore cannot plead such matter: but, if it could be pleaded, it would be an excuse. It is law that a man cannot marry his father's wife's daughter: if a man contracts with a woman whose mother his father afterwards marries, is the contract in force? [Willes J. If you look at Burn's Eccl. L., vol. 2, p. 440, title Mar [El. Bl. & El. 770] riage, I., you will find that the illegality is only in marrying such a daughter if she is his father's offspring^[3] in which case the marriage is voidable (though not void, as in the case of marriage with a grandmother): if she is his stepmother's daughter by a former husband, there is no illegality.] There is a fallacy in treating this as a plea in confession and avoidance: no breach is confessed; it is only shewn that the conditional contract fails by the failure of the condition. It is said that sexual intercourse is not the only object of marriage; and that is so; in the Digest, lib. 50, t. 17, s. 30, it is said, "Nuptias non concubitus, sed consensus facit:" but it is at least an essential part of the contract. If, after marriage, it turned out that the husband had been throughout incapable in this respect, the wife might, not get the marriage dissolved, but have it declared null ab initio. Suppose the woman, after marriage, refused the conjugal rights to the husband on the ground that the exercise of them would endanger her life: there might in that case be a sentence of divorce, according to the ecclesiastical law. It is to be observed here that the plea is not so narrow as an averment of incapacity to procreate: it avers that the defendant is "incapable of marriage without great danger of his life." Can the contract be understood as extending to such a case? [Pollock C.B. A man may endanger his life by serving his country as a soldier, or by sitting by the bed of a dying friend, or by going up in a balloon. But perhaps you may say that a man is not to attempt his own life under such circumstances that, if the attempt succeeds, it will be self-murder.] It is urged that the party contracting, if he cannot perform the contract, must pay damages for the breach. [Pollock, C.B. The [El. Bl. & El. 771] question is, what is the contract?] That is so. Suppose a man promises to marry on a given day, and on that day is unable to leave his bed. In Sparrow v. [120 Eng. Rep. 698] Sowgate (1 (W.) Jones, 29) a bond was conditioned that defendant, who had become bail for R. in an action of debt by plaintiff against R., would, if R. was convict in the action, and did not pay the sum adjudged or render himself to prison, pay the sum; and plaintiff recovered against R., who did not pay or render himself: defendant pleaded that R. died after judgment and before any ca. sa. issued; and this was held a good plea on demurrer. In Williams v. Lloyd (1 (W.) Jones, 179) plaintiff declared that he delivered a horse to defendant, who promised to redeliver it on request; that defendant had been requested to redeliver, but refused: defendant pleaded that the horse died before the request: and this was held a good bar. The passage cited from 1 Rol. Abr. 450, by Lord Campbell C.J. is allowed by him to be law, though the reason which he gives is questionable. It is not that time is not of the essence of the contract, but that the law will not compel a party to venture his life. Time is of the essence of the contract, as much as in the case of a bond to pay on a certain day, where payment after the day was no defence before stat. 4 Ann. c. 16, s. 12. (He also referred to Mortimer v. Mortimer (2 Hagg. Con. C. C. 310).)

Mellish, in reply. The rule as to conditions is inapplicable to promises or covenants: the true effect of a condition, properly so called, appears from Com. Dig. Condition (B 1). The principle of the decision in Sparrow v. Sowgate (1 (W.) Jones, 29) is that the obligor was bound only to place the obligee in the same position as he [El. Bl. & El. 772] would have been in if R. had been arrested: now the obligee was in the same position as he would have been in if R. had died in prison. So in Williams v. Lloyd (1 (W.) Jones, 179) the plaintiff was as well off as he would have been if the horse bad been redelivered and had afterwards died. The argument on the other side passes over the fact that the defendant confesses that he refused to marry. That is a general refusal to marry in a reasonable time. [Bramwell B. I understand the plea to mean that the defendant was incapable for an indefinite time.] That seems to be extending its language. [Bramwell B. If a man were incapable for a limited time only, would that support the plea? Willes J. Perhaps he ought to have pleaded that he did not bring the incapacity on himself.] It is dangerous to refine upon the meaning of a contract so well known to the common law. [Willes J. as early as 10 W. 3 a man recovered large damages against a woman for a breach of promise to marry; and this Court refused to grant a new trial on the ground of excessive damages^[4].]

Cur. adv. vult.

On this day, there being a difference of opinion on the Bench, the learned Judges delivered judgments seriatim.

Watson B. This was an appeal from the judgment of the Court of Queen's Bench, in which judgment was for the defendant.

The question turns on a special plea. The action was for breach of promise of marriage; in which the [El. Bl. & El. 773] declaration alleged that the defendant promised to marry the plaintiff within a reasonable time, that a reasonable time had elapsed, and that the defendant had refused. The plea was, That, after making the agreement and before any breach thereof, the defendant became and was, and thence forward hitherto has been, and still is, afflicted with a dangerous bodily disease, which has caused frequent and severe bleedings from his lungs; by reason of which disease the defendant then became, and was thence, and hath hitherto been, and still is, incapable of marriage without the greatest danger to life, and therefore unfit for the marriage state: whereof the plaintiff had notice. In the argument at the bar in this Court, and at the bar and on the Bench in the Court below, much discussion took place as to what was the meaning and effect of the plea.

The plea is an excuse: viz. that, before breach, and up to the time of the commencement of the action, the defendant was afflicted by a dangerous bodily disease, and therefore "incapable of marriage," and therefore "unfit for the marriage state." The plea does not properly confess any breach of the promise. This question before us arises after verdict; and every intendment is to be made so as to support the plea if possible. The terms are twofold. "Incapable of marriage" may mean two things, either incapable of going through the ceremony of marriage, or incapable of performing the functions required ill the married state. In either view of the case I think the plea good. Certainly these words may be considered to apply to the ceremony of marriage; and then the defendant is not to pay damages by reason of a physical [120 Eng. Rep. 699] inability. The latter words "unfit for the marriage state," means the want of that which, as Lord [El. Bl. & El. 774] Stowell expresses it, is a competency "to perform the duties which the married contract enjoins;" Greenstreet v. Cumyns (2 Phiill. Ca. Ecc. 10). The words "fit," or "not fit," seem to be the apt words to express this state in proceedings in the Ecclesiastical Court; Sparrow v. Harrison (3 Curt. 16). Marriage according to our law, as decided in the House of Lords, was a contract requiring a religious ceremony to its validity^[5]. Now, according to the rubric, the parties are to declare at the altar that there is no lawful impediment to the marriage, and that with reference to the object and purposes of marriage as there stated. This is declared to be the law of the Church. Here the parties in this case could not without a falsehood make such a solemn declaration. It would be no answer to say that, by modern legislation, the parties may marry otherwise than according to the rubric; for we are now declaring what is the contract of marriage. Supposing, this marriage being performed, the wife may at any distance of time, presently or at a future time, have a decree declaring the marriage to be void, it seems to be strange that a man is liable in damages for not doing that which is against law, human and divine. The real ground of my opinion is that this contract, is, like many other contracts, subject to conditions incident to their nature; amongst others, that the parties remain in health to undergo the ceremony, and do not become "unfit" for marriage, and that the circumstances should not render it contrary to law.

It was conceded, on the argument and in the Court below, that insanity of mind would be an excuse, and that the insane person would not be responsible in [El. Bl. & El. 775] damages. If so, why not insanity of body? In each case, as alleged, he is to answer in damages for not marrying; in each case the marriage is void; Parmeter v. Parmeter^[6]; in each case it is no act of the defendant, but the act of God. It is not a dissolution of the contract, except at election, such as the man refusing to marry on the score of the want of chastity of the intended wife.

With this view of the plea, it is clear that the allegation of notice was immaterial and need not be proved.

In this declaration it is said the defendant "refused to marry." This is explained by this: that this, by itself, constituted no breach before the defendant's illness; and it shews that before the reasonable time had elapsed he was attacked by the disease. If so, then the reasonable time had not elapsed. The term "reasonable time" refers to health under all the circumstances.

The cases cited in the Court below have little or no application in my view of the case: viz. of Paradine v. Jane (Aleyn, 26), a covenant to repair a house; or, 1 Roll. Abr. p. 450, pl. 10, to build a house; or, Co. Litt. 209 a., to enfeoff a stranger; or to load a ship; Baker v. Hodgson (3 M. & S. 267). In these and in all like cases the covenantor or promisor agrees to do the acts, or that the acts shall be done, unconditionally and at all events; and for this he is liable if living, or his real or personal representative, as the case may be, having assets. It is clear that in one respect death dissolves the contract to marry; Chamberlain v. Williamson (2 M. & S. 408). [El. Bl. & El. 776] The performance of such contracts is stilI subject to be excused by subsequently becoming illegal.

An argument was relied on, that this promise might have been made with the knowledge of defendant's infirmity. To this there are two answers: first, the plea alleges that the infirmity arose after the promise of marriage; secondly, it must from the declaration be taken to be a contract of marriage of the ordinary kind, with all its usual obligations and incidents. If it had been otherwise it should have been so alleged.

I think the judgment of the Court below should be affirmed.

Martin B. then read the judgment of

Bramwell B: In this case the verdict should be entered for the defendant, if so much of the plea as is proved is an answer to the breach of contract complained of. The averment of notice was not proved: but that is immaterial, unless the plea, with or without it, is bad. It is good if it justifies the breach complained of. It is good, therefore, if it justifies the not marrying (for a refusal to marry is not marrying) at [120 Eng. Rep. 700] the time when, but for the reason alleged, the defendant ought to have married. What are the consequences, whether the contract is rescinded or whether the defendant is liable to marry at some other time, or what else may result, I will advert to hereafter. At present, the question is, Does the plea justify the particular breach alleged? Now the plea alleges that, before and at the time of the breach, the defendant was afflicted by bodily disease which made him incapable of marriage without great danger of his life, and unfit for the married state. The question [El. Bl. & El. 777] was at first argued as though this meant an unfitness for sexual intercourse: but Mr. James said it meant, and it appears from the judgment of Erle J. to mean, not only that, but also an incapacity to bear the fatigue and excitement of the marriage ceremony. It was proved to be true in both its meanings. I think either matter a justification for not marrying.

But it is necessary to examine both; as some seem to consider the plea merely to mean unfitness for the ceremony of marriage, others the other unfitness I have mentioned. As neither fraud nor illegality is alleged, the excuse for not performing the contract must be found in the terms of the contract itself. The plea therefore assumes that it is a term of the contract declared on, that, in the event named in the plea, the defendant should be excused from marrying: and, as there is no reason why such term should be in this particular contract unless it is in all such contracts, the question is reduced to this: Is it a term in an ordinary agreement to marry that, if the man from bodily disease cannot marry without danger to his life, and is unfit for marriage from the cause mentioned at the time appointed, be shall be excused marrying then? The plea assumes it is. I think it is. Of course I admit that parties might stipulate otherwise; but, if they do not, I think they are implied terms of the ordinary contract.

I quite agree that, where parties can make their own terms, the law ought not lightly to imply any. But there are instances in which it is done from the necessity, or almost necessity, of the case; and, if ever it is reasonable to do it, it is in the contract to marry. Consider how it is made, and how it is proved; made without formality, usually without witnesses, perhaps without [El. Bl. & El. 778] the word itself being used, or any word of contract, an understanding between the parties, rather than a bargain; come to, at least very often, in a state when the feelings are much excited; proved by a variety of acts and conduct which assume the contract to exist. It seems unreasonable to deal with it as with a contract for sale of goods or other business transaction, though, no doubt, the same principle governs both. "All these contracts ought to be looked upon (as Lord Hardwicke said, in the case of Woodhouse v. Shepley (2 Atk. 535)) with a jealous eye." "They are liable to many mischiefs; to many dangerous consequences." Per Lord Mansfield, in Lowe v. Peers (4 Burr. 2225, 2230). These mischiefs and dangers would be greater if the engagement was taken to be unconditional and unqualified. That terms are implied in contracts is admitted. Contracts for personal service, for matters dependent on personal capacity, as to write a book or paint a picture, are conditional on the continuance of the ability, mental or corporeal, to perform them. This very contract to marry has an implied condition that the woman shall continue chaste. Other instances might he given. Similar considerations make me think such conditions, then, as the plea assumes, are to be implied in the ordinary contract to marry. Surely, if a man said to a woman, "I have promised to marry you, and must and will, but will never live with you or treat you as a wife," he would not be offering, but refusing, to perform his contract; Leeds v. Cook (4 Esp. 256). The contract is a contract to marry and perform the duties of marriage. I think it better to recognise what we all know exists, and to assume it exists for a good purpose, than to affect to [El. Bl. & El. 779] ignore it. Besides, there is abundant warranty for so doing. The marriage of an impotent man is null; and two of the three reasons for matrimony given in the marriage service involve the capacity for sexual intercourse. Can it be doubted, then, if death were the certain result of the fatigue and excitement of the ceremony, that the defendant would be excused, or that impotency supervening on the promise would excuse him? Could he be bound, in performance of his promise, to commit suicide, or go through a ceremony which would be a nullity? But, if the certainty of a fatal result would excuse, so would great danger of it. If impotency would, so surely should great danger; if death from the exercise of capacity, more so. I desire to speak with all reserve: but to possess the lawful means of gratifying a powerful passion with the alterna [120 Eng. Rep 701] tive of abstaining or periling life is indeed to incur a risk of "intense misery instead of mutual comfort:" and it does seem to me, with great respect, a great mistake to lose sight of these considerations, and suppose happiness can be found in such a marriage by the gratification of an innocent desire to enjoy the consortium vital with the man, obtain rank and station as his wife, and be dowable of his lands. Moreover, this is to think only of the woman and not of the man, who might object that her wishes, however innocent, were very unreasonable towards him in wishing him to put himself in the temptation of perilling his life; and be might even doubt the innocence of such a desire, certainly, of wishing him to go through a ceremony which might be fatal to him.

This suggests the following. If the man is not excused, but bound, is the woman bound in such a case? Impossible, one would think. But, if not, it [El. Bl. & El. 780] must be on account of some implied condition in the contract. It is not as though the man was in default. She could not refuse to marry, in such a case, on the ground that he had broken his contract by not continuing fit for marrying. For, if so, she might not only refuse to marry him, but maintain an action against him for becoming unfit. That cannot be: he does not thereby break his contract; yet she is excused. If so, so must he be; for, if without default of one party to a contract the other has a right to refuse to perform on the happening of a certain event, it must be assumed, till the contrary appears, that right is common to both. If in such case she could rely on an implied condition to excuse her marrying him, why may not be on one to excuse his marrying her?

The contract to marry bas been assimilated to those to which it bears no resemblance. A man contracts to load a ship, and cannot. Well, that is his misfortune; a loss will be sustained by him or the shipowner; and it is convenient that, if he puts no condition in his contract, none should be implied, and that, if his contract is unconditional, he should bear the loss consequent on his non-performance. So of a contract to sell corn. But in the case of a contract to marry, with supervening impotency, there is a loss which must fall on both, whether the contract is fulfilled or not. It seems to me, then, that sexual intercourse is contemplated by parties who agree to marry as an essential part of their engagement; that inability for it in one party is an excuse for performance by the other; that, where such excuse exists without any default in the disabled party, it is contrary to principle to bold that an option is given to the other; consequently that the right of secession in such case is mutual.

[El. Bl. & El. 781] The authorities are ill favour of this view; Pothier, Traite du Mariage, part 2, c. 1, art. 7, s. 61. But it is said his authority is impaired by his adding, as a cause of dissolution, "a derangement of fortune, which puts me out of condition to be able to support the charges of the marriage which we bad promised to contract." I own I see nothing unreasonable in this, nor anything very different from our law. People who agree to marry, not having the means, agree with an implied condition to wait till they have them; the legal expression of which is that their engagement is to marry in a reasonable time; and that does not arrive till their means are sufficient. Suppose, after the engagement, poverty falls on them: that is an excuse for not immediately marrying. Is it reasonable that the woman should wait till the man becomes able to maintain her? This reasoning may be wrong: still there is Pothier's authority direct on the question in hand. Then there is the opinion of Lord Kenyon in Atchinson v. Baker (2 Peake's N. P. C. 103), cited and approved in 1 Parsons On The Law of Contract, 550 (book III. ch. XI. (3d ed. Boston, 1857)). Paradine v. Jane (Aleyn, 26), and similar cases, cited for the plaintiff, are misapplied. They beg this question. No doubt, if a contract made by the parties is unconditional, death on disease is no excuse: but the question in this case is, Whether the contract is not conditional on the continuance of life and health. Why, if the defendant died before breach, could not his executors be liable? The answer is, because he has not undertaken to live. Neither has he to continue competent in health. And the one is as much a condition of matrimony as the other. This disposes of Barker v. Hodgson (3 M. & S. 267). Lord [El. Bl. & El. 782] Ellenborough's remark, "Perhaps it is too much to say the freighter was compellable to load his cargo," does not mean be was excused from so doing; for the plaintiff recovered in respect of the defendant not having done so; the damages were for breach of the covenant to do it. What Lord Ellenborough means I imagine to be: that the defendant was not morally compellable, or would not [120 Eng. Rep. 702] have had specific performance enjoined. It is to me unintelligible, how, if the man is not bound to perform the contract, he can be liable to pay damages for its non-performance.

But, it is said, notice ought to have been given to the plaintiff. In point of right feeling I agree. But the parties here are at law with each other. The defendant says, "I have a legal answer to your legal demand." As a rule, a man is not bound to say why; and I see no reason why he should be in this case of a contract to marry. It may be the defendant communicated to the plaintiff, in the most delicate way, an objection to marriage, but refused to say why. If she chooses to go to law with him, as on a bargain, she must abide by rules of law applicable to all cases of bargains and contracts.

