Supreme Court of Canada
American National Red Cross v. Geddes Brothers, (1920) 61 S.C.R. 143
Date: 1920-10-12
The American National Red Cross (Defendant) Appellant;
and
Geddes Brothers (Plaintiffs) Respondents.
1920: June 4; 1920: October 12.
Present: Sir Louis Davies, C.J. and Idington, Duff, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Contract—Sale of goods—Abandonment by vendor—Acceptance—Notice—Subsequent acts of vendor.
G., by contract in writing, agreed to sell goods to the American Red Cross but before any were delivered wrote the latter that he would be unable to carry out his contract. The Red Cross then made an entry on its books that the contract was cancelled.
Held, reversing the judgment of the Appellate Division (47 Ont. L.R. 163) Mignault J. dissenting, that though the Red Cross did not give notice to G. that the abandonment was accepted the contract was terminated as the subsequent acts of G., and especially his failure to deliver the goods at the times specified showed that he treated it as at an end and believed that the other party had elected to accept.
Per Anglin J.—The conduct of G., viewed in the light of his letters and the terms of the contract, amounted to an intimation of abandonment and gave the Red Cross an option to rescind which was sufficiently exercised when delivery was tendered.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario affirming the judgment at the trial in favour of the plaintiffs.
The facts are sufficiently stated in the above head-note.
[Page 144]
Tilley K.C. for appellant.
D.L. McCarthy K.C. for respondents.
THE CHIEF JUSTICE.—This action is one brought to recover damages for non-acceptance by the defendants, appellants, of a quantity of woollen sweater yarn tendered by the plaintiffs under a contract, called throughout order 1788, for the sale by the plaintiffs to the defendants of 20,000 pounds of such yarn.
There is no dispute between the parties as to the facts and the single question argued at bar and to be disposed of on this appeal is whether an unequivocal and absolute written renunciation by the plaintiffs of their contract for the delivery of the yarn contained in a letter of the 2nd October, 1918, had been adopted by the defendants.
On the receipt of plaintiff’s letter of renunciation the defendants’ manager, Mr. Reed, gave instructions that the contract was to be marked “cancelled” on the defendants, records, and it was so marked, but no letter was written to plaintiffs notifying them that their renunciation of the contract had been accepted. The defendants had forwarded written instructions to the plaintiffs as to the shipping of the yarn dated the same day as the plaintiffs had sent their renunciation letter. The letter covering the shipping instructions sent by the defendants, and that embodying the renunciation by the latter of the contract crossed each other.
The plaintiffs, however, when they received these shipping instructions knew they must have been forwarded before the receipt by the defendants of the plaintiffs’ letter of renunciation of the contract.
[Page 145]
After the 5th of October, when these crossing letters were received by the respective parties, one sending shipping orders, and the other renouncing the contract, there were no further communications between them respecting this yarn now in dispute, being order No. 1788, until December 10, 1918, when portions of the yarn were offered for delivery to the defendants, and were refused. But it does not seem to me that this subsequent offer materially affected the legal position of the parties.
The contention on the part of the appellants was that the plaintiffs’ letter of the 2nd October, 1918, being an unequivocal and absolute refusal to carry out contract 1788, was received and adopted by the defendants, who at once cancelled the order in their records. They further contended that the plaintiffs’ failure afterwards to deliver the 4,000 pounds of spot yarn, immediately on receipt of shipping instructions, and the first monthly instalment of 2,000 pounds within a month after receipt of shipping instructions, was evidence that they were aware the defendants had accepted their repudiation.
The question then, it seems to me, in every such case must be whether under the proved facts adoption of one party to a contract of its repudiation by the other party may be inferred from the proved facts, or whether an actual notice of acceptance or adoption must be given by the party receiving notice of the repudiation to the party repudiating.
It seems to me from reading the authorities that such an actual notice of acceptance or adoption is not necessary but that adoption may be reasonably inferred from all the circumstances as proved.
[Page 146]
It would, of course, have been better business on the part of the defendants to have acknowledged and accepted plaintiffs’ letter of renunciation, but that they as a fact did accept it is proved by the evidence of their having cancelled the order in their records. Then, what view did plaintiffs entertain on the crucial point of their repudiation having been accepted? Undoubtedly they fully understood and believed it had been, as the evidence of Gordon Geddes clearly shows. He says at page 10:—
Q.—Now did you receive any reply to your letter of October 2nd?
A.—No.
Q.—Then what did you do?
A.—Well, I waited about three weeks, as near as I can recall, and was firmly convinced—I waited what I thought was a reasonable time—and felt Mr. Reed was taking our letter as final, and the order would be cancelled.
It is true, he afterwards changed his mind, for reasons best known to himself, without giving defendants any notice, or inquiring from them whether they were satisfied with his renunciation of the contract or not.