I understand the opinion of Mr. Justice Crompton to be rather as above expressed, with this difference. He thinks that, at the utmost, all the defendant, was entitled to was to rescind the contract. But, if so, I think the plea good. When is he to rescind? If a contract gives a right to rescind, and fixes no time for rescinding, it need not be done till the time arrives for performance: no previous notice need be given. In truth, such a right to rescind is a right to say "No" when the time arrives for performance. It may be that a person who rescinds must give notice. But when? He does give notice [El. Bl. & El. 783] when he refuses. Is he bound to give it earlier? If so, why? In the not very probable case of the lady going to the altar without previous arrangement, surely he might, if afflicted as the defendant is, barely send word, in answer to an invitation to join her, that he would not. In the more probable case of some previous request, he refuses when it is made. In other words, till he refuses there is no breach of contract; and when he refuses he by so doing gives notice he will not perform. Is he bound to say why? I cannot understand why he is. No doubt, if, after his disability arises, he goes on with the engagement, be may well be bound, as that would be evidence that the original contract was not conditioned as I think ordinary contracts to marry are, or would furnish evidence of a fresh contract.

Further, if it is said that the facts proved only justify a postponement of the marriage, I think the plea good. The plaintiff complains that the defendant refused. The defendant says, "When I did, I had a sufficient reason." I do not understand the breach to be, "You refused, and refused for ever." I do not understand such a breach in point of law. I do not understand what is meant by a plea "in excuse or suspension of the performance" as distinguished from one "in discharge of the promise." Hochster v. De la Tour (2 E. & B. 678) turns on the relation of master and servant. If I contract to do a thing, and am sued for not doing it, it is a good defence to say the time for doing it has not arrived: and, I take it, it would be a bad replication to say, "True, but you said you never would." See Avery v. Bowden^[7]. The [El. Bl. & El. 784] plaintiff can only be entitled to recover on these pleadings and proof on the ground that the asserted and proved incompetency is no ground for refusing to marry when the request so to do is made. I am of opinion it is. In short, the defendant here says: "You complain I refused. I admit it; I did so for a good reason, viz. my performance was conditional on my continuing in a competent state; and I ceased to be so." If the plaintiff meant to say the contract was not so conditioned, she should have given evidence (in my opinion) that the contract in this case was not the ordinary contract to marry. If she meant to say there was a new contract evidenced by the engagement continuing after the disability was known, she should have new assigned. But, if she relies on and proves the common contract only, it is in my opinion a good answer to prove that the defendant, when he refused, laboured under either of the infirmities proved in this case.

If I am to say whether I think the contract ended by such an event, I say I do; and on this ground: that it is so vitally for the benefit of both parties that that should be the agreement between them, that common sense requires it to be so implied. The disability of the defendant, if not incurable, was one of indefinite duration, and of a lasting character. Had it been that he broke a leg, or was afflicted with a fever which disabled him for marriage at the time appointed, I should have thought him not liable to an action for not marrying then, but bound to marry on his recovering. This last consideration seems to me to suggest an argument in favour of the contract being conditional as suggested. For in ordinary contracts, if not liable at the day [120 Eng. Rep. 703] appointed, a person would not be at another time; but in [El. Bl. & El. 785] this contract is absurd to suppose that, if a day was named for a marriage and the man broke his was ill of a fever, lost a parent, or from some other consideration of health or decency could not marry on the day in question, he would either be liable to an action wholly discharged from his promise to marry. But the same good sense and convenience which would reject such a conclusion, in my judgment, requires that contract should be construed with the conditions I attach.

For these reasons, as well as those of Mr. Justice Wightman and Lord Chief Justice Erle, I think the judgment should be affirmed.

Willes J. I am of opinion, for the reasons stated at large by Lord Campbell in Court below, that the judgment therein given against his Lordship's opinion and that of Mr. Justice Crompton ought to be reversed, and judgment given for the plaintiff for the damages assessed in her favour by the jury, with costs. This is not a case of impotence; and I need give no opinion upon such a case.

The canon law is clear upon the point, that only impotence, permanent and incurable, such as that which results from the loss of one of the necessary organs of generation, constitutes an impediment to marriage, and not that which may temporary or curable.

The contract in this case is stated by the plaintiff in the declaration, and admitted by the defendant in his plea, to have been in terms an unconditional one: and it guess work, not construction, to read it as conditional. Its performance is not impossible; and it is not enough to shew, in answer to an action upon a contract [El. Bl. & El. 786] that its performance is inconvenient or may be dangerous. The delicacy of health, alleged as an excuse, is the man's misfortune, not to be visited, beyond what is inevitable, upon the woman. If either party is to have the option of breaking the match, it ought to be the woman. The Court have no right to say what is best for her. If the man were rich or distinguished, and the woman mercenary ambitious, she might still desire to marry him for advancement in life. I do not sympathise with such a woman, if any there be: but this is not a question of sentiment. If it were, I might put the case of a real attachment, where such an illness as that stated in the plea supervening might make the woman even more anxious to marry, in order to be the companion and the nurse, if she could not be the mistress of her sweetheart.

The judgment for the defendant ought therefore to be reversed, and judgment given for the plaintiff, with costs.

Crowder J. The question in this case is, Whether the plea affords any legal answer to the action: and I am of opinion that it does not.

The declaration is upon a contract to marry, and avers a breach of that contract by not marrying in a reasonable time. The plea, as I understand it, admits a breach as alleged in the declaration, but sets up an excuse for it. And the question to be decided is, Whether that excuse is a legal answer to the action.

Now I think the substance of the excuse alleged is that, in consequence of the defendant's dangerous illness which had supervened since the promise and before the breach, it became very inexpedient and imprudent to [El. Bl. & El. 787] perform the contract, and therefore the defendant broke it. It is quite impossible to construe the plea as alleging any physical impossibility to go through the ceremony of marriage, or any physical incapacity to perform the duties of marriage. Whether, if such allegations had existed, they would have afforded any answer to the action, I do not think it necessary in this case to decide: and I abstain from giving any opinion upon that point.

But I am of opinion that it is no excuse for the breach of a promise to marry, that the performance of the conjugal duties would be attended with danger to the defendant's life. Such a state of illness may make it matter of the greatest prudence on his part to break his contract, and to pay such damages as a jury may award again him for the breach. But, in my opinion, it is no legal answer to the action. I desire to refer to the arguments and reasoning of Lord Campbell in the Court below as conclusive in my mind upon this view of the case. It would be idle for me to repeat them.

I think, therefore, our judgment should be for the plaintiff.

Martin B. This is an appeal from the judgment of the Court of Queen's Bench reported in the 27th Law Journal, page 345. The action is for breach of promise to [120 Eng. Rep. 704] marry. The declaration is in the common form, alleging the promise to marry within a reasonable time. Amongst other pleas, the defendant pleaded that, before breach, he became and was and is afflicted with dangerous bodily disease, which occasioned frequent and severe bleeding from the lungs, by reason of which disease be became and was and is incapable of marriage without great danger to his life, and therefore unfit for the [El. Bl. & El. 788] marriage state; whereof the plaintiff before action just before breach had notice. Issue was joined upon this plea. The cause was tried before my brother Erle; and the jury found that all the averments in the plea were proved except that as to notice. The Judge directed the verdict to be entered for the defendant, giving the plaintiff leave to move to enter it for her. The other issues were found for the plaintiff, and the damages assessed contingently at £100. A rule was obtained to enter the verdict for the plaintiff: and, alter argument, the Court were equally divided; Lord Campbell and my brother Crompton thinking the plea bad, in which case, an averment in it not being proved, the plaintiff would be entitled to have the verdict entered for her; my brothers Wightman and Erle thought the plea, as proved, good. My brother Crompton, being the junior Judge, gave way for the purpose of this appeal; and the plaintiff's rule was discharged.

I agree with Lord Campbell and my brother Crompton, and think the plea bad. The law of England permits an action to recover damages for the breach of a promise to marry; although I am aware that many persons think that such an action should not be allowed. The action is not for a specific performance, a suit which I apprehend no Court in this country could entertain, but for damages for the nonperformance of a contract. The plea is one in confession and avoidance: and the facts alleged in it (exclusive of the notice to the plaintiff) are said to excuse or justify the breach. The Judges of the Court of Queen's Bench do not seem to have been agreed as to the exact meaning of the plea: but, to put it in the most favourable view for the defendant, it may be assumed that the promise to [El. Bl. & El. 789] marry involves a promise to consummate the marriage, and that the incapacity and danger to life mentioned in the plea bas been caused by an inevitable misfortune without any act or conduct of the plaintiff conducing to it.

The general rule upon the subject is, that, when a person by his own contract creates a duty or charge upon himself, be is bound to make it good if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his conduct; Paradine v. Jane (Aleyn, 26), cited and acted upon in Hadley v. Clarke (8 T. R. 259) and Atkinson v. Ritchie (10 East, 530). See also Com. Dig., Action upon tbe Case upon Assumpsit (G.). And I know of no authority, except it be Lawrence V. Twentiman (1 Rol. Abr. 450, pl. 10), having any tendency to shake it, or to shew that such a state of facts as alleged in the plea is an answer to an action for pecuniary damages for the breach of contract to marry. I think it very much better to adhere to the rule than to create an ordinary exception for which, no doubt, plausible reasons may be given. To admit exceptions of this kind utterly destroys the certainty of the law, and in my opinion is inconvenient. But, in the present case, what the defendant promised to do was to marry the plaintiff. This be could have done; and it is quite consistent with the averment in the plea that the incapacity and danger to life may have been caused by the defendant's own acts or conduct: and a case will readily suggest itself where, after a promise to marry, an incapacity to consummate marriage and danger to life in attempting to do so might arise, in which it would seem absurd to suppose that damages [El. Bl. & El. 790] could not be recovered. The supposed subject of the plea would be the grossest aggravation of the cause of action. As to Lawrence v. Twentiman (1 Rol. Abr. 450, pl. 10), except it be explicable in the manuer suggested by Lord Campbell in his judgment in this case,viz. that time was not of the essence of the contract, or that the law relating to holding intercourse with persons affected by the plague (see stat. 1 Ja. 1, c. 31,) made the performance of the contract illegal, I cannot agree with it. It is, no doubt, referred to in several books as authority: but, unless explained as above, it seems contrary to the rule of law. The placitum is to the effect that a man bad contracted to build a house before a certain day, but was excused because the plague had broken out, and continued to the day in the neighborhood: but, it is added, be must build it afterwards. Unless the contract really was to build the house within a reasonable time, or the statute of James made the building illegal because of the existence of the plague in the neighborhood (in which case the decision was right), the case cannot be sustained. How is it possible to [120 Eng. Rep. 705] maintain that there could be any obligation to build it afterwards? The builder never contracted to do so; and the common law could not impose such a contract upon him. See Shepherd's Touchstone, by Preston, page 174, and Barker v. Hodgson (3 M. 267), which seems to the contrary.

It must be taken that the law deems a contract to marry to be one of pecuniary value: and, assuming that it could not reasonably be expected, under the circumstances stated in the plea, that the defendant should marry the plaintiff, I can see no reason why he should [El. Bl. & El. 791] not compensate her for the breach of the contract. Why should the consequences of the misfortune fall upon her, and not upon the defendant? See Lord Ellenborough's judgment in Barker v. Hodgson (3 M. & S. 267), and the dicta of Lord Holt in Thornborow v. Whitacre (2 Ld. Raym. 1164). For these reasons I think the judgment ought to be reversed.

Williams J. I am of opinion that the plea is bad, and that the plaintiff is therefore entitled to judgment.

It appears to me to be a plea in confession and avoidance; that is to say the defendant alleges that he is justified in not keeping his promise, because, after making it, he became incapable of marriage without great danger of his life. I am of opinion that, though this is a reason why he should not be compelled to a specific performance of the contract, and a very good reason why he should in prudence prefer paying damages for the breach of his contract to the performance of it, it is no ground for resisting the payment of such damages.

According to the general law applicable to contracts, the plea is insufficient by reason of the rule (cited in Lord Campbell's judgment) as laid down in Paradine v. Jane (Aleyn, 26), and which is established by the authorities collected in Serjt. Williams’s note (2) to the case of Walton v. Waterhouse (2 Wms. Saund. 422).

But it is alleged that a contract to marry stands on a peculiar footing, a subject to implied conditions peculiar to itself. And the authorities certainly: ground for contending that, if the parties in this case had been reversed, and the present defendant were suing [El. Bl. & El. 792] the present plaintiff on the contract, she might have set up his bodily inaptitude as a ground for refusing to perform her contract, just as he might have pleaded her corporal inaptitude, or want of chastity, which had supervened or had been discovered since the making of the contract. But there is no authority, that I am aware of, or any good reason, for allowing the one party to set up his or her corporal infirmity or unfitness for marriage, or his or her impurity, in answer to the requisition of the other, who may nevertheless wish for and insist upon the performance. A woman would not be allowed to plead her own want to chastity if she were sued for a breach of promise of marriage, notwithstanding the man might well set it up as an answer of she were to seek to enforce the contract.

But it has been argued that this is not a plea in confession and avoidance, kind of circuitous traverse of a reasonable time having elapsed, or a plea merely of matter which suspends the performance of the contract. As to this, I think it enough to say that in this respect I entirely agree in the view which Lord Campbell and my brother Crompton have taken in their judgments.

I will add that this question, though a nice and curious one, is not likely in my opinion to be of any great practical importance. Surely the cases must be very rare where a woman, if informed that the man to whom she has been affianced is in such a state of health as the defendant is alleged to have been, and is requested to excuse on that account the completion of the marriage contract, would insist on the performance of it, or where, if she was so ill advised as to bring an action for a breach a jury could be found who would, under such circumstances, give her more than nominal damages. [El. Bl. & El. 793] But, in the present case, the defendant, broke off the marriage without informing the plaintiff that he had such a ground for wishing to be excused from becoming her husband.

For these reasons I think the judgment of the Queen's Bench ought to be reversed.

Pollock C.B. After the discussion which this case has undergone, I do not think it necessary to say any thing upon the formal or technical parts of the case: but I shall proceed at once to the question as to which a difference of opinion prevails among the members of this Court, and of the Court below: and that is, What is the real meaning of a contract to marry within a reasonable time, which is the contract stated in the declaration?

Some learned Judges think it is of the same character as any other contract, and [120 Eng. Rep. 706] that no terms or conditions can be implied by the law: and that, if it be not performed in the terms expressed, the party failing to perform must pay damages for the breach of it. Other learned Judges think that there are implied conditions or exceptions, and that the matter stated in the plea is one of them; and therefore that the defendant cannot be called upon to pay damages for the non-performance of the contract alleged in the declaration under the circumstances which appear on the whole record.

Now it must be conceded on all hands that there are contracts to which the law implies exceptions and conditions which are not expressed. All contracts for personal services which can be performed only during the lifetime of the party contracting are subject to the implied condition that he shall be alive to perform them: [El. Bl. & El. 794] and, should he die, his executor is not liable to an action for the breach of contract occasioned by his death. So a contract by an author to write a book within a reasonable time, or by a painter to paint a picture within a reasonable time, would in my judgment be deemed subject to the condition that, if the author became insane or the painter paralytic, and so incapable of performing the contract by the act of God he would not be liable personally in damages any more than his executors would be if he bad been prevented by death. In truth, the reasonable time has not arrived, if the party contracting to perform the act has been deprived by illness of the means of performing it: but I should decline to put my judgment on that ground; though in this case, and on this record, I think it would be quite sufficient. I prefer putting it on the ground that there is an implied exception, including the state of facts alleged in the plea, and found by the jury to be true.

In the case of the ordinary contract to marry, such as it is presented to the Court by evidence in actions of this sort, I think no one can doubt that the continuance of life is an implied condition. The question then is: Is the continuance of health, of such a state of health as makes it not improper to marry, another condition? I am of opinion that it is. There are conditions to be implied (I think) on both sides in such an agreement. I think every one would admit that it is a condition on the part of the female that she should continue chaste, and perhaps, more generally (though this is not so clear), that her conduct should not be such us to make a marriage with her improper. I think the test that may be safely applied to ascertain whether any such condition is implied or not is to consider what would he the case [El. Bl. & El. 795] if a man were, after such a promise to marry, to lose by accident or disease the capacity to contract matrimony by becoming impotent. To such a case the decisions about impossibility do not, I think, apply. By the act of God the contract has become void. The man may go through the ceremony of marriage; but he cannot marry: the ceremony would not be binding: it would operate nothing: and the contract to marry is broken by the calamity of his becoming impotent.

It has been suggested that in such a case the woman may be contented with the society of the man, and that the choice ought to rest with her; and that, if she be willing to marry, he must marry or pay damages. I am of opinion that such is not the law. I think, if the man can say with truth "By the visitation of Providence I am not capable of marriage," he cannot be called upon to marry; and I think this is an implied condition in all agreements to marry. I think that a view of the law which puts a contract of marriage all the same footing as a bargain for a horse, or a bale of goods, is not in accordance with the general feelings of mankind, and is supported by no authority.

And I think the judgment of the Court below ought to be affirmed.

Judgment reversed^[8].

[1] February 2d and 4th.

[2] See The Earl of Shrewsbury v. Scott, 6 Com. B. N. S. 1, 178.

[3] See 2 Co. Inst. 684; stat. 25 H. 8, c. 22, s. 3; 28 H. 8, c. 7, s. 11.

[4] Harrison v. Cage, Carth. 467.

[5] See Regina v. Millis, 10 Cl. & F. 534.

[6] The reporters have been unable to find this case: the authority referred to is perhaps Countess of Portsmouth v. Earl of Portsmouth, 1 Hag. C. Ecc. 355.

[7] 6 E. & B. 953, in Exch. Ch.; affirming the judgment of Q. B. in Avery v. Bowden, 5 E. & B. 714.

[8] Cockburn C.J., who had heard the argument in the Court of Exchequer Chamber, had, since then, become Chief Justice of the Court of Queen's Bench, against the judgment of which Court this appeal was brought.

3 Best & S. 826
122 Eng. Rep. 310 (Q.B. 1863)
TAYLOR
v.
CALDWELL
Queen’s Bench
May 6, 1863

The declaration alleged that by an agreement, bearing date the 27th May, 1861, the defendants agreed to let, and the plaintiffs agreed to take, on the terms therein stated, The Surrey Gardens and Music Hall, Newington, Surrey, for the following days, that is to say, Monday the 17th June, 1861, Monday the 15th July, 1861, Monday the 5th August, 1861, and Monday the 19th August, 1861, for the purpose of giving a series of four grand concerts and day and night fetes, at the Gardens and Hall on those days respectively, at the rent or sum of 100l. for each of those days. It then averred the fulfilment of conditions etc., on the part of the plaintiffs; and breach by the defendants, that they did not nor would allow the plaintiffs to have the use of The Surrey Music Hall and Gardens according to the agreement, but wholly made default therein, etc.; whereby the plaintiffs lost divers moneys paid by them for printing advertisements of and in advertising the concerts, and also lost divers sums expended and expenses incurred by them in preparing for the concerts and otherwise in relation thereto, and on the faith of the performance by the defendants of the agreement on their part, and had been otherwise injured, etc.

Pleas. First. Traverse of the agreement.

Second. That the defendants did allow the plaintiffs to have the use of The Surrey Music Hall and Gardens according to the agreement, and did not make any default therein, etc.

Third. That the plaintiffs were not ready or willing to take The Surrey Music Hall and Gardens.

Fourth. Exoneration before breach.

Fifth. That at the time of the agreement there was a general custom of the trade and business of the plaintiffs and the defendants, with respect to which the agreement was made, known to the plaintiffs and the defendants, and with reference to which they agreed, and which was part of the agreement, that in the event of the Gardens and Music Hall being destroyed or so far damaged by accidental fire as to prevent the entertainments being given according to the intent of the agreement, between the time of making the agreement and the time appointed for the performance of the same, the agreement should be rescinded and at an end; and that the Gardens and Music Hall were destroyed and so far damaged by accidental fire as to prevent the entertainments, or any of them, being given, according to the intent of the agreement, between the time of making the agreement and the first of the times appointed for the performance of the same, and continued so destroyed and damaged until after the times appointed for the performance of the agreement had elapsed, without the default of the defendants or either of them.

Issue on all the pleas. On the trial, before Blackburn J., at the London Sittings after Michaelmas Term, 1861, it appeared that the action was brought on the following agreement:

"Royal Surrey Gardens,

"27th May, 1861.

"Agreement between Messrs. Caldwell & Bishop, of the one part, and Messrs. Taylor & Lewis of the other part, whereby the said Caldwell & Bishop agree to let, and the said Taylor & Lewis agree to take, on the terms hereinafter stated, The Surrey Gardens and Music Hall, Newington, Surrey, for the following days, viz.:

"Monday, the 17th June, 1861,

Monday the 15th July, 1861,

Monday the 5th August, 1861,

Monday the 19th August, 1861,

for the purpose of giving a series of four grand concerts and day and night fetes at the said Gardens and Hall on those days respectively at the rent or sum of £100 for each of the said days. The said Caldwell & Bishop agree to find and provide at their own sole expense, on each of the aforesaid days, for the amusement of the public and persons then in the said Gardens and Hall, an efficient and organised military and quadrille band, the united bands to consist of from thirty-five to forty members; al fresco entertainments of various descriptions; coloured minstrels, fireworks and full illuminations; a ballet or divertissement, if permitted; a wizard and Grecian statues; tight rope performances; rifle galleries; air gun shooting; Chinese and Parisian games; boats on the lake, and (weather permitting) aquatic sports, and all and every other entertainment as given nightly during the months and times above mentioned. And the said Caldwell & Bishop also agree that the before mentioned united bands shall be present and assist at each of the said concerts, from its commencement until 9 o'clock at night; that they will, one week at least previous to the above mentioned dates, underline in bold type in all their bills and advertisements that Mr. Sims Reeves and other artistes will sing at the said gardens on those dates respectively, and that the said Taylor & Lewis shall have the right of placing their boards, bills and placards in such number and manner (but subject to the approval of the said Caldwell & Bishop) in and about the entrance to the said gardens, and in the said grounds, one week at least previous to each of the above mentioned days respectively, all bills so displayed being affixed on boards. And the said Caldwell & Bishop also agree to allow dancing on the new circular platform after 9 o'clock at night, but not before. And the said Caldwell & Bishop also agree not to allow the firework display to take place till a J past 11 o'clock at night. And, lastly, the said Caldwell & Bishop agree that the said Taylor & Lewis shall be entitled to and shall be at liberty to take and receive, as and for the sole use and property of them the said Taylor & Lewis, all moneys paid for entrance to the Gardens, Galleries and Music Hall and firework galleries, and that the said Taylor & Lewis may in their own discretion secure the patronage of any charitable institution in connection with the said concerts. And the said Taylor & Lewis agree to pay the aforesaid respective sum of £100 in the evening of the said respective days by a crossed cheque, and also to find and provide, at their own sole cost, all the necessary artistes for the said concerts, including Mr. Sims Reeves, God's will permitting.(Signed)

"J. CALDWELL."

Witness "CHAS. BISHOP.

(Signed) "S. Denis."

On the 11th June the Music Hall was destroyed by an accidental fire, so that it became impossible to give the concerts. Under these circumstances a verdict was returned for the plaintiff, with leave reserved to enter a verdict for the defendants on the second and third issues.

Petersdorff Serjt., in Hilary Term, 1862, obtained a rule to enter a verdict for the defendants generally.

The rule was argued, in Hilary Term, 1863 (January 28th); before Cockburn C.J., Wightman, Crompton and Blackburn JJ.

H. Tindal Atkinson shewed cause. First. The agreement sued on does not shew a "letting" by the defendants to the plaintiffs of the Hall and Gardens, although it uses the word "let," and contains a stipulation that the plaintiffs are to be empowered to receive the money at the doors, and to have the use of the Hall, for which they are to pay £100, and pocket the surplus; for the possession is to remain in the defendants, and the whole tenor of the instrument is against the notion of a letting. Whether an instrument shall be construed as a lease or only an agreement for a lease, even though it contains words of present demise, depends on the intention of the parties to be collected from the instrument; Morgan d. Dowding v. Bissell (3 Taunt. 65). Christie v. Lewis (2 B. & B. 410) is the nearest case to the present, where it was held that, although a charter party between the owner of a ship and its freighter contains words of grant of the ship, the possession of it may not pass to the freighter, but remain in the owner, if the general provisions in the instrument qualify the words of grant.

Secondly. The destruction of the premises by fire will not exonerate the defendants from performing their part of the agreement. In Paradine v. Jane (Al. 26) it is laid down that, where the law creates a duty or charge, and the party is disabled to perform it without any default in him, and hath no remedy over, there the law will excuse him; but when the party, by his own contract, creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. And there accordingly it was held no plea to an action for rent reserved by lease that the defendant was kept out of possession by an alien enemy whereby he could not take the profits.

Pearce, in support of the rule. First. This instrument amounts to a demise. It uses the legal words for that purpose, and is treated in the declaration as a demise.

Secondly. The words "God's will permitting" override the whole agreement.

Cur. adv. vult.

The judgment of the Court was now delivered by

BLACKBURN, J. In this case the plaintiffs and defendants had, on the 27th May, 1861, entered into a contract by which the defendants agreed to let the plaintiffs have the use of The Surrey Gardens and Music Hall on four days then to come, viz., the 17th June, 15th July, 5th August and 19th August, for the purpose of giving a series of four grand concerts, and day and night fetes at the Gardens and Hall on those days respectively; and the plaintiffs agreed to take the Gardens and Hall on those days, and pay £100 for each day.

The parties inaccurately call this a "letting," and the money to be paid a "rent;" but the whole agreement is such as to shew that the defendants were to retain the possession of the Hall and Gardens so that there was to be no demise of them, and that the contract was merely to give the plaintiffs the use of them on those days. Nothing however, in our opinion, depends on this. The agreement then proceeds to set out various stipulations between the parties as to what each was to supply for these concerts and entertainments, and as to the manner in which they should be carried on. The effect of the whole is to shew that the existence of the Music Hall in the Surrey Gardens in a state fit for a concert was essential for the fulfilment of the contract,—such entertainments as the parties contemplated in their agreement could not be given without it.

After the making of the agreement, and before the first day on which a concert was to be given, the Hall was destroyed by fire. This destruction, we must take it on the evidence, was without the fault of either party, and was so complete that in consequence the concerts could not be given as intended. And the question we have to decide is whether, under these circumstances, the loss which the plaintiffs have sustained is to fall upon the defendants. The parties when framing their agreement evidently had not present to their minds the possibility of such a disaster, and have made no express stipulation with reference to it, so that the answer to the question must depend upon the general rules of law applicable to such a contract.

There seems no doubt that where there is a positive contract to do a thing, not in itself unlawful, the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burthensome or even impossible. The law is so laid down in 1 Roll. Abr. 450, Condition (G), and in the note (2) to Walton v. Waterhouse (2 Wms. Saund. 421 a. 6th ed.), and is recognised as the general rule by all the Judges in the much discussed case of Hall v. Wright (E. B. & E. 746). But this rule is only applicable when the contract is positive and absolute, and not subject to any condition either express or implied: and there are authorities which, as we think, establish the principle that where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless when the time for the fulfilment of the contract arrived some particular specified thing continued to exist, so that, when entering into the contract, they must have contemplated such continuing existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.

There seems little doubt that this implication tends to further the great object of making the legal construction such as to fulfil the intention of those who entered into the contract. For in the course of affairs men in making such contracts in general would, if it were brought to their minds, say that there should be such a condition. Accordingly, in the Civil law, such an exception is implied in every obligation of the class which they call obligatio de certo corpore. The rule is laid down in the Digest, lib. xlv., tit. l, de verborum obligationibus, 1. 33. "Si Stichus certo die dari promissus, ante diem moriatur: non tenetur promissor." The principle is more fully developed in l. 23. "Si ex legati causa, aut ex stipulatii hominem certum mihi debeas: non aliter post mortem ejus tenearis mihi, quam si per te steterit, quominus vivo eo eum mihi dares: quod ita fit, si aut interpellatus non dedisti, aut occidisti eum." The examples are of contracts respecting a slave, which was the common illustration of a certain subject used by the Roman lawyers, just as we are apt to take a horse; and no doubt the propriety, one might almost say necessity, of the implied condition is more obvious when the contract relates to a living animal, whether man or brute, than when it relates to some inanimate thing (such as in the present case a theatre) the existence of which is not so obviously precarious as that of the live animal, but the principle is adopted in the Civil law as applicable to every obligation of which the subject is a certain thing. The general subject is treated of by Pothier, who in his Traite des Obligations, partie 3, chap. 6, art. 3, § 668 states the result to be that the debtor corporis certi is freed from his obligation when the thing has perished, neither by his act, nor his neglect, and before he is in default, unless by some stipulation he has taken on himself the risk of the particular misfortune which has occurred.

Although the Civil law is not of itself authority in an English Court, it affords great assistance in investigating the principles on which the law is grounded. And it seems to us that the common law authorities establish that in such a contract the same condition of the continued existence of the thing is implied by English law.

There is a class of contracts in which a person binds himself to do something which requires to be performed by him in person; and such promises, e.g. promises to marry, or promises to serve for a certain time, are never in practice qualified by an express exception of the death of the party; and therefore in such cases the contract is in terms broken if the promisor dies before fulfilment. Yet it was very early determined that, if the performance is personal, the executors are not liable; Hyde v. The Dean of Windsor (Cro. Eliz. 552, 553). See 2 Wms. Exors. 1560, 5th ed., where a very apt illustration is given. "Thus," says the learned author, "if an author undertakes to compose a work, and dies before completing it, his executors are discharged from this contract: for the undertaking is merely personal in its nature, and, by the intervention of the contractor's death, has become impossible to be performed."For this he cites a dictum of Lord Lyndhurst in Marshall v. Broadhurst (1 Tyr. 348, 349), and a case mentioned by Patteson J. in Wentworth v. Cock (10 A. & E. 42, 45-46). In Hall v. Wright (E. B. & E. 746, 749), Crompton J., in his judgment, puts another case. "Where a contract depends upon personal skill, and the act of God renders it impossible, as, for instance, in the case of a painter employed to paint a picture who is struck blind, it may be that the performance might be excused."

It seems that in those cases the only ground on which the parties or their executors, can be excused from the consequences of the breach of the contract is, that from the nature of the contract there is an implied condition of the continued existence of the life of the contractor, and, perhaps in the case of the painter of his eyesight. In the instances just given, the person, the continued existence of whose life is necessary to the fulfilment of the contract, is himself the contractor, but that does not seem in itself to be necessary to the application of the principle; as is illustrated by the following example. In the ordinary form of an apprentice deed the apprentice binds himself in unqualified terms to "serve until the full end and term of seven years to be fully complete and ended," during which term it is covenanted that the apprentice his master "faithfully shall serve," and the father of the apprentice in equally unqualified terms binds himself for the performance by the apprentice of all and every covenant on his part. (See the form, 2 Chitty on Pleading, 370, 7th ed. by Greening.) It is undeniable that if the apprentice dies within the seven years, the covenant of the father that he shall perform his covenant to serve for seven years is not fulfilled, yet surely it cannot be that an action would lie against the father? Yet the only reason why it would not is that he is excused because of the apprentice's death.

These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused from performing his contract to deliver, which has thus become impossible.

That this is the rule of the English law is established by the case of Rugg v. Minett (11 East, 210), where the article that perished before delivery was turpentine, and it was decided that the vendor was bound to refund the price of all those lots in which the property had not passed; but was entitled to retain without deduction the price of those lots in which the property had passed, though they were not delivered, and though in the conditions of sale, which are set out in the report, there was no express qualification of the promise to deliver on payment. It seems in that case rather to have been taken for granted than decided that the destruction of the thing sold before delivery excused the vendor from fulfilling his contract to deliver on payment.

This also is the rule in the Civil law, and it is worth noticing that Pothier, in his celebrated Traite du Contrat de Vente (see Part. 4, § 307, etc.; and Part. 2, ch. 1, sect. 1, art. 4, § 1), treats this as merely an example of the more general rule that every obligation de certo corpore is extinguished when the thing ceases to exist. See Blackburn on the Contract of Sale, p. 173.

The same principle seems to be involved in the decision of Sparrow v. Sowyate (W. Jones, 29), where, to an action of debt on an obligation by bail, conditioned for the payment of the debt or the render of the debtor, it was held a good plea that before any default in rendering him the principal debtor died. It is true that was the case of a bond with a condition, and a distinction is sometimes made in this respect between a condition and a contract. But this observation does not apply to Williams v. Lloyd (W. Jones, 179). In that case the count, which was in assumpsit, alleged that the plaintiff had delivered a horse to the defendant, who promised to redeliver it on request. Breach, that though requested to redeliver the horse he refused. Plea, that the horse was sick and died, and the plaintiff made the request after its death; and on demurrer it was held a good plea, as the bailee was discharged from his promise by the death of the horse without default or negligence on the part of the defendant. "Let it be admitted," say the Court, "that he promised to deliver it on request, if the horse die before, that is become impossible by the act of God, so the party shall be discharged, as much as if an obligation were made conditioned to deliver the horse on request, and he died before it." And Jones, adds the report, cited 22 Ass. 41, in which it was held that a ferryman who had promised to carry a horse safe across the ferry was held chargeable for the drowning of the animal only because he had overloaded the boat, and it was agreed, that notwithstanding the promise no action would have lain had there been no neglect or default on his part.

It may, we think, be safely asserted to be now English law, that in all contracts of loan of chattels or bailments if the performance of the promise of the borrower or bailee to return the things lent or bailed, becomes impossible because it has perished, this impossibility (if not arising from the fault of the borrower or bailee from some risk which he has taken upon himself) excuses the borrower or bailee from the performance of his promise to redeliver the chattel. The great case of Coggs v. Bernard (1 Smith's L. C. 171, 5th ed.; 2 L. Raym. 909) is now the leading case on the law of bailments, and Lord Holt, in that case, referred so much to the Civil law that it might perhaps be thought that this principle was there derived direct from the civilians, and was not generally applicable in English law except in the ease of bailments; but the case of Williams v. Lloyd (W. Jones, 179), above cited, shews that the same law had been already adopted by the English law as early as The Book of Assizes. The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance.

We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things. Consequently the rule must be absolute to enter the verdict for the defendants.

Rule absolute.

L.R. 2 K.B. 740
KRELL
v.
HENRY.
IN THE COURT OF APPEAL.
August 11, 1903

Contract—Impossibility of Performance—Implied Condition—Necessary Inference—Surrounding Circumstances—Substance of Contract—Coronation—Procession—Inference that Procession would pass.

By a contract in writing of June 20, 1902, the defendant agreed to hire from the plaintiff a flat in Pall Mall for June 26 and 27, on which days it had been announced that the coronation processions would take place and pass along Pall Mall. The contract contained no express reference to the coronation processions, or to any other purpose for which the flat was taken. A deposit was paid when the contract was entered into, As the processions did not take place on the days originally fixed, the defendant declined to pay the balance of the agreed rent :—

Held (affirming the decision of Darling J.), from necessary inferences drawn from surrounding circumstances, recognised by both contracting parties, that the taking place of the processions on the days originally fixed along the proclaimed route was regarded by both contracting parties as the foundation of the contract; that the words imposing on the defendant the obligation to accept and pay for the use of the flat for the days named, though general and unconditional, were not used with reference to the possibility of the particular contingency which afterwards happened, and consequently that the plaintiff was not entitled to recover the balance of the rent fixed by the contract.