However, we have here the explicit evidence of the letter of renunciation; its receipt by the defendant; the cancelling of the order in its books, and the firm conviction sworn to by the renouncing party that the contract was at an end. No notice of any kind was sent by the plaintiffs of their desire or intention to withdraw their renunciation while, as a matter of fact, they failed to deliver or offer delivery of two instalments of yarn which the contract specifically called for, namely 5,000 pounds as soon as reasonably possible after the 5th October, and 2,000 pounds which should have been forwarded about the 5th of November. In my judgment, the fair inference which should be drawn from all these proved facts is that the contract had been put an end to by consent and assent of both parties.
[Page 147]
I can see little difference between writing an adoption of the renunciation on the letter containing it, or directing the cancellation of the contract renounced in the records of the party receiving the renunciation. In either case, it is some evidence of adoption of the renunciation, and a letter to the renouncing party, though a prudent and businesslike course, is not an essential necessary to complete the adoption in cases where facts proved allow of a fair inference of acceptance of renunciation being drawn.
The law in cases of this kind is laid down by Lord Esher in giving judgment in the case of Johnstone v. Milling, at page 467, as follows:—
Accordingly the defendant has recourse to the doctrine laid down in several cases cited, the best known of which is perhaps the case of Hochster v. De la Tour. In those cases the doctrine relied on has been expressed in various terms more or less accurately; but I think that in all of them the effect of the language used with regard to the doctrine of anticipatory breach of contract is that a renunciation of a contract, or, in other words, a total refusal to perform it by one party before the time for performance arrives, does not, by itself, amount to a breach of contract but may be so acted upon and adopted by the other party as a rescission of the contract as to give an immediate right of action. When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned declares his intention then and there to rescind the contract, because one party to a contract cannot by himself rescind it, but by wrongfully making such a renunciation of the contract he entitles the other party, if he pleases, to agree to the contract being put an end to subject to the retention by him of his right to bring an action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation. He cannot, however, himself proceed with the contract on the footing that it still exists for other purposes, and also treat such renunciation as an immediate breach. If he adopts the renunciation, the contract is at an end for the purpose of the action for wrongful renunciation; if he does not wish to do so, he must wait for the arrival of the time when in the ordinary course a cause of action on the contract would arise. He must elect which course he will pursue. Such appears to me to be the only doctrine recognized by the law with regard to anticipatory breach of contract.
[Page 148]
I accept this extract as correctly stating the law on the subject which I think applicable to this present appeal. I find that the reasonable and necessary inference from the proved facts is that the plaintiffs’ letter of repudiation of 2nd October, never withdrawn or qualified by them, had been adopted and acted upon by the defendants and the contract put an end to by mutual assent. See also Frost v. Knight.
I would, therefore, allow the appeal and dismiss the action with costs throughout.
IDINGTON J.—Mr. Gordon Geddes, a member of the respondent firm, tells that they were carrying on, in Sarnia, Ontario, a retail dry goods and woollen business as well as jobbing when he, in the early part of August, 1918, went to Washington to solicit orders from the appellant “for wool, knitting yarn.”
He met, on that occasion, Mr. Reed, an associate director of the Bureau of Purchases for the appellant, and they agreed on terms for two orders to be sent respondent.
One order was to be for sock yarn, which is now, save incidentally in its results as shedding light on the course of the business, out of the question raised herein.
The other was to be yarn for knitting sweaters. That was, pursuant to the agreement reached orally, forwarded on the 14th August, 1918, to respondent. It was numbered and will be referred to herein as number 1788.
To induce the giving of it, Mr. Gordon Geddes had represented that respondents had on hand, ready for shipment, 4,000 pounds of the desired quality.
[Page 149]
The order No. 1788, so forwarded by appellant specified 20,000 pounds at a price of $1.80, delivery 4,000 pounds at once, and 2,000 pounds a month. Shipping instructions to be given later—and to ship, freight collect, f.o.b. Sarnia.
Presumably this was received in due course by mail a couple of days later.
The first response was dated 24th August, 1918, and so far as related to order No. 1788 was as follows:—
Re your Order No. W1788 for 20,000 lbs. knitting yarn.
We regret to say there is some doubt about our ability to fill this order.
The 4,000 lbs. spot yarn was sold and delivered to the American Red Cross at this same price prior to receipt of your order, and the mill from whom we bought this yarn claims they are unable to deliver the balance.
We will make every effort to secure this delivery, and will force the issue at once, and if we receive all or any part of it, will deliver it as per your order.
On 26th September, 1918, the appellant wrote as follows:
Sarnia, Canada,
Sept. 26, 1918.
Messrs. Geddes Bros.,
Sarnia, Canada.
Gentlemen:—
We write you in reference to order numbers W 1787, calling for 35,000 pounds of worsted yarn, and order W 1788, calling for 20,000 pounds of woollen yarn.