Taylor v. Caldwell, (1863) 3 B. & S. 826, discussed and applied.

APPEAL from a decision of Darling J.

The plaintiff, Paul Krell, sued the defendant, C. S. Henry, for £50, being the balance of a sum of £75, for which the defendant had agreed to hire a flat at 56A, Pall Mall on the days of June 26 and 27, for the purpose of viewing the processions to be held in connection with the coronation of His Majesty. The defendant denied his liability, and counterclaimed for the return of the sum of £25, which had been paid as a deposit, on the ground that, the processions not having taken place owing to the serious illness of the King, there had been a total failure of consideration for the contract entered into by him. The facts, which were not disputed, were as follows. The plaintiff on leaving the country in March, 1902, left instruc [741] tions with his solicitor to let his suite of chambers at 56A, Pall Mall on such terms and for such period (not exceeding six months) as he thought proper. On June 17,1902, the defendant noticed an announcement in the windows of the plaintiff's flat to the effect that windows to view the coronation processions were to be let. The defendant interviewed the housekeeper on the subject, when it was pointed out to him what a good view of the processions could be obtained from the premises, and he eventually agreed with the housekeeper to take the suite for the two days in question for a sum of 751. On June 20 the defendant wrote the following letter to the plaintiff's solicitor:—

“I am in receipt of yours of the 18th instant, inclosing form of agreement for the suite of chambers on the third floor at 56A, Pall Mall, which I have agreed to take for the two days, the 26th and 27th instant, for the sum of £75. For reasons given you I cannot enter into the agreement, but as arranged over the telephone I inclose herewith cheque for £25 as deposit, and will thank you to confirm to me that I shall have the entire use of these rooms during the days (not the nights) of the 26th and 27th instant. You may rely that every care will be taken of the premises and their contents. On the 24th inst. I will pay the balance, viz., £50, to complete the £75 agreed upon."

On the same day the defendant received the following reply from the plaintiff's solicitor:—

“I am in receipt of your letter of to-day's date inclosing cheque for £25. deposit on your agreeing to take Mr. Krell's chambers on the third floor at 56A, Pall Mall for the two days, the 26th and 27th June, and I confirm the agreement that you are to have the entire use of these rooms during the days (but not the nights), the balance, £50, to, be paid to me on Tuesday next the 24th instant."

The processions not having taken place on the days originally appointed, namely, June 26 and 27, the defendant declined to pay the balance of £50 alleged to be due from him under the contract in writing of June 20 constituted by the above two letters. Hence the present action.

[742] Darling J., on August 11, 1902, held, upon the authority of Taylor v. Caldwell^[1] and The Moorcock^[2], that there was an implied condition in the contract that the procession should take place, and gave judgment for the defendant on the claim and counter-claim.

The plaintiff appealed.

Spencer Bower, K.C., and Holman Gregory, for the plaintiff. In the contract nothing is said about the coronation procession, but it is admitted that both parties expected that there would be a procession, and that the price to be paid for the rooms was fixed with reference to the expected procession. Darling J. held that both the claim and the counter-claim were governed by Taylor v. Caldwell^[1], and that there was an implied term in the contract that the procession should take place. It is submitted that the learned judge was wrong. If he was right, the result will be that in every case of, this kind an unremunerated promisor will be in effect an insurer of the hopes and expectations of the promisee.

Taylor v. Caldwell^[1] purports to be founded on two passages in the Digest. But other passages in the Digest are more directly in point, and shew that the implied condition is that there shall not lie a physical extinction of the subject-matter of the contract.

[VAUGHAN WILLIAMS L.J. The English cases have extended the doctrine of the Digest.]

The limits of the extension are—(1.) the not coming into being of a thing which was not in existence at the date of the contract; (2.) the case of a thing, e.g., a ship, or a person in a contract for personal service, being incapacitated from doing the work intended. In order that the person who has contracted to pay the price should be excused from doing so, there must be (1.) no default on his part; (2.) either the physical extinction or the not coming into existence of the subject-matter of the contract; (3.) the performance of the contract must have been thereby rendered impossible.

In the present case there has been no default on the part of [743] the defendant. But there has been no physical extinction of the subject-matter, and the performance of the contract was quite possible. Rule 1, laid down in Taylor v. Caldwell^[3], and not rule 3, is the rule that regulates this case. Rule 1 is directly in the plaintiff's favour, for here the contract was positive and absolute. In that case the music hall which was the subject of the contract had been burnt down, so that performance of the contract by either party had become impossible.

[VAUGHAN WILLIAMS L.J. referred to Wright v. Hall.^[4]]

The cases which will be relied on for the defendant are all distinguishable from the present case.

Appleby v. Meyers^[5], Boast v. Firth^[6], Baily v. De Crespigny^[7], Howell v. Coupland^[8], and Nickoll v. Ashton^[9] are all distinguishable from the present case, in which two of the necessary elements do not exist.

There are a number of authorities in favour of the plaintiff, such as Paradine v. Jane^[10] ; Barker v. Hodgson^[11] ; Marquis of Bute v. Thompson^[12] ; Hills v. Sughrue^[13] ; Brown v. Royal Insurance Co.^[14] These cases were all anterior to Taylor v. Caldwell.^[1] There are other cases subsequent to Taylor v. Caldwell^[1] , such as Kennedy v. Panama & c., Mail Co.^[15] ; In re Arthur^[16] ; The Moorcock.^[17]

The real question is, What was the position of the parties on June 20, and what was the contract then entered into between them? The right possessed by the plaintiff on that day was the right of looking out of the window of the room, with the opportunity of seeing the procession from that window; the only sale to the defendant was of such right as the plaintiff had, and that was all that the plaintiff was parting with by the contract. There was, of course, the risk that the procession, [744] the anticipation or which gave the room a marketable value, might, from some cause or other, never take place; but that risk passed to the defendant by the contract. On entering into the contract with the defendant the plaintiff put it out of his power to let the room to anyone else: he passed the right and the risk at the same time. No implied condition can be imported into the contract that the object of it shall be attained. There can be no implied condition that the defendant shall be placed in the actual position of seeing the procession. This case is closely analogous to that of London Founders' Association, Limited v. Clarke^[18] , where it was held that in a contract for the sale of shares in a company there was no implied covenant that the purchaser should be put into the status of a shareholder by registration. So in Turner v. Goldsmith^[19] , where the defendant contracted to employ the plaintiff for a fixed term as agent in a business which he, the defendant, ultimately abandoned before the expiration of the term, it was held that there was no implied condition for the continued existence of the business, and accordingly the plaintiff was held entitled to damages for breach of contract. And that was so although part of the res had perished; here no part of the res had perished. The rule is that the Court will not imply any condition in a contract except in case of absolute necessity: Hamlyn, v. Wood.^[20] No doubt under the Sale of Goods Act, 1893 (56 & 57 Vict. c. 71), s. 7, where the specific goods, the subject of the contract, perish, the contract is gone; but this is not a case of that kind. And s. 14 enacts that, unless specified, no implied warranty or condition as to the quality or fitness of the goods supplied under a contract shall be imported. Ashmore v. Cox^[21] is an authority in favour of the plaintiff, for it was there held that a buyer under a contract took the risk of the performance of the contract being rendered impossible by unforeseen circumstances.

Blakeley v. Muller^[22] is also in the plaintiff's favour to the extent of the counter-claim.

[745] [Duke, K.C. The defendant abandons his counter-claim for £25 so that the sole question is as to his liability for the £50.

Upon the main question, then, it is submitted that both the decision in Blakeley v. Muller^[23] and of Darling, J. in the present case are opposed to the principle of Taylor v.Caldwell.^[1] The contract here is absolute, and the defendant has not, as he might have done, guarded himself against the risk by suitable words.

Then, if it is said that this was a mere licence to use the room and therefore revocable as not being under seal, it has now been decided that even if such a licence is revoked an action is still maintainable for breach of contract: Kerrison v. Srnith.^[24]

In conclusion it is submitted that the Court cannot imply an express condition that the procession should pass. Nothing should be implied beyond what was necessary to give to the contract that efficacy which the parties intended at the time. There is no such necessity here; in fact, the inference is the other way, for money was paid before the days specified; which shews that the passing of the procession did not really constitute the basis of the contract, except in a popular sense. The truth is that each party had an expectation, no doubt; but the position is simply this: one says, "Will you take the room?" and the other says, "Yes." That is all. The contract did nothing more than give the defendant the opportunity of seeing whatever might be going on upon the days mentioned.

Duke, K.C., and Ricardo, for the defendant. The question is, What was the bargain? The defendant contends that it was a bargain with an implied condition that the premises taken were premises in front of which a certain act of State would take place by Royal Proclamation. A particular character was thus impressed upon the premises; and when that character ceased to be impressed upon them the contract was at an end. It is through nobody's fault, but through an unforeseen misfortune that the premises lose that character. The price agreed to be paid must he regarded: it is equivalent to [746] many thousands a year. What explanation can be given of that, except that it was agreed to be paid for the purpose of enabling the defendant to see the procession? It was the absolute assumption of both parties when entering into the contract that the procession would pass.

The principle of Taylor v. Caldwell^[1] —namely, that a contract for the sale of a particular thing must not be construed as a positive contract, but as subject to an implied condition that, when the time comes for fulfilment, the specified thing continues to exist—exactly applies. The certainty of the coronation and consequent procession taking place was the basis of this contract. Both parties bargained upon the happening of a certain event the occurrence of which gave the premises a special character with a corresponding value to the defendant; but as the condition failed the premises lost their adventitious value. There has been such a change in the character of the premises which the plaintiff agreed the defendant should occupy as to deprive them of their value. When the premises become unfit for the purpose for which they were taken the bargain is off: Taylor v. Caldwell^[25] , the principle of which case was adopted by the Court of Appeal in Nickoll v. Ashton.^[26] What was in contemplation here was not that the defendant should merely go and sit in the room, but that he should see a procession which both parties regarded as an inevitable event. There was an implied warranty or condition founded on the presumed intention of the parties, and upon reason: The Moorcock.^[27] No doubt the observations of the Court in that ca.se were addressed to a totally different subject-matter, but the principle laid down was exactly as stated in Taylor v. Caldwell ^[1]and Nickoll v. Ashton.^[28] In Hamlyn v. Wood^[29] it was held that a contract there must be a reasonable implication in order to give the transaction such efficacy as both parties intended it to have, and that without such implication the consideration would fail. In the case of a demise, collateral bargains do not arise; but here [747] there is an agreement, and what has to be done is to ascertain the meaning and intention the parties had in entering into it.

[STIRLING L.J. In Appleby v. Myers^[30] there was a contract to supply certain machinery to a building, but before the completion of the contract the building was burnt down; and it was held that both parties were excused from performance of the contract.]

In that case the contract had been partly performed; but the defendant's case is stronger than that. When, as here, the contract is wholly executory and the subject-matter fails, the contract is at an end.

[STIRLING L.J. In Baily v. De Crespigny^[31] , where the performance of a covenant woo rendered impossible by an Act of Parliament, it was held that the covenantor was discharged.

VAUGHN WILLIAMS L.J. In Howell v. Coupland^[32] the contract was held to be subject to an implied condition that the parties should-be excused if performance became impossible through the perishing of the subject-matter.]

That applies here: it is impossible for the plaintiff to give the defendant that which he bargained for, and, therefore, there is a total failure of consideration.

To sum up, the basis of the contract is that there would be a procession; that is to say it is a contract based upon a certain thing coming into existence: there is a condition precedent that there shall be a procession. But for the mutual expectation of a procession upon the days mentioned there would have been no contract whatever. The basis of the contract was also the continuance of a thing in a certain condition; for on June 20 the rooms were capable of being described as a place from which to view a procession on two particular days; whereas when those days arrived the rooms were no longer capable of being so described.

Holman Gregory replied.

Cur. adv. vult.

Aug. 11. VAUGHAN WILLIAMS L.J. read the following written judgment:—The real question in this case is the extent [748] of the application in English law of the principle of the Roman law which has been adopted and acted on in many English decisions, and notably in the case of Taylor v. Caldwell.^[1] That case at least makes it clear that

“where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfilment of the contract arrived, some particular specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be considered a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor."

Thus far it is clear that the principle of the Roman law has been introduced into the English law. The doubt in the present case arises as to how far this principle extends. The Roman law dealt with obligationes de certo corpore. Whatever may have been the limits of the Roman law, the case of Nickoll v. Ashton^[33] makes it plain that the English law applies the principle not only to cases where the performance of the contract becomes impossible by the cessation of existence of the thing which is the subject-matter of the contract, but also to cases where the event which renders the contract incapable of performance is the cessation or non-existence of an express condition or state of things, going to the root of the contract, and essential to its performance. It is said, on the one side, that the specified thing, state of things, or condition the continued existence of which is necessary for the fulfilment of the contract, so that the parties entering into the contract must have contemplated the continued existence of that thing, condition, or state of things as the foundation of what was to be done under the contract, is limited to things which are either the subject-matter of the contract or a condition or state of things, present or anticipated, which is expressly [749] mentioned in the contract. But, on the other side, it is said that the condition or state of things need not be expressly specified, but that it is sufficient if that condition or state of things clearly appears by extrinsic evidence to have been assumed by the parties to be the foundation or basis of the contract, and the event which causes the impossibility is of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made. In such a case the contracting parties will not be held bound by the general words which, though large enough to include, were not used with reference to a possibility of a particular event rendering performance of the contract impossible. I do not think that the principle of the civil law as introduced into the English law is limited to cases in which the event causing the impossibility of performance is the destruction or non-existence of some thing which is the subject-matter of the contract or of some condition or state of things expressly specified as a condition of it. I think that you first have to ascertain, not necessarily from the terms of the contract, but, if required, from necessary inferences, drawn from surrounding circumstances recognised by both contracting parties, what is the substance of the contract, and then to ask the question whether that substantial contract needs for its foundation the assumption of the existence of a particular state of things. If it does, this will limit the operation of the general words, and in such case, if the contract becomes impossible of performance by reason of the non-existence of the state of things assumed by both contracting parties as the foundation of the contract, there will be no breach of the contract thus limited. Now what are the facts of the present case? The contract is contained in two letters of June 20 which passed between the defendant and the plaintiff's agent, Mr. Cecil Bisgood. These letters do not mention the coronation, but speak merely of the taking of Mr. Krell's chambers, or, rather, of the use of them, in the daytime of June 26 and 27, for the sum of £75, £25. then paid, balance £50 to be paid on the 24th. But the affidavits, which by agreement between the parties are to be taken as stating the facts of the case, shew that the plaintiff exhibited on his [750] premises, third floor, 56A, Pall Mall, an announcement to the effect that windows to view the Royal coronation procession were to be let, and that the defendant was induced by that announcement to apply to the housekeeper on the premises, who said that the owner was willing to let the suite of rooms for the purpose of seeing the Royal procession for both days, but not nights, of June 26 and 27.

In my judgment the use of the rooms was let and taken for the purpose of seeing the Royal procession. It was not a demise of the rooms, or even an agreement to let and take the rooms. It is a licence to use rooms for a particular purpose and none other. And in my judgment the taking place of those processions on the days proclaimed along the proclaimed route, which passed 56A, Pall Mall, was regarded by both contracting parties as the foundation of the contract; and I think that it cannot reasonably be supposed to have been in the contemplation of the contracting parties, when the contract was made, that the coronation would not be held on the proclaimed days, or the processions not take place on those days along the proclaimed route; and I think that the words imposing on the defendant the obligation to accept and pay for the use of the rooms for the named days, although general and unconditional, were not used with reference to the possibility of the particular contingency which afterwards occurred. It was suggested in the course of the argument that if the occurrence, on the proclaimed days, of the coronation and the procession in this case were the foundation of the contract, and if the general words are thereby limited or qualified, so that in the event of the non-occurrence of the coronation and procession along the proclaimed route they would discharge both parties from further performance of the contract, it would follow that if a cabman was engaged to take some one to Epsom on Derby Day at a suitable enhanced price for such a journey, say £10, both parties to the contract would be discharged in the contingency of the race at Epsom for some reason becoming impossible; but I do not think this follows, for I do not think that in the cab case the happening of the race would be the foundation of the contract. No doubt the purpose of the engager would be to go to see the Derby, and the price would be proportionately high; but the cab had [751] no special qualifications for the purpose which led to the  selection of the cab for this particular occasion. Any other cab would have done as well. Moreover, I think that, under the cab contract, the hirer, even if the race went off, could have said, "Drive me to Epsom; I will pay you the agreed sum; you have nothing to do with the purpose for which I hired the cab," and that if the cabman refused he would have been guilty of a breach of contract, there being nothing to qualify his promise to drive the hirer to Epsom on a particular day. Whereas in the case of the coronation, there is not merely the purpose of the hirer to see the coronation procession, but it is the coronation procession and the relative position of the rooms which is the basis of the contract as much for the lessor as the hirer; and I think that if the King, before the coronation day and after the contract, had died, the hirer could not have insisted on having the rooms on the days named. It could not in the cab case be reasonably said that seeing the Derby race was the foundation of the contract, as it was of the licence in this case. Whereas in the present case, where the rooms were offered and taken, by reason of their peculiar suitability from the position of the rooms for a view of the coronation procession, surely the view of the coronation procession was the foundation of the contract, which is a very different thing from the purpose of the man who engaged the cab—namely, to see the race—being held to be the foundation of the contract. Each case must be judged by its own circumstances. In each case one must ask oneself, first, what, having regard to all the circumstances, was the foundation of the contract? Secondly, was the performance of the contract prevented? Thirdly, was the event which prevented the performance of the contract of such a character that it cannot reasonably be said to have been in the contemplation of the parties at the date of the contract? If all these questions are answered in the affirmative (as I think they should be in this case), I think both parties are discharged from further performance of the contract. I think that the coronation procession was the foundation of this contract, and that the non-happening of it prevented the performance of the contract; and, secondly, I think that the [752] non-happening of the procession, to use the words of Sir James Hannen in Baily v. De Crespigny^[34] , was an event “of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, and that they are not to be held bound by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened." The test seems to be whether the event which causes the impossibility was or might have been anticipated and guarded against. It seems difficult to say, in a case where both parties anticipate the happening of an event, which anticipation is the foundation of the contract, that either party must be taken to have anticipated, and ought to have guarded against, the event which prevented the performance of the contract. In both Jackson v. Union Marine Insurance Co.^[35] and Nickoll v. Ashton^[28] the parties might have anticipated as a possibility that perils of the sea might delay the ship and frustrate the commercial venture: in the former case the carriage of the goods to effect which the charterparty was entered into; in the latter case the sale of the goods which were to be shipped on the steamship which was delayed. But the Court held in the former case that the basis of the contract was that the ship would arrive in time to carry out the contemplated commercial venture, and in the latter that the steamship would arrive in time for the loading of the goods the subject of the sale. I wish to observe that cases of this sort are very different from cases where a contract or warranty or representation is implied, such as was implied in The Moorcock^[36] , and refused to be implied in Hamlyn v.Wood,^[29] But The Moorcock^[36] is of importance in the present case as shewing that whatever is the suggested implication—be it condition, as in this case, or warranty or representation—one must, in judging whether the implication ought to be made, look. not only at the words of the contract, but also at the surrounding facts and the knowledge of the parties of those facts. There seems to rile to be ample [753] authority for this proposition. Thus in Jackson v. Union Marine Insurance Co.^[37] , in the Common Plead, the question of whether the object of the voyage had been frustrated by the delay of the ship was left as a question of fact to the jury, although there was nothing in the charterparty defining the time within which the charterers were to supply the cargo of iron rails for San Francisco, and nothing on the face of the charterparty to indicate the importance of time in the venture; and that was a case in which, as Bramwell B. points out in his judgment at p.148, Taylor v. Caldwell^[1] was a strong authority to support the conclusion arrived at in the judgment—that the ship not arriving in time for the voyage contemplated, but at such time as to frustrate the commercial venture, was not only breach of the contract but discharged the charterer, though he had such an excuse that no action would lie. And, again. in Harris v. Dreesman^[38] the vessel had to be loaded as no particular time was mentioned, within a reasonable time; and, in judging of a reasonable time, the Court approved of evidence, being given that the defendants, the charterers, to the knowledge of the plaintiffs, had no control over the colliery from which both parties knew that the coal was to come; and that, although all that was said in the charterparty was that the vessel should proceed to Spital Tongue's Spout (the spout of the Spital Tongue's Colliery), and there take on board from the freighters a full and complete cargo of coals, and five tons of coke, and although there was no evidence to prove any custom in the port as to loading vessels in turn. Again it was held in Mumford v. Gething^[39] that, in construing a written contract of service under which A. was to enter the employ of B., oral evidence is admissible to shew in what capacity A. was to, serve B. See also Price v. Mouat.^[40] The rule seems to be that which is laid down in Taylor on Evidence, vol. ii. s. 1082:

"It may be laid down as a broad and distinct rule of law that extrinsic evidence of every material fact which will enable the Court to ascertain the nature and qualities of the subject-matter of the instrument, or, in other words, to identify the [754] persons and things to which the instrument refers, must of necessity be received."

And Lord Campbell in his judgment says:

"I am of opinion that, when there is a contract for the sale of a specific subject-matter, oral evidence may be received, for the purpose of shewing what that subject-matter was, of every fact within the knowledge of the parties before and at the time of the contract."

See per Campbell C.J., Macdonald v. Longbottom.^[41] It seems to me that the language of Willes J. in Lloyd v. Guibert^[42] points in the same direction. I myself am clearly of opinion that in this case, where we have to ask ourselves whether the object of the contract was frustrated by the non-happening of the coronation and its procession on the days proclaimed, parol evidence is admissible to shew that the subject of the contract was rooms to view the coronation procession, and was so to the knowledge of both parties. When once this is established, I see no difficulty whatever in the case. It is not essential to the application of the principle of Taylor v. Caldwell^[1] that the direct subject of the contract should perish or fail to be in existence at the date of performance of the contract. It is sufficient if a state of things or condition expressed in the contract and essential to its performance perishes or fails to be in existence at that time. In the present case the condition which fails and prevents the achievement of that which was, in the contemplation of both parties, the foundation of the contract, is not expressly mentioned either as a condition of the contract or the purpose of it; but I think for the reasons which I have given that the principle of Taylor v. Caldwell^[1] ought to be applied. This disposes of the plaintiff's claim for £50 unpaid balance of the price agreed to be paid for the use of the rooms. The defendant at one time set up a cross-claim for the return of the £25 he paid at the date of the contract. As that claim is now withdrawn it is unnecessary to say anything about it. I have only to add that the facts of this case do not bring it within the principle laid down in Stubbs v. Holywell Ry. Co.^[43] ; that in the case of contracts falling directly within the rule of [755] Taylor v. Caldwell^[1] the subsequent impossibility does not affect rights already acquired, because the defendant had the whole of June 24 to pay the balance, and the public announcement that the coronation and processions would not take place on the proclaimed days was made early on the morning of the 24th, and no cause of action could accrue till the end of that day. I think this appeal ought to be dismissed.

ROMER L.J. With some doubt I have also come to the conclusion that this case is governed by the principle on which Taylor v. Caldwell^[1] was decided, and accordingly that the appeal must be dismissed. The doubt I have felt was whether the parties to the contract now before us could be said, under the circumstances, not to have had at all in their contemplation the risk that for some reason or other the coronation processions might not take place on the days fixed, or, if the processions took place, might not pass so as to be capable of being viewed from the rooms mentioned in the contract; and whether, under this contract, that risk was not undertaken by the defendant. But on the question of fact as to what was in the contemplation of the parties at the time, I do not think it right to differ from the conclusion arrived at by Vaughan Williams L.J., and (as I gather) also arrived at by my brother Stirling. This being so, I concur in the conclusions arrived at by Vaughan Williams L.J. in his judgment, and I do not desire to add anything to what he has said so fully and completely.

STIRLING L.J. said he had had an opportunity of reading the judgment delivered by Vaughan Williams L.J., with which he entirely agreed. Though the case was one of very great difficulty, he thought it came within the principle of Taylor v. Caldwell.^[1]

Appeal dismissed.

Solicitors: Cecil Bisgood; M. Grunebaum.

NOTE.—For other cases arising out of the postponement of the coronation, See the next following case; Elliott v. Crutchley, ante, p. 476, and Herne Bay Steam Boat Co. v. Hutton, ante, p. 683.

[1] 3 B. & S. 826.

[2] (1889) 14 P. D. 64.

[3] 3 B. & S. at p. 833.

[4] (1858) E. B. & E. 746.

[5] (1867) L. R. 2 C.P. 651.

[6] (1868) L. R.4 C. P. 1.

[7] (1869) L. R. 4 Q. B. 180.

[8] (1876) 1 Q. B. D. 258.

[9] [1901] 2 K. B. 126.

[10] (1646) Al. 26.

[11] (1814) 3 M. & S. 267; 15 R. R. 485.

[12] (1844) 13 M. & W. 487.

[13] (1846) 15 M. & W. 253.

[14] (1859) 1 E. & E. 853. 

[15] (1867) L. R. 2 Q. B. 580.

[16] (1880) 14 Ch. D. 603.

[17] 14 P. D. 64.

[18] (1888) 20 Q. B. D. 576, 579, 580,582.

[19] [1891] 1 Q. B. 544, 548, 551.

[20] [1891] 2 Q. B. 488, 491-2.

[21] [1899] 1 Q. B. 436, 441

[22] [1903] 88 L.T. 90; 67 J.P. 51: post, p. 760 (note).

[23] 88 L. T. 90; 67 J. P. 51.

[24] [1897] 2 Q. B. 445.

[25] 3 B. & S. at p. 832.

[26] [1901] 2 K. B. 126, 137.

[27] 14 P. D. 64, 68.

[28] [1901] 2 K. B.126.

[29] [1891] 2 Q. B. 488.

[30] L. R. 2 C. P. 651.

[31] L. R. 4, Q. B. 180.

[32] 1 Q. B. D. 258. 

[33] [1901] 2 K. B.126.

[34] L. R. 4 Q. B. 185.

[35] (1873) L. R. 8 C. P. 572.

[36] 14 P. D. 64.

[37] L. R. 8 C. P. 572; (1874) 10 C. P: 125; 42 L. J. (C.P.) 284.

[38] (1854) 23 L. J. (Ex.) 210.

[39] (1859) 7 C. B. (N.S.) 305.

[40] (1862) 11 C. B. (N.S.) 508.

[41] (1859) 1 E. & E. 977, at p. 983.

[42] (1865) 35 L. J. (Q.B.) 74, 75.

[43] (1867) L. R.. 2 Ex. 311.

153 Mass 517, 27 N.E. 667 (1891)
ALONZO M. BUTTERFIELD
v.
NAPOLEON L. BYRON.
Hampden. September 23, 1890. — May 19, 1891.

Present: FIELD, C. J., W. ALLEN, C. ALLEN, HOLMES, KNOWLTON, MORTON, & LATHROP, JJ.

Building Contract — Act of God — Implied Condition — Failure of Consideration — Assumpsit.

A builder and a landowner entered into a contract, by which the former was to " make, erect, build, and finish " a hotel upon the land, and the latter was to do the grading, excavating, stone-work, brick-work, painting, and plumbing, and pay a certain sum as follows: each month seventy-five per cent of the value of the work of the preceding month, the balance in thirty days after completion. The building was destroyed by lightning shortly before completion. Held, that the contract was upon an implied condition that the building when begun should continue in existence until completed; and that neither party could recover damages for a non-performance of the contract, but each might recover from the other, the landowner for what he had paid, the builder for what he had done and furnished, under the same.

CONTRACT, brought in the name of the plaintiff for the benefit of certain insurance companies, for breach of a building contract entered into between the plaintiff and the defendant. At the trial in the Superior Court, before Barker, J., there was evidence tending to show the following facts.

On November 13, 1888, the plaintiff, who owned a parcel of land in the town of Montgomery, on which he intended to build a hotel, and the defendant, who was a builder, entered into the contract in question, which contained the following provisions:

[158]

"The said N. Byron covenants and agrees to and with the said A. M. Butterfield to make, erect, build, and finish in a good, substantial, and workmanlike manner, a three and one half story frame hotel upon lot of land situated in Montgomery, Mass., said hotel to be built agreeable to the draught, plans, explanations, or specifications furnished, or to be furnished, to said A. M. Butterfield by Richmond and Seabury, of good and substantial materials, and to be finished complete on or before the twentieth day of May, 1889.

"And said A. M. Butterfield covenants and agrees to pay to said N. Byron for the same eight thousand five hundred dollars, as follows: seventy-five per cent of the amount of work done and materials furnished during the preceding month to be paid for on the first of the following month, and the remaining twenty-five per cent to be paid thirty days after the entire completion of the building."

By the specifications referred to, the plaintiff was to do the grading, excavating, stone-work, brick-work, painting, and plumbing.

The time for completing the contract was subsequently extended to June 10, 1889, and a provision was made that the defendant should forfeit $15 for every day's default after that date. Up to May 25, 1889, the defendant had complied with the contract as far as he had gone, and had almost finished the building. The plaintiff, who had insured his interest in the building with the companies for whose benefit the action was brought, had up to the same time made payments to the defendant amounting to $5,652.30, for work done and materials furnished. On May 25 the building was struck by lightning and burned to the ground, by which event it was rendered impossible for the defendant to complete the building within the required time. The companies in which the plaintiff had insured paid him the sum of $6,914.08, viz. $5,652.30 for advances made to the defendant, and $1,261.78 for work done and materials furnished by the plaintiff in laying the foundations; and the plaintiff assigned to the companies whatever claims he might have against the defendant for breach of the contract. The plaintiff never made any demand upon the defendant to rebuild, nor offered to lay the necessary foundations for a new building.[519] The defendant never called upon the plaintiff to lay such foundations, nor offered to rebuild.

At the trial, the plaintiff contended that he was entitled to recover in his action (1) the whole of the sum of $6,914.08, (2) $38 for certain shingles and window weights that had been saved from the fire and carried away by the defendant, and (3) the amount forfeited under the contract at the rate of $15 a day from June 10, 1889, to the date of the writ.

Upon these facts the judge directed a verdict for the defendant, and reported the case for the determination of this court, such order to be made as the court might direct.

The case was argued at the bar in September, 1890, and afterwards, in February, 1891, was submitted on the briefs to all the judges.

G. D. Robinson, for the plaintiff. G. M. Steams, (W. B. Stone with him,) for the defendant.

KNOWLTON, J. It is well established law, that, where one contracts to furnish labor and materials, and construct a chattel or build a house on land of another, he will not ordinarily be excused from performance of his contract by the destruction of the chattel or building, without his fault, before the time fixed for the delivery of it. 'Adams v. Nichols, 19 Pick. 275. Wells v. Calnan, 107 Mass. 514. Dermott v. Jones, 2 Wall. 1. School Trustees of Trenton v. Bennett, 3 Dutcher, 513. Tompkins v. Dudley, 25 N. Y. 272. ' It is equally well settled, that when work is to be done under a contract on a chattel or building which is not wholly the property of the contractor, or for which ne is not solely accountable, as where repairs are to be made on the property of another, the agreement on both sides is upon the implied condition that the chattel or building shall continue in existence, and the destruction of it without the fault of either of the parties will excuse performance of the contract, and leave no right of recovery of damages in favor of either against the other. Taylor v. Caldwell, 3 B. & S. 826. Lord v. Wheeler, 1 Gray, 282. Gilbert <f Barker Manuf. Co. v. Butler, 146 Mass. 82. Eliot National Bank v. Beal, 141 Mass. 566, and cases there cited. Dexter v. Norton, 47 N. Y. 62. Walker v. Tucker, 70 111. 527. In such cases, from the very nature of the agreement as applied to the subject matter, it is manifest that, while nothing [520] is expressly said about it, the parties contemplated the continued existence of that to which the contract relates. The implied condition is a part of the contract, as if it were written into it, and by its terms the contract is not to be performed if the subject matter of it is destroyed, without the fault of either of the parties, before the time for complete performance has arrived.

The fundamental question in the present case is, What is the true interpretation of the contract ? Was the house while in the process of erection to be in the control and at the sole risk of the defendant, or was the plaintiff to have a like interest, as the builder of a part of it ? Was the defendant's undertaking to go on and build and deliver such a house as the contract called for, even if he should be obliged again and again to begin anew on account of the repeated destruction of a partly completed building by inevitable accident, or did his contract relate to one building only, so that it would be at an end if the building, when nearly completed, should perish without his fault ? It is to be noticed that his agreement was not to build a house, furnishing all the labor and materials therefor. His contract was of a very different kind. The specifications are incorporated into it, and it appears that it was an agreement to contribute certain labor and materials towards the erection of a house on land of the plaintiff, towards the erection of which the plaintiff himself was to contribute other labor and materials, which contributions would together make a completed house. The grading, excavating, stone-work, brick-work, painting, and plumbing were to be done by the plaintiff.

Immediately before the fire, when the house was nearly completed, the defendant's contract, so far as it remained unperformed, was to finish a house on the plaintiff's land, which had been constructed from materials and by labor furnished in part by the plaintiff and in part by himself. He was no more responsible that the house should continue in existence than the plaintiff was. Looking at the situation of the parties at that time, it was like a contract to make repairs on the house of another. His undertaking and duty to go on and finish the work was upon an implied condition that the house, the product of their joint contributions, should remain in existence. The destruction of it by fire discharged him from his contract. The [521] fact that the house was not in existence when the contract was made is immaterial. Howell v. Coupland, 1 Q. B. D. 258.

It seems very clear that, after the building was burned, and. just before the day fixed for the completion of the contract, the defendant could not have compelled the plaintiff to do the grading, excavating, stone-work, brick-work, painting, and plumbing for another house of the same kind. The plaintiff might have answered, " I do not desire to build another house which cannot be completed until long after the date at which I wished to use my house. My contract related to one house. Since that has been destroyed without my fault, I am under no further obligation." If the plaintiff could successfully have made this answer to a demand by the defendant that he should do his part towards the erection of a second building, then certainly the defendant can prevail on a similar answer in the present suit. In other words, looking at the contract from the plaintiffs position, it seems manifest that he did not agree to furnish the work and materials required of him by the specifications for more than one house, and if that was destroyed by inevitable accident, just before its completion, he was not bound to build another, or to do anything further under his contract. If the plaintiff was not obliged to make his contribution of work and materials towards the building of a second house, neither was the defendant.*" The agreement of each to complete the performance of the contract after a building, the product of their joint contributions, had been partly erected, was on an implied condition that the building should continue in existence. Neither can recover anything of the other under the contract^ for neither has performed the contract so that its stipulations can be availed of. The case of Cook v. MeCabe, 53 Wis. 250, was very similar in its facts to the one at bar, and identical with it in principle. There the court, in an elaborate opinion, after a full consideration of the authorities, held that the contractor could recover of the owner a pro rata share of the contract price for the work performed and the materials furnished before the fire. Clark v. Franklin, 7 Leigh, 1, is of similar purport.