We received your letter of August 26th, and do not understand your letter, and we will expect this yarn delivered as contracted with us.!
I would ask you to wire at once how much of this yarn can be shipped immediately, and when contract can be completed as we are issuing shipping instructions now on all the yarn we have purchased and wish to know just when we can count on delivery.
Be sure to wire on receipt of this letter, and oblige,
Respectfully yours,
Edward T. Reed,
Associate Director,
Bureau of Purchases.
[Page 150]
And on 2nd October, as follows:—
Washington, D.C.,
Oct. 2nd, 1918.
Geddes Bros.,
Sarnia, Canada.
Gentlemen:—
Referring to your letter of September, 25th, we will say that complete shipping instructions are being sent you for order No. Washington 1787 and 1788, and we will be glad if prompt shipments can be made on both these orders.
Respectfully yours,
Edward T. Reed,
Associate Director,
Bureau of Purchases.
That was accompanied by the following shipping instructions relative to No. 1788:—
To Geddes Brothers,
Sarnia, Canada.
Please ship the following to addresses specified below. Ship via Freight Collect.
20,000 lbs., Code No. 1033B, Yarn.
Distribution:
6,200 lbs. Atlantic Division, American Red Cross, 20 E. 15th Street, New York City.
7,000 lbs. Lake Division, American Red Cross, 724 Prospect Ave., Cleveland, Ohio.
6,800 lbs Northern Division, American Red Cross, 10th and Nicollett Ave., Minneapolis, Minn.
Alternate shipments to the Different Divisions.
Approved: Edward T. Reed,
For Director, Bureau of Purchases.
I can find no letter of 25th September, 1918, in the case, or explanation relative thereto.
The letter of 2nd October, 1918, crossed in the mail the following from respondents:—
[Page 151]
Sarnia, Canada,
Oct. 2nd, 1908.
Mr. Edward T. Reed,
c/o American Red Cross, Bureau of Purchases,
National Headquarters, Washington, D.C.
Dear Sir:
Replying to your favour of the 26th inst., we wired you to-day as per your request, and enclose confirmation herewith. Regarding your order, No. 1787, for 35,000 pounds of worsted yarn, we expect to be able to deliver this complete, and as we stated to you in our telegram, have approximately 6,000 pounds ready for immediate delivery, which we are holding until we receive shipping instructions from you.
Regarding your order No. 1788, for 20,000 pounds of woollen yarn at $1.80, it will be impossible for us to deliver this as the mills are not able to make it, they state, on account of having government orders which require their whole attention.
At the time this order was taken, i.e., August 14th, Mr. Geddes pointed out to you that there was a possibility that it might not be possible for us to fill these orders complete, and we believe the circumstances were outlined to you at that time. We wrote you on August 26th, explaining just what we would be able to do in reference to these orders and as we received no reply, we presumed you understood the situation.
We greatly regret, naturally, that we are not able to fill this order, but it is something over which we have no control, and we trust that under the circumstances you will consider this entirely satisfactory.
Yours very truly,
Geddes Bros.
No such telegram is in the case, nor is there any telegram from respondents as requested by appellant’s letter of 26th September, 1918.
The appellant, on receipt of the letter, marked in their books that the order No. 1788 was cancelled; but, evidently, in absence of such telegram as requested and through pressure of work, omitted to write or wire such cancellation had been made.
Nothing more, however, was heard, in regard thereto, by appellant, until the 10th day of December, 1918, when they received from Bates & Bates notification of a shipment by them from Montreal account respondents.
[Page 152]
The correct inference of cancellation agreed to had, however, been properly drawn as appears from the evidence of said Gordon Geddes who testifies as follows:—
Q. Then what did you do? A. Well, I waited three weeks, as near as I can recall, and was firmly convinced—I waited what I thought was a reasonable time—and felt Mr. Reed was taking our letter as final, and the order would be cancelled. After I waited a certain length of time I began to get worried about it, and having the last two exhibits in my mind, I felt perfectly satisfied that Mr. Reed would force us to deliver that yarn. I got busy and canvassed the jobbing trade, and places we did not usually expect to get yarn in that quantity. I covered London, Toronto, and finally got to Montreal.
Q. With what result? A. I found some small quantity at Duncan Bell’s, at a high price, and I thoroughly covered all the jobbing houses there and located another small quantity through Mclntyre, Son & Company, also at a high price.
He drew the correct inference but failed to telegraph the fact though he had been, as appears above, urged to do so by the letter of appellant of 26th September, above quoted, which the respondents must have received four or five days before wiring as desired.
I am unable to reconcile with any sense of fair dealing such conduct on his part.
Instead of doing as they should have done they changed their minds. I suspect by reason of their omission to fairly consider the whole correspondence and act accordingly, that the true reason for change of mind was not any worry about what Mr. Reed would do, but a change of market more favourable to them, six weeks later.