What are the rights of the parties in regard to what has been done in part performance of a contract in which there is an implied condition that the subject to which the contract relates [522] shall continue in existence, and where the contemplated work cannot be completed by reason of the destruction of the property without fault of either of the parties, is in dispute upon the authorities. The decisions in England differ from those of Massachusetts, and of most of the other States of this country. There the general rule, stated broadly, seems to be that the loss must remain where it first falls, and that neither of the parties can recover of the other for anything done under the contract. In England, on authority, and upon original grounds not very satisfactory to the judges of recent times, it is held that freight advanced for the transportation of goods subsequently lost by the perils of the sea cannot be recovered back. Allison v. Bristol Ins. Co. 1 App. Cas. 209, 226. Byrne v. Schiller, L. R. 6 Ex. 319. In the United States and in Continental Europe the rule is different. Grriggs v. Austin, 3 Pick. 20, 22. Brown v. Harris, 2 Gray, 359. In England it is held that one who has partly performed a contract on property of another which is destroyed without the fault of either party, can recover nothing; and on the other hand, that one who has advanced payments on account of labor and materials furnished under such circumstances cannot recover back the money. Appleby v. Myers, L. R. 2 0. P. 651. Anglo-Egyptian Navigation Co. v. Rennie, L. R. 10 C. P. 271. One who has advanced money for the instruction of his son in a trade cannot recover it back if he who received it dies without giving the instruction. Whinevp v. Hughes, L. R. 6 C. P. 78. But where one dies and leaves unperformed a contract which is entire, his administrator may recover any instalments which were due on it before his death. Stubbs v. Holywell Railway, L. R. 2 Ex. 311.

In this country, where one is to make repairs on a house of another under a special contract, or is to furnish a part of the work and materials used in the erection of a house, and his contract becomes impossible of performance on account of the destruction of the house, the rule is uniform, so far as the authorities have come to our attention, that he may recover for what he has done or furnished. In Cleary v. Sohier, 120 Mass. 210, the plaintiff made a contract to lath and plaster a certain building for forty cents per square yard. The building was destroyed by a fire which was an unavoidable casualty. The [523] plaintiff had lathed the building and put on the first coat of plaster, and would have put on the second coat, according to his contract, if the building had not been burned. He sued on an implied assumpsit for work done and materials found. It was agreed that, if he was entitled to recover anything, the judgment should be for the price charged. It was held that he could recover. See also Lord v. Wheeler, 1 Gray, 282 ; Wells v. Calnan, 107 Mass. 514, 517. In Cook v. MoCabe, ubi supra, the plaintiff recovered pro rata under his contract; that is, as we understand, he recovered on an implied assumpsit at the contract rate. In Hollis v. Chapman, 36 Texas, 1, and in Clark v. Franklin, 7 Leigh, 1, the recovery was a proportional part of the contract price. To the same effect are Schwartz v. Saunders, 46 111. 18, Rawson v. Clark, 70 111. 656, and Clark v. Busse, 82 111. 515. The same principle is applied to different facts in Jones v. Judd, 4 Comst. 411, and in Margrave v. Conroy, 4 C. E. Green, 281. If the owner in such a case has paid in advance, he may recover back his money, or so much of it as was an overpayment. The principle seems to be, that when, under an implied condition of the contract, the parties are to be excused from performance if a certain event happens, and by reason of the happening of the event it becomes impossible to do that which was contemplated by the contract, there is an implied assumpsit for what has properly been done by either of them, the law dealing with it as done at the request of the other, and creating a liability to pay for it its value, to be determined by the price stipulated in the contract, or in some other way if the contract price cannot be made applicable. Where there is a bilateral contract for an entire consideration moving from each party, and the contract cannot be performed, it may be held that the consideration on each side is the performance of the contract by the other, and that a failure completely to perform it is a failure of the entire consideration, leaving each party, if there has been no breach or fault on either side, to his implied assumpsit for what he has done.

The only question that remains in the present case is one of pleading. The defendant is entitled to be compensated at the contract price for all he did before the fire. The plaintiff is to be allowed for all his payments. If the payments are to be treated merely as advancements on account of a single entire [524] consideration, namely, the completion of the whole work, the work not having been completed, they may be sued for in this action, and the defendant's only remedy available in this suit is by a declaration in set-off. If, on the other hand, each instalment due was a separate consideration for the payment made at the time, then as to those instalments and the payments of them the contract is completely executed, and the plaintiff can recover nothing, and the implied assumpsit in favor of the defendant can be only for the part which remains unpaid.

We are of opinion that the consideration which the defendant was to receive was an entire sum for the performance of the contract, and that the payments made were merely advances on account of it, and that, on his failure to perform the contract, there was a failure of consideration which gave the plaintiff a right to sue for money had and received, and that the like failure of consideration on the other side gave the defendant a right to sue on an implied assumpsit for work done and materials found.

The $38 due from the defendant to the plaintiff cannot be recovered in this action. The report and the pleadings show that the suit was brought under an assignment for the benefit of the insurers, to recover damages for a breach of the contract for the erection of the building, and not to recover the value of the shingles or weights carried away from the ruins.

According to the terms of the report, the ruling being wrong, such order may be made as this court shall direct. A majority of the court are of opinion that the verdict should be set aside, and the defendant be given leave to file a declaration in set-off, if he is so advised, on such terms as the Superior Court deems reasonable.

Verdict set aside.

258 N.Y. 194

CANADIAN INDUSTRIAL ALCOHOL COMPANY, LTD., Respondent,
v.
DUNBAR MOLASSES COMPANY, Appellant.

Canadian Industrial Alcohol Co. v. Dunbar Molasses Co., 233 App. Div. 821, affirmed.

(Argued December 3, 1931; decided January 5, 1932.)

[195] APPEAL, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 23, 1931, unanimously affirming a judgment in favor of plaintiff entered upon a verdict.

Jay Leo Rothschild, Louis Rivkin and Walter S. Beck for appellant. The contract between the parties contemplated the purchase of specific and identified molasses, the failure of which to come into existence terminated the obligations of both. Future unascertained goods may be specific goods within this rule. It is not necessary that they be presently identified and appropriated to the contract. (Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N.Y. 294; Taylor v. Caldwell, 3 Best & S. 826; Dexter v. Norton, 47 N.Y. 62; Stewart v. Stone, 127 N.Y. 500; Goldman v. Rosenberg, 116 N.Y. 78; International Paper Co. v. Rockefeller, 161 App. Div. 180.) Where the parties contract with reference to a subject-matter subsequently to come into existence, and such subject-matter does not come into existence, the obligations of both are dissolved by reason of the implied condition that it should have come into existence. (Howell v. Coupland, 1 Q.B.D. 258; Scialli v. Correale, 97 N.J.L. 165; Whipple v. Lyons Beet Sugar Refinery Co., 64 Misc. Rep. 363; 137 App. Div. 881; 202 N.Y. 522; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N.Y. 294; Clarksville Land v. Harriman, 68 N.H. 374; Ontario Fruit Growers v. Cutting Fruit Packing Co., 134 Cal. 21; Marks Realty Co. v. Hotel Hermitage Co., 170 App. Div. 484; Krell v. Henry, [1903] 2 K.B. 740; Maidment v. Krauss Milling Co., 225 App. Div. 492; McKenna v. McNamee, 15 Can. Sup. Ct. 311.) Where the parties contract with reference to a subject-matter predicated upon a basis or factor which it is assumed will continue to function and make performance possible, then the failure of that basis or factor to function, irrespective of the cause, as long as it be due to no fault of the parties, dissolves the obligation of both. (Lorillard v. Clyde, 142 [196] N.Y. 456; Texas Co. v. Hogarth Shipping Co., 256 U.S. 619; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N.Y. 294.) The letters should have been admitted in evidence to show the setting in which the contract was made. (Atterbury v. Bank of Washington Heights, 241 N.Y. 231; White's Bank of Buffalo v. Myles, 73 N.Y. 335; French v. Carhart, 1 N.Y. 96; Emmitt v. Penoyer, 151 N.Y. 564; Gillet v. Bank of America, 160 N.Y. 549; Tamplin S. S. Co. v. Anglo Mexican Pet. Products Co., [1916] 2 A. C. 397.) It was error to permit recovery on the basis of market value, and to exclude evidence of plaintiff's ability to obtain other molasses from defendant at a lesser cost. (Saxe v. Penokee, 159 N.Y. 371; Lawrence v. Porter, 63 Fed. Rep. 62; Siegel v. Huebshman, 187 App. Div. 548; Silberman v. Faber Piano Co., 190 N.Y. Supp. 629.)

George de Forest Lord, Thaddeus G. Cowell and Jesse Hoyt for respondent. The contract was unconditional and defendant cannot avoid its unrestricted undertaking because of the failure of a third party to manufacture the molasses which defendant expected to obtain in time to make delivery to the plaintiff. (Marsh v. Johnston, 125 App. Div. 597; 196 N.Y. 511; Krulewitch v. National Importing & Trading Co., 195 App. Div. 544; Richards & Co. v. Wreschner, 174 App. Div. 484; Boker v. Demorest Mfg. Co., 28 Misc. Rep. 263; Cannistraci v. Chieves & Co., 165 N.Y. Supp. 933; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N.Y. 487; Ciocca-Lombardi Wine Co. v. Fucini, 204 App. Div. 392; 236 N.Y. 584; Whitehouse v. Staten Island Water Co., 101 App. Div. 112; Hecla Powder Co. v. Sigua Iron Co., 91 Hun, 429; 157 N.Y. 437; Bigler v. Hall, 54 N.Y. 167; Thomas v. Dickinson, 23 Barb. 431; Beebee v. Johnson, 19 Wend. 500; Day v. United States, 245 U.S. 159; Northern Pac. Ry. Co. v. Amer. Trading Co., 195 U.S. 439; Jacksonville, etc., Railway v. Hooper, 160 U.S. 514; The Harriman, 76 [197] U.S. 161; Dermott v. Jones, 2 Wall. 1; City of Minneapolis v. Republic Creosoting Co., 161 Minn. 178; Kingsville Cotton Oil Co. v. Dallas Waste Mills, 210 S.W. Rep. 832; Roberts v. Lumber Co., 76 W.Va. 290; Pennsylvania R. Co. v. Reichert, 58 Md. 261; Stone v. Dennis, 3 Porter [Ala.], 231.) It was not error to exclude the letters. (Elefante v. Pizitz, 182 App. Div. 819; Carthage T. P. Mills v. Village of Carthage, 200 N.Y. 1; Chelsea Exchange Bank v. Weinstein, 248 N.Y. Supp. 47.) A purchaser is not bound to accept goods from a defaulting seller when the goods are offered at a price higher than the price named in the contract. (Havemeyer v. Cunningham, 35 Barb. 515; Saxe v. Penokee Lumber Co., 159 N.Y. 371.)

CARDOZO, Ch. J. A buyer sues a seller for breach of an executory contract of purchase and sale.

The subject-matter of the contract was "approximately 1,500,000 wine gallons Refined Blackstrap [molasses] of the usual run from the National Sugar Refinery, Yonkers, N.Y., to test around 60% sugars."

The order was given and accepted December 27, 1927, but shipments of the molasses were to begin after April 1, 1928, and were to be spread out during the warm weather.

After April 1, 1928 the defendant made delivery from time to time of 344,083 gallons. Upon its failure to deliver more, the plaintiff brought this action for the recovery of damages. The defendant takes the ground that, by an implied term of the contract, the duty to deliver was conditioned upon the production by the National Sugar Refinery at Yonkers of molasses sufficient in quantity to fill the plaintiff's order. The fact is that the output of the refinery, while the contract was in force, was 485,848 gallons, much less than its capacity, of which amount 344,083 gallons were allotted to the defendant and shipped to the defendant's customer. [198] The argument for the defendant is that its own duty to deliver was proportionate to the refinery's willingness to supply, and that the duty was discharged when the output was reduced.

The contract, read in the light of the circumstances existing at its making, or more accurately in the light of any such circumstances apparent from this record, does not keep the defendant's duty within boundaries so narrow. We may assume, in the defendant's favor that there would have been a discharge of its duty to deliver if the refinery had been destroyed (Stewart v. Stone, 127 N.Y. 500; Dexter v. Norton, 47 N.Y. 62; Nitro Powder Co. v. Agency of C. C. & F. Co., 233 N.Y. 294, 297), or if the output had been curtailed by the failure of the sugar crop (Pearson v. McKinney, 160 Cal. 649; Howell v. Coupland, 1 Q.B.D. 258; 3 Williston on Contracts, § 1949) or by the ravages of war (Matter of Badische Co., [1921] 2 Ch. 331; Horlock v. Beal, [1916] 1 A.C. 486) or conceivably in some circumstances by unavoidable strikes (American Union Line v. Oriental Navigation Corp., 239 N.Y. 207, 219; Normandie Shirt Co. v. Eagle, Inc., 238 N.Y. 218, 229; Delaware, L. & W. Co. v. Bowns, 58 N.Y. 573; and cf. Blackstock v. New York & Erie R. R. Co., 20 N.Y. 48; also 2 Williston on Contracts, § 1099, pp. 2045, 2046). We may even assume that a like result would have followed if the plaintiff had bargained not merely for a quantity of molasses to be supplied from a particular refinery, but for molasses to be supplied in accordance with 8, particular contract between the defendant and the refiner, and if thereafter such contract had been broken without fault on the defendant’s part (Scialli v. Correale, 97 N.J.L. 165; cf., however, Marsh v. Johnston, 125 App. Div. 597; 196 N.Y. 511). The inquiry is merely this, whether the continuance of a special group of circumstances appears from the terms of the contract interpreted in the setting of the occasion, to have been a tacit or implied presupposition in the minds of the [199] contracting parties, conditioning their belief in a continued obligation (Tamplin S. S. Co. v. Anglo-Mexican P. P. Co., [1916] 2 A.C. 397, 406, 407; Blackburn Bobbin Co. v. Allen & Sons, Ltd., L.R. [1918] 1 K.B. 540; Lorillard v. Clyde, 142 N.Y. 456; 3 Williston on Contracts, § 1952).

Accepting that test, we ask ourselves the question what special group of circumstances does the defendant lay before us as one of the presuppositions immanent in its bargain with the plaintiff? The defendant asks us to assume that a manufacturer, having made a contract with a middleman for a stock of molasses to be procured from a particular refinery would expect the contract to lapse whenever the refiner chose to diminish his production, and this in the face of the middleman's omission to do anything to charge the refiner with a duty to continue. Business could not be transacted with security or smoothness if a presumption so unreasonable were at the root of its engagements. There is nothing to show that the defendant would have been unable by a timely contract with the refinery to have assured itself of a supply sufficient for its needs. There is nothing to show that the plaintiff in giving the order for the molasses, was informed by the defendant that such a contract had not been made, or that performance would be contingent upon obtaining one thereafter. If the plaintiff had been so informed, it would very likely have preferred to deal with the refinery directly, instead of dealing with a middleman. The defendant does not even show that it tried to get a contract from the refinery during the months that intervened between the acceptance of the plaintiff's order and the time when shipments were begun. It has wholly failed to relieve itself of the imputation of contributory fault (3 Williston on Contracts, § 1959). So far as the record shows, it put its faith in the mere chance that the output of the refinery would be the same from year to year, and finding its faith vain, [200] it tells us that its customer must have expected to take a chance as great. We see no reason for importing into the bargain this aleatory element. The defendant is in no better position than a factor who undertakes in his own name to sell for future delivery a special grade of merchandise to be manufactured by a special mill. The duty will be discharged if the mill is destroyed before delivery is due. The duty will subsist if the output is reduced because times turn out to be hard and labor charges high (cf. Day v. United States, 245 U.S. 159, 161; Northern Pac. Ry. Co. v. American Trading Co., 195 U.S. 439, 467).

The defendant assigns as error the exclusion of correspondence that passed between itself and the plaintiff after April 10, 1928, when deliveries began. The letters, if received, would not have affected the result.

Error also is assigned in a ruling as to damages.

The plaintiff kept the contract alive till October 25, 1928, when it gave notice that it would go out into the open market, buy what molasses it required, and charge the defendant with the difference.

On June 27, 1928, while the defendant was still holding out the hope that deliveries might be made, it offered to supply the plaintiff with other molasses (400,000 gallons), the output of a different refinery, at six and one-half cents per gallon, about a cent less than the average market price in June. The offer was coupled with a notice that it would be deemed to be revoked unless the plaintiff's order for the molasses so offered was received by the defendant not later than July 2.

The price quoted in this offer was less than the market price in June, but substantially more than the price (four and three-quarters cents per gallon) at which the plaintiff had agreed to buy.

We see no merit in the claim that plaintiff, while still keeping the contract open, was chargeable with a duty to accept the substitute for performance tendered by the [201] delinquent seller (Havemeyer v. Cunningham, 35 Barb. 515).

The defendant, in making the tender, did not suggest that the plaintiff was under a duty to accept it. The tender was made "not as a matter of obligation," but for accommodation solely. The plaintiff might accept or reject as it preferred.

Another tender of substituted performance was made by the defendant on October 26, 1928, upon receipt of notice from the plaintiff that there would be a purchase in the market. Again in a spirit of "accommodation" the defendant made a tender, not of molasses, but of another contract for molasses. "We are willing to let you have 400,000 to 850,000 gallons of molasses, at our option, 7-1/4 ¢ per gallon, f. o. b., New York or Philadelphia," the offer to be deemed revoked if not accepted by return mail. The market price at that time was about one-half a cent higher.

The plaintiff replied in substance that it had no longer any faith in the defendant's readiness or ability to live up to its engagements, and did not wish to add another contract to the one already broken.

The law did not charge it with a duty to make such an experiment again.

Other rulings complained of by the defendant have been considered, and no error has been found in them.

The judgment should be affirmed with costs. (See 258 N.Y. 603.)

POUND, CRANE, LEHMAN, KELLOGG, O'BRIEN and HUBBS, JJ., concur.

Judgment affirmed.

25 Cal.2d 48, 153 P.2d 47 (1944)
CAROLINE A. LLOYD et al., Respondents,
v.
WILLIAM J. MURPHY, Appellant.
L. A. No. 18738.
Supreme Court of California. In Bank.
Oct. 31, 1944.

ChaS.W. Rollinson and Wm. Roy Ives for Appellant.

Albert W. Leeds for Respondents.

Schultheis & Laybourne and Clifford E. Royston as Amici Curiae on behalf of Respondents.

TRAYNOR, J.

On August 4, 1941, plaintiff leased to defendant for a five-year term beginning September 15, 1941, [25 Cal.2d 51] certain premises located at the corner of Almont Drive and Wilshire Boulevard in the city of Beverly Hills, Los Angeles County, "for the sole purpose of conducting thereon the business of displaying and selling new automobiles (including the servicing and repairing thereof and of selling the petroleum products of a major oil company) and for no other purpose whatsoever without the written consent of the lessor" except "to make an occasional sale of a used automobile." Defendant agreed not to sublease or assign without plaintiffs' written consent. On January 1, 1942, the federal government ordered that the sale of new automobiles be discontinued. It modified this order on January 8, 1942, to permit sales to those engaged in military activities, and on January 20, 1942, it established a system of priorities restricting sales to persons having preferential ratings of A-1-j or higher. On March 10, 1942, defendant explained the effect of these restrictions on his business to one of the plaintiffs authorized to act for the others, who orally waived the restrictions in the lease as to use and subleasing and offered to reduce the rent if defendant should be unable to operate profitably. Nevertheless defendant vacated the premises on March 15, 1942, giving oral notice of repudiation of the lease to plaintiffs, which was followed by a written notice on March 24, 1942. Plaintiffs affirmed in writing on March 26th their oral waiver and, failing to persuade defendant to perform his obligations, they rented the property to other tenants pursuant to their powers under the lease in order to mitigate damages. On May 11, 1942, plaintiffs brought this action praying for declaratory relief to determine their rights under the lease, and for judgment for unpaid rent. Following a trial on the merits, the court found that the leased premises were located on one of the main traffic arteries of Los Angeles County; that they were equipped with gasoline pumps and in general adapted for the maintenance of an automobile service station; that they contained a one-story storeroom adapted to many commercial purposes; that plaintiffs had waived the restrictions in the lease and granted defendant the right to use the premises for any legitimate purpose and to sublease to any responsible party; that defendant continues to carry on the business of selling and servicing automobiles at two other places. Defendant testified that at one of these locations he sold new automobiles exclusively and when asked if he were aware that many new automobile dealers were continuing in business replied: "Sure. It [25 Cal.2d 52] is just the location that I couldn't make a go, though, of automobiles." Although there was no finding to that effect, defendant estimated in response to inquiry by his counsel, that 90 per cent of his gross volume of business was new car sales and 10 per cent gasoline sales. The trial court held that war conditions had not terminated defendant's obligations under the lease and gave judgment for plaintiffs, declaring the lease as modified by plaintiffs' waiver to be in full force and effect, and ordered defendant to pay the unpaid rent with interest, less amounts received by plaintiffs from re- renting. Defendant brought this appeal, contending that the purpose for which the premises were leased was frustrated by the restrictions placed on the sale of new automobiles by the federal government, thereby terminating his duties under the lease.

Although commercial frustration was first recognized as an excuse for nonperformance of a contractual duty by the courts of England (Krell v. Henry [1903] 2 K.B. 740 [C.A.]; Blakely v. Muller, 19 T.L.R. 186 [K. B.]; see McElroy and Williams, The Coronation Cases, 4 Mod. L. Rev. 241) its soundness has been questioned by those courts (see Maritime National Fish, Ltd., v. Ocean Trawlers, Ltd. [1935] A.C. 524, 528-29, 56 L.Q. Rev. 324, arguing that Krell v. Henry, supra, was a misapplication of Taylor v. Caldwell, 3 B. & S. 826 [1863], the leading case on impossibility as an excuse for nonperformance), and they have refused to apply the doctrine to leases on the ground that an estate is conveyed to the lessee, which carries with it all risks (Swift v. McBean, 166 L.T. Rep. 87 [1942] 1 K.B. 375; Whitehall Court v. Ettlinger, 122 L.T. Rep. 540, (1920) 1 K.B. 680, [1919] 89 L.J. [K.B.] N.S. 126; 137 A.L.R. 1199, 1224; see collection and discussion on English cases in Wood v. Bartolino, [48 N.M. 175, 146 P.2d 883, 886-87]. Many courts, therefore, in the United States have held that the tenant bears all risks as owner of the estate (Cusack v. Pratt, 78 Colo. 28 [239 P. 22, 44 A.L.R. 55]; Yellow Cab Co. v. Stafford-Smith Co., 320 Ill. 294 [150 N.E. 670, 43 A.L.R. 1173]), but the modern cases have recognized that the defense may be available in a proper case, even in a lease. As the author declares in 6 Williston, Contracts (rev. ed. 1938), 1955, pp. 5485-87,

"The fact that lease is a conveyance and not simply a continuing contract and the numerous authorities enforcing liability to pay rent in spite of destruction of leased premises, however, have made it difficult to give relief. That the tenant has been relieved, nevertheless, [25 Cal.2d 53] in several cases indicates the gravitation of the law toward a recognition of the principle that fortuitous destruction of the value of performance wholly outside the contemplation of the parties may excuse a promisor even in a lease. . . ."

"Even more clearly with respect to leases than in regard to ordinary contracts the applicability of the doctrine of frustration depends on the total or nearly total destruction of the purpose for which, in the contemplation of both parties, the transaction was entered into."

The principles of frustration have been repeatedly applied to leases by the courts of this state (Brown v. Oshiro, 58 Cal.App.2d 190 [136 P.2d 29]; Davidson v. Goldstein, 58 Cal.App.2d Supp. 909 [136 P.2d 665]; Grace v. Croninger, 12 Cal.App.2d 603 [55 P.2d 940]; Knoblaugh v. McKinney, 5 Cal.App.2d 339 [42 P.2d 332]; Industrial Development & Land Co. v. Goldschmidt, 56 Cal.App. 507 [206 P. 134]; Burke v. San Francisco Breweries, Ltd., 21 Cal.App. 198 [131 P. 83]) and the question is whether the excuse for nonperformance is applicable under the facts of the present case.

[1] Although the doctrine of frustration is akin to the doctrine of impossibility of performance (see Civ. Code, 1511; 6 Cal.Jur. 435-450; 4 Cal.Jur. Ten-year Supp. 187-192; Taylor v. Caldwell, supra) since both have developed from the commercial necessity of excusing performance in cases of extreme hardship, frustration is not a form of impossibility even under the modern definition of that term, which includes not only cases of physical impossibility but also cases of extreme impracticability of performance (see Mineral Park Land Co. v. Howard, 172 Cal. 289, 293 [156 P. 458, L.R.A. 1916F 1]; Christin v. Superior Court, 9 Cal.2d 526, 533 [71 P.2d 205, 112 A.L.R. 1153]; 6 Williston, op.cit. supra, § 1935, p. 5419; Rest., Contracts, 454, comment a., and Cal.Ann. p. 254). Performance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by a fortuitous event, which supervenes to cause an actual but not literal failure of consideration (Krell v. Henry, supra; Blakely v. Muller, supra; Marks Realty Co. v. Hotel Hermitage Co., 170 App.Div. 484 [156 N.Y.S. 179]; 6 Williston, op. cit. supra, §§ 1935, 1954, pp. 5477, 5480; Restatement, Contracts, § 288).

[2] The question in cases involving frustration is whether [25 Cal.2d 54] the equities of the case, considered in the light of sound public policy, require placing the risk of a disruption or complete destruction of the contract equilibrium on defendant or plaintiff under the circumstances of a given case (Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour, Ltd. [1942], 167 L.T.R. [H.L.] 101, 112-113; see Smith, Some Practical Aspects of the Doctrine of Impossibility, 32 Ill. L. Rev. 672, 675; Patterson, Constructive Conditions in Contracts, 42 Columb. L. Rev. 903, 949; 27 Cal. L. Rev. 461), and the answer depends on whether an unanticipated circumstance, the risk of which should not be fairly thrown on the promisor, has made performance vitally different from what was reasonably to be expected (6 Williston, op.cit. supra, § 1963, p. 5511; Restatement, Contracts, 454). The purpose of a contract is to place the risks of performance upon the promisor, and the relation of the parties, terms of the contract, and circumstances surrounding its formation must be examined to determine whether it can be fairly inferred that the risk of the event that has supervened to cause the alleged frustration was not reasonably foreseeable. If it was foreseeable there should have been provision for it in the contract, and the absence of such a provision gives rise to the inference that the risk was assumed.

[3] The doctrine of frustration has been limited to cases of extreme hardship so that businessmen, who must make their arrangements in advance, can rely with certainty on their contracts (Anglo-Northern Trading Co. v. Emlyn Jones and Williams, 2 K.B. 78; 137 A.L.R. 1199, 1216-1221). [4] The courts have required a promisor seeking to excuse himself from performance of his obligations to prove that the risk of the frustrating event was not reasonably foreseeable and that the value of counterperformance is totally or nearly totally destroyed, for frustration is no defense if it was foreseeable or controllable by the promisor, or if counterperformance remains valuable. (La Cumbre Golf & Country Club v. Santa Barbara Hotel Co., 205 Cal. 422, 425 [271 P. 476]; Johnson v. Atkins, 53 Cal.App.2d 430, 434 [127 P.2d 1027]; Grace v. Croninger, 12 Cal.App2d 603, 606-607 [55 P.2d 940]; Industrial Development & Land Co. v. Goldschmidt, 56 Cal.App. 507, 511 [206 P. 134]; Burke v. San Francisco Breweries, Ltd., 21 Cal.App. 198, 201 [131 P. 83]; Megan v. Updike Grain Corp. (C.C.A. 8), 94 F.2d 551, 553; Herne Bay Steamboat Co. [25 Cal.2d 55] v. Hutton [1903], 2 K.B. 683; Leiston Gas Co. v. Leiston Cum Sizewell Urban District Council [1916], 2 K.B. 428; Raner v. Goldberg, 244 N.Y. 438 [155 N.E. 733]; 6 Williston, op. cit. supra, 1939, 1955, 1963; Restatement, Contracts, 288.)

[5] Thus laws or other governmental acts that make performance unprofitable or more difficult or expensive do not excuse the duty to perform a contractual obligation (Sample v. Fresno Flume etc. Co., 129 Cal. 222, 228 [61 P. 1085]; Klauber v. San Diego St. Car Co., 95 Cal. 353 [30 P. 555]; Texas Co. v. Hogarth Shipping Co., 256 U.S. 619, 630 [41 S.Ct. 612, 65 L.Ed. 1123]; Columbus Ry. Power & Light Co. v. Columbus, 249 U.S. 399, 414 [39 S.Ct. 349, 63 L.Ed. 669]; Thomson v. Thomson, 315 Ill. 521, 527 [146 N.E. 451]; Commonwealth v. Bader, 271 Pa. 308, 312 [114 A. 266]; Commonwealth v. Neff, 271 Pa. 312, 314 [114 A. 267]; London & Lancashire Ind. Co. v. Columbiana County, 107 OhioSt. 51, 64 [140 N.E. 672]; see 6 Williston, op. cit. supra, 1955, 1963, pp. 5507-09). [6] It is settled that if parties have contracted with reference to a state of war or have contemplated the risks arising from it, they may not invoke the doctrine of frustration to escape their obligations Northern Pac. Ry. Co. v. American Trading Co., 195 U.S. 439, 467-68 [25 S.Ct. 84, 49 L.Ed. 269]; Primos Chemical Co. v. Fulton Steel Corp. (D.C.N.Y.), 266 F. 945, 948; Krulewitch v. National Importing & Trading Co., 195 App.Div. 544 [186 N.Y.S. 838, 840]; Smith v. Morse, 20 La.Ann. 220, 222; Lithflux Mineral & Chem. Works v. Jordan, 217 Ill.App. 64, 68; Medeiros v. Hill, 8 Bing. 231, 131 Eng.Rep. 390, 392; Bolckow V. & Co. v. Compania Minera de Sierra Minera, 115 L.T.R. [K.B.] 745, 747).

[7] At the time the lease in the present case was executed the National Defense Act (Public Act No. 671 of the 76th Congress [54 Stats. 601], § 2A), approved June 28, 1940, authorizing the President to allocate materials and mobilize industry for national defense, had been law for more than a year. The automotive industry was in the process of conversion to supply the needs of our growing mechanized army and to meet lend-lease commitments. Iceland and Greenland had been occupied by the army. Automobile sales were soaring because the public anticipated that production would soon be restricted. These facts were commonly known and it cannot be said that the risk of war and its consequences necessitating restriction of the production and sale of automobiles [25 Cal.2d 56] was so remote a contingency that its risk could not be foreseen by defendant, an experienced automobile dealer. Indeed, the conditions prevailing at the time the lease was executed, and the absence of any provision in the lease contracting against the effect of war, gives rise to the inference that the risk was assumed. Defendant has therefore failed to prove that the possibility of war and its consequences on the production and sale of new automobiles was an unanticipated circumstance wholly outside the contemplation of the parties.

[8] Nor has defendant sustained the burden of proving that the value of the lease has been destroyed. The sale of automobiles was not made impossible or illegal but merely restricted and if governmental regulation does not entirely prohibit the business to be carried on in the leased premises but only limits or restricts it, thereby making it less profitable and more difficult to continue, the lease is not terminated or the lessee excused from further performance (Brown v. Oshiro, supra, p. 194; Davidson v. Goldstein, supra, p. 918; Grace v. Croninger, supra, p. 607; Industrial Development & Land Co. v. Goldschmidt, supra; Burke v. San Francisco Brewing Co., supra, p. 202; First National Bank of New Rochelle v. Fairchester Oil Co., 267 App.Div. 281 [45 N.Y.S.2d 532, 533]; Robitzek Inv. Co., Inc. v. Colonial Beacon Oil Co., 265 App.Div. 749 [40 N.Y.S.2d 819, 824]; Colonial Operating Corp. v. Hannon Sales & Service, Inc., 265 App.Div. 411 [39 N.Y.S.2d 217, 220]; Byrnes v. Balcom, 265 App.Div. 268 [38 N.Y.S.2d 801, 803]; Deibler v. Bernard Bros. Inc., 385 Ill. 610 [53 N.E.2d 450, 453]; Wood v. Bartolino, [48 N.M. 175,146 P.2d 883, 886, 888, 890]. Defendant may use the premises for the purpose for which they were leased. New automobiles and gasoline continue to be sold. Indeed, defendant testified that he continued to sell new automobiles exclusively at another location in the same county.

Defendant contends that the lease is restrictive and that the government orders therefore destroyed its value and frustrated its purpose. [9] Provisions that prohibit subleasing or other uses than those specified affect the value of a lease and are to be considered in determining whether its purpose has been frustrated or its value destroyed (see Owens, The Effect of the War Upon the Rights and Liabilities of Parties to a Contract, 19 California State Bar Journal 132, 143). It must not be forgotten, however, that

"The landlord has not covenanted that the tenant shall have the right to carry on the [25 Cal.2d 57] contemplated business or that the business to which the premises are by their nature or by the terms of the lease restricted shall be profitable enough to enable the tenant to pay the rent but has imposed a condition for his own benefit; and, certainly, unless and until he chooses to take advantage of it, the tenant is not deprived of the use of the premises."

(6 Williston, Contracts, op. cit. supra, § 1955, p. 5485; see, also, People v. Klopstock, 24 Cal.2d 897, 901 [151 P.2d 641].) [10] In the present lease plaintiffs reserved the rights that defendant should not use the premises for other purposes than those specified in the lease or sublease without plaintiff's written consent. Far from preventing other uses or subleasing they waived these rights, enabling defendant to use the premises for any legitimate purpose and to sublease them to any responsible tenant. This waiver is significant in view of the location of the premises on a main traffic artery in Los Angeles County and their adaptability for many commercial purposes. The value of these rights is attested by the fact that the premises were rented soon after defendants vacated them. It is therefore clear that the governmental restrictions on the sale of new cars have not destroyed the value of the lease. Furthermore, plaintiffs offered to lower the rent if defendant should be unable to operate profitably, and their conduct was at all times fair and cooperative.

[11] The consequences of applying the doctrine of frustration to a leasehold involving less than a total or nearly total destruction of the value of the leased premises would be undesirable. Confusion would result from different decisions purporting to define "substantial" frustration. Litigation would be encouraged by the repudiation of leases when lessees found their businesses less profitable because of the regulations attendant upon a national emergency. Many leases have been affected in varying degrees by the widespread governmental regulations necessitated by war conditions.

The cases that defendant relies upon are consistent with the conclusion reached herein. In Industrial Development & Land Co. v. Goldschmidt, supra, the lease provided that the premises should not be used other than as a saloon. When national prohibition made the sale of alcoholic beverages illegal, the court excused the tenant from further performance on the theory of illegality or impossibility by a change in domestic law. The doctrine of frustration might have been applied, since the purpose for which the property was leased [25 Cal.2d 58] was totally destroyed and there was nothing to show that the value of the lease was not thereby totally destroyed. In the present case the purpose was not destroyed but only restricted, and plaintiffs proved that the lease was valuable to defendant. In Grace v. Croninger, supra, the lease was for the purpose of conducting a "saloon and cigar store and for no other purpose" with provision for subleasing a portion of the premises for bootblack purposes. The monthly rental was $650. It was clear that prohibition destroyed the main purpose of the lease, but since the premises could be used for bootblack and cigar store purposes, the lessee was not excused from his duty to pay the rent. In the present case new automobiles and gasoline may be sold under the lease as executed and any legitimate business may be conducted or the premises may be subleased under the lease as modified by plaintiff's waiver. Colonial Operating Corp. v. Hannon Sales & Service, Inc., 34 N.Y.S.2d 116, was reversed in 265 App.Div. 411 [39 N.Y.S.2d 217, and Signal Land Corp. v. Loecher, 35 N.Y.S.2d 25; Schantz v. American Auto Supply Co., Inc., 178 Misc. 909 [36 N.Y.S.2d 747]; and Canrock Realty Corp. v. Vim Electric Co., Inc., 37 N.Y.S.2d 139, involved government orders that totally destroyed the possibility of selling the products for wich the premises were leased. No case has been cited by defendant or disclosed by research in which an appellate court has excused a lessee from performance of his duty to pay rent when the purpose of the lease has not been totally destroyed or its accomplishment rendered extremely impracticable or where it has been shown that the lease remains valuable to the lessee.

The judgment is affirmed.

Gibson, C.J., Shenk, J., Curtis, J., Edmonds, J., Carter, J., and Schauer, J., concurred.

453 F.2d 939 (1972)

AMERICAN TRADING AND PRODUCTION CORPORATION, Plaintiff-Appellant,
v.
SHELL INTERNATIONAL MARINE LTD., Defendant-Appellee.

No. 306, Docket 71-1837.
United States Court of Appeals, Second Circuit.
Argued December 13, 1971.
Decided January 5, 1972.

[940] Herbert M. Lord, New York City (Burlingham, Underwood, Wright, White & Lord, New York City, Frederick M. Sevekow, Jr., New York City, of counsel), for plaintiff-appellant.

MacDonald Deming, New York City (Haight, Gardner, Poor & Havens, Thomas R. H. Howarth, New York City, of counsel), for defendant-appellee.

Before SMITH, KAUFMAN and MULLIGAN, Circuit Judges.

MULLIGAN, Circuit Judge:

This is an appeal by American Trading and Production Corporation (hereinafter "owner") from a judgment entered on July 29th, 1971, in the United States District Court for the Southern District of New York, dismissing its claim against Shell International Marine Ltd. (hereinafter "charterer") for additional compensation in the sum of $131,978.44 for the transportation of cargo from Texas to India via the Cape of Good Hope as a result of the closing of the Suez Canal in June, 1967. The charterer had asserted a counterclaim which was withdrawn and is not in issue. The action was tried on stipulated facts and without a jury before Hon. Harold R. Tyler, Jr. who dismissed the claim on the merits in an opinion dated July 22, 1971.

We affirm.

The owner is a Maryland corporation doing business in New York and the charterer is a United Kingdom corporation. On March 23, 1967 the parties entered into a contract of voyage charter in New York City which provided that the charterer would hire the owner's tank vessel, WASHINGTON TRADER, for a voyage with a full cargo of lube oil from Beaumont/Smiths Bluff, Texas to Bombay, India. The charter party provided that the freight rate would be in accordance with the then prevailing American Tanker Rate Schedule (ATRS), $14.25 per long ton of cargo, plus seventy-five percent (75%), and in addition there was a charge of $.85 per long ton for passage through the Suez Canal. On May 15, 1967 the WASHINGTON TRADER departed from Beaumont with a cargo of 16,183.32 long tons of lube oil. The charterer paid the freight at the invoiced sum of $417,327.36 on May 26, 1967. On May 29th, 1967 the owner advised the WASHINGTON TRADER by radio to take additional bunkers at Ceuta due to possible diversion because of the Suez Canal crisis. The vessel arrived at Ceuta, Spanish Morocco on May 30, bunkered and sailed on May 31st, 1967. On June 5th the owner cabled the ship's master advising him of various reports of trouble in the Canal and suggested delay in entering it pending clarification. On that very day, the Suez Canal was closed due to the state of war which had developed in the Middle East. The owner then communicated with the charterer on June 5th through the broker who had negotiated the charter party, requesting approval for the diversion of the WASHINGTON TRADER which then had proceeded to a point about 84 miles northwest of Port Said, the entrance to the Canal. On June 6th the charterer responded that under the circumstances it was "for owner to decide whether to continue to wait or make the alternative passage via the Cape since Charter Party Obliges them to deliver cargo without qualification." In response the owner replied on the same day that in view of the closing of the Suez, the WASHINGTON TRADER would proceed to Bombay via the Cape of Good Hope and "we are reserving all rights for extra compensation." The vessel proceeded westward, back through the Straits of Gibraltar and around the Cape and eventually arrived in Bombay on July 15th (some 30 days later than initially expected), traveling a total of 18,055 miles instead of the 9,709 miles which it would have sailed had the Canal been open. The owner billed $131,978.44 as extra compensation which the charterer has refused to pay.

On appeal and below the owner argues that transit of the Suez Canal was the agreed specific means of performance [941] of the voyage charter and that the supervening destruction of this means rendered the contract legally impossible to perform and therefore discharged the owner's unperformed obligation (Restatement of Contracts § 460 (1932)). Consequently, when the WASHINGTON TRADER eventually delivered the oil after journeying around the Cape of Good Hope, a benefit was conferred upon the charterer for which it should respond in quantum meruit. The validity of this proposition depends upon a finding that the parties contemplated or agreed that the Suez passage was to be the exclusive method of performance, and indeed it was so argued on appeal. We cannot construe the agreement in such a fashion. The parties contracted for the shipment of the cargo from Texas to India at an agreed rate and the charter party makes absolutely no reference to any fixed route. It is urged that the Suez passage was a condition of performance because the ATRS rate was based on a Suez Canal passage, the invoice contained a specific Suez Canal toll charge and the vessel actually did proceed to a point 84 miles northwest of Port Said. In our view all that this establishes is that both parties contemplated that the Canal would be the probable route. It was the cheapest and shortest, and therefore it was in the interest of both that it be utilized. However, this is not at all equivalent to an agreement that it be the exclusive method of performance. The charter party does not so provide and it seems to have been well understood in the shipping industry that the Cape route is an acceptable alternative in voyages of this character.

The District of Columbia Circuit decided a closely analogous case, Transatlantic Financing Corp. v. United States, 124 U.S. App. D.C. 183, 363 F.2d 312 (1966). There the plaintiff had entered into a voyage charter with defendant in which it agreed to transport a full cargo of wheat on the CHRISTOS from a United States port to Iran. The parties clearly contemplated a Suez passage, but on November 2, 1956 the vessel reduced speed when war blocked the Suez Canal. The vessel changed its course in the Atlantic and eventually delivered its cargo in Iran after proceeding by way of the Cape of Good Hope. In an exhaustive opinion Judge Skelly Wright reviewed the English cases which had considered the same problem and concluded that "the Cape route is generally regarded as an alternative means of performance. So the implied expectation that the route would be via Suez is hardly adequate proof of an allocation to the promisee of the risk of closure. In some cases, even an express expectation may not amount to a condition of performance." Transatlantic Financing Corp. v. United States, supra, 363 F.2d at 317 (footnote omitted).

Appellant argues that Transatlantic is distinguishable since there was an agreed upon flat rate in that case unlike the instant case where the rate was based on Suez passage. This does not distinguish the case in our view. It is stipulated by the parties here that the only ATRS rate published at the time of the agreement from Beaumont to Bombay was the one utilized as a basis for the negotiated rate ultimately agreed upon. This rate was escalated by 75% to reflect whatever existing market conditions the parties contemplated. These conditions are not stipulated. Had a Cape route rate been requested, which was not the case, it is agreed that the point from which the parties would have bargained would be $17.35 per long ton of cargo as against $14.25 per long ton.

Actually, in Transatlantic it was argued that certain provisions in the P. & I. Bunker Deviation Clause referring to the direct and/or customary route required, by implication, a voyage through the Suez Canal. The court responded "actually they prove only what we are willing to accept—that the parties expected the usual and customary route would be used. The provisions in no way condition performance upon non-occurrence of this contingency." Transatlantic Financing Corp. v. United States, [942] supra, 363 F.2d at 317 n. 8. We hold that all that the ATRS rate establishes is that the parties obviously expected a Suez passage but there is no indication at all in the instrument or dehors that it was a condition of performance.

This leaves us with the question as to whether the owner was excused from performance on the theory of commercial impracticability (Restatement of Contracts § 454 (1932)). Even though the owner is not excused because of strict impossibility, it is urged that American law recognizes that performance is rendered impossible if it can only be accomplished with extreme and unreasonable difficulty, expense, injury or loss.^[1] There is no extreme or unreasonable difficulty apparent here. The alternate route taken was well recognized, and there is no claim that the vessel or the crew or the nature of the cargo made the route actually taken unreasonably difficult, dangerous or onerous. The owner's case here essentially rests upon the element of the additional expense involved—$131,978.44. This represents an increase of less than one third over the agreed upon $417,327.36. We find that this increase in expense is not sufficient to constitute commercial impracticability under either American or English authority.

Mere increase in cost alone is not a sufficient excuse for non-performance (Restatement of Contracts § 467 (1932)). It must be an "extreme and unreasonable"^[2] expense (Restatement of Contracts § 454 (1932)).^[3] While in the Transatlantic case supra, the increased cost amounted to an increase of about 14% over the contract price, the court did cite with approval^[4] the two leading English cases Ocean Tramp Tankers Corp. v. V/O Sovfracht (The Eugenia), 1964 2 Q.B. 226, 233 (C.A.1963) (which expressly overruled Societe Franco Tunisienne D'Armement v. Sidermar S.P.A. (The Messalia), 1961 2 Q.B. 278 (1960), where the court had found frustration because the Cape route was highly circuitous and involved an increase in cost of approximately 50%), and Tsakiroglou & Co. Lt. v. Noblee Thorl  G.m.b.H., 1960 2 Q.B. 318, 348, aff'd, 1962 A.C., 93 (1961) where the House of Lords found no frustration though the freight costs were exactly doubled due to the Canal closure.^[5]

Appellant further seeks to distinguish Transatlantic because in that case the [943] change in course was in the mid-Atlantic and added some 300 miles to the voyage while in this case the WASHINGTON TRADER had traversed most of the Mediterranean and thus had added some 9000 miles to the contemplated voyage. It should be noted that although both the time and the length of the altered passage here exceeded those in the Transatlantic, the additional compensation sought here is just under one third of the contract price. Aside from this however, it is a fact that the master of the WASHINGTON TRADER was alerted by radio on May 29th, 1967 of a "possible diversion because of Suez Canal crisis," but nevertheless two days later he had left Ceuta (opposite Gibraltar) and proceeded across the Mediterranean. While we may not speculate about the foreseeability of a Suez crisis at the time the contract was entered, there does not seem to be any question but that the master here had been actually put on notice before traversing the Mediterranean that diversion was possible. Had the WASHINGTON TRADER then changed course, the time and cost of the Mediterranean trip could reasonably have been avoided, thereby reducing the amount now claimed. (Restatement of Contracts § 336, Comment d to subsection (1) (1932)).

In a case closely in point, Palmco Shipping Inc. v. Continental Ore Corp. (The "Captain George K"), 1970 2 Lloyd's L. Rep. 21 (Q.B. 1969), The Eugenia, supra, was followed, and no frustration was found where the vessel had sailed to a point three miles northwest of Port Said only to find the Canal blocked. The vessel then sailed back through the Mediterranean and around the Cape of Good Hope to its point of destination, Kandla. The distances involved, 9700 miles via the initially contemplated Canal route and 18,400 miles actually covered by way of the Cape of Good Hope, coincide almost exactly with those in this case. Moreover, in The "Captain George K" there was no indication that the master had at anytime after entering the Mediterranean been advised of the possibility of the Canal's closure.

Finally, owners urge that the language of the "Liberties Clause," Para. 28(a) of Part II of the charter party^[6] provides explicit authority for [944] extra compensation in the circumstances of this case. We do not so interpret the clause. We construe it to apply only where the master, by reason of dangerous conditions, deposits the cargo at some port or haven other than the designated place of discharge. Here the cargo did reach the designated port albeit by another route, and hence the clause is not applicable. No intermediate or other disposition of the oil was appropriate under the circumstances.

Appellant relies on C. H. Leavell & Co. v. Hellenic Lines, Ltd., 13 F.M.C., 76, 1969 A.M.C. 2177 (1969) for a contrary conclusion. That case involved a determination as to whether surcharges to compensate for extra expenses incurred when the Suez Canal was closed after the commencement of a voyage, were available to a carrier. The Federal Maritime Commission authorized the assessment since the applicable tariffs were on file as provided by section 18(b) of the Shipping Act (46 U.S.C. § 817(b)) and also on the basis of Clause 5 of the bill of lading which is comparable to the Liberties Clause in issue here, except for the language which authorized the carrier to "proceed by any route. . . ." (Leavell, supra, 13 F.M.C. at 81, 1969 A.M.C. at 2182). This is the very language relied upon by the Commission in finding the surcharge appropriate (Leavell, supra, 13 F.M.C. at 89, 1969 A.M.C. at 2191) where the carrier proceeded to the initially designated port of destination via the Cape of Good Hope. Utilization of an alternate route contemplates berthing at the contracted port of destination. There is no such language in the clause at issue. Its absence fortifies the contention that the Liberties Clause was not intended to be applicable to the facts in litigation here.

Matters involving impossibility or impracticability of performance of contract are concededly vexing and difficult. One is even urged on the allocation of such risks to pray for the "wisdom of Solomon.”  6 A. Corbin, Contracts § 1333, at 372 (1962). On the basis of all of the facts, the pertinent authority and a further belief in the efficacy of prayer, we affirm.

[1] This is the formula utilized in the Restatement of Contracts § 454 (1932).

[2] The Restatement gives some examples of what is "extreme and unreasonable"— Restatement of Contracts § 460, Illus. 2 (tenfold increase in costs) and Illus. 3 (costs multiplied fifty times) (1932); compare § 467, Illus. 3. See generally G. Grismore, Principles of the Law of Contracts § 179 (rev. ed. J. E. Murray 1965).

[3] Both parties take solace in the Uniform Commercial Code which in comment 4 to Section 2-615 states that the rise in cost must "alter the essential nature of the performance . . ." This is clearly not the case here. The owner relies on a further sentence in the comment which refers to a severe shortage of raw materials or of supplies due to "war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost. . . ." Since this is not a case involving the sale of goods but transportation of a cargo where there was an alternative which was a commercially reasonable substitute (see Uniform Commercial Code § 2-614 (1)) the owner's reliance is misplaced.

[4] Transatlantic Financing Corp. v. United States, supra, 363 F.2d at 319 n.14.

[5] While these are English cases and refer to the doctrine of "frustration" rather than "impossibility" as Judge Skelly Wright pointed out in Transatlantic, supra, 363 F.2d at 320 n. 16 the two are considered substantially identical, 6 A. Corbin, Contracts § 1322, at 327 n. 9 (rev. ed. 1962). While Tsakiroglou and The Eugenia are criticized in Schegal, Of Nuts, and Ships and Sealing Wax, Suez, and Frustrating Things—The Doctrine of Impossibility of Performance, 23 Rutgers L. Rev. 419, 448 (1969), apparently on the theory that the charterer is a better loss bearer, the overruled Sidermar case was previously condemned in Berman, Excuse for Nonperformance in the Light of Contract Practices in International Trade, 63 Colum. L. Rev. 1413, 1424-27 (1963).

[6] "28. Liberty Clauses. (a) In any situation whatsoever and wheresoever occurring and whether existing or anticipated before commencement of or during the voyage, which in the judgment of the Owner or Master is likely to give rise to risk of capture, seizure, detention, damage, delay or disadvantage to or loss of the Vessel or any part of her cargo, or to make it unsafe, imprudent, or unlawful for any reason to commence or proceed on or continue the voyage or to enter or discharge the cargo at the port of discharge, or to give rise to delay or difficulty in arriving, discharging at or leaving the port of discharge or the usual place of discharge in such port, the Owner may before loading or before the commencement of the voyage, require the shipper or other person entitled thereto to take delivery of the Cargo at port of shipment and upon their failure to do so, may warehouse the cargo at the risk and expense of the cargo; or the owner or Master, whether or not proceeding toward or entering or attempting to enter the port of discharge or reaching or attempting to reach the usual place of discharge therein or attempting to discharge the cargo there, may discharge the cargo into depot, lazaretto, craft or other place; or the Vessel may proceed or return, directly or indirectly, to or stop at any such port or place whatsoever as the Master or the Owner may consider safe or advisable under the circumstances, and discharge the cargo, or any part thereof, at any such port or place; or the Owner or the Master may retain the cargo on board until the return trip or until such time as the Owner or the Master thinks advisable and discharge the cargo at any place whatsoever as herein provided or the Owner or the Master may discharge and forward the cargo by any means at the risk and expense of the cargo. The Owner may, when practicable, have the Vessel call and discharge the cargo at another or substitute port declared or requested by the Charterer. The Owner or the Master is not required to give notice of discharge of the cargo, or the forwarding thereof as herein provided. When the cargo is discharged from the Vessel, as herein provided, it shall be at its own risk and expense; such discharge shall constitute complete delivery and performance under this contract and the Owner shall be freed from any further responsibility. For any service rendered to the cargo as herein provided the Owner shall be entitled to a reasonable extra compensation."