It hardly lies in the mouth of one so failing himself to act and answer promptly to complain of another he so treated doing the same. Had they done so on receipt of the letter of 26th September, in all probability we never would have had the confusion presented by the crossing letters of the 2nd October or, I venture to think, this lawsuit.
[Page 153]
Yet the basis of the argument in the way of excusing the respondents’ conduct in first repudiating their contract, making, pursuant to such repudiation, default from month to month and then suddenly turning round and tendering goods in pretended fulfilment of it, is that the appellant had failed to answer a letter.
Moreover the argument overlooks the fact that respondents had, by their letter of 24th August, 1918, which I quoted above, assured the appellant that they would make every effort to secure this delivery and would force the issue at once, etc., etc. What effort then made to carry out the said promise does not appear.
It certainly does not appear a very solid basis upon which to rest such an argument when they kept appellant waiting a whole month to hear the result of such assurances as said letter contained.
And when they got the letter of 26th September from appellant referring thereto insisting upon due fulfilment of their contract, instead of pleading for forbearance they tell appellant that this one is absolutely impossible of fulfilment.
If that is not an absolute repudiation of it, what would be? Must we have violent and ill-natured words used to render repudiation effective?
Indeed it is fairly arguable on the evidence that the respondents never had become bound and this letter was a distinct refusal to become so and hence nothing more to be said. They doubtless hoped for generous treatment, and got it by the actual cancellation.
The other contract got from appellant, at same time, and by virtue of the same soliciting effort, and which in a close sense, as to giving of orders for shipment, and all else ran concurrently with that now in question, has been fulfilled or adjusted in a common sense fashion.
[Page 154]
They were grouped together in the correspondence up to the point when the respondents said they found that one now in question impossible of fulfilment, and then much correspondence continued relative only to the other. It evidently was assumed by both parties that that alleged contract had ended.
The respondents must have been much more dense than I take them to be if they did not infer and clearly understand under all the foregoing circumstances that their abandonment or repudiation of the other order now in question had been assented to by appellant.
There were half a dozen shipments under 1787, and all implied therein relative to that contract recognized it as on foot; and most of these before the appellant had ever heard of anything to suggest that the respondents pretended that they were assuming appellant recognized the order now in question as being on foot and in force.
How could respondents imagine that appellant during all that time and under such circumstances was distinguishing thus its treatment of one contract and ignoring its twin, unless by reason of assent to the respondent’s renunciation.
On November 6th appellant wrote respondents asking how fast shipments will be made on Order No. 1787, but made no reference to any claim under order No. 1788, now in question.
Seeing this was but a few days after Mr. Geddes had, as he professes, begun to get worried lest he might be called upon to fill the Order No. 1788, it seems very remarkable he did not cease worrying or ask how it came about that appellant seemed only concerned as to order No. 1787.
[Page 155]
Indeed he carefully abstained, after the 2nd October, 1918, from ever referring to the matter of order No. 1788 in any communications he had with appellant.
Instead of worrying about being possibly liable to be called on for delivery thereunder, a careful study of all the evidence leads me to interpret his conduct early in November as the result of a treacherous intention to take advantage, if he could safely, of the omission, on the appellant’s part, to formally assent by letter to the repudiation of respondents.
The numerous cases cited by the respective authors and editors of Benjamin on Sales, and Blackburn on Sales, relative to contracts for delivery by instalments, fail to disclose anything like a parallel to the features of this case. And those cited in argument fail to fit these peculiar features.
We have, however, as the result of much discussion, the opinions of many eminent judges on the question of what may constitute such a renunciation as to relieve the other party to the contract.
I accept that expressed by Lord Coleridge in the case of Freeth v. Burr, at page 213, as follows:—
In cases of this sort, where the question is whether the one party is set free by the action of the other, the real matter for consideration is whether the acts or conduct of the one do or do not amount to an intimation of an intention to abandon and altogether to refuse performance of the contract. I say this in order to explain the ground upon which I think the decisions in these cases must rest. There has been some conflict amongst them. But I think it may be taken that the fair result of them is as I have stated, viz., that the true question is whether the acts and conduct of the party evince an intention no longer to be bound by the contract. Now, non-payment on the one hand, or non-delivery on the other, may amount to such an act, or may be evidence for a jury of an intention wholly to abandon the contract and set the other party free.
[Page 156]
Apply this to the terms of the respondents’ letter declaring it absolutely impossible to fulfil the contract as interpreted by both himself and Mr. Reed, and the fact that the latter did accept and cancel the contract and the conduct of respondents in accord with that assumption, and I think we have a safe guide which leads to the conclusion that respondents are not entitled to recover.
The appellant could not on the facts disclosed have recovered anything for any breach of contract.
On these grounds alone the appellant is entitled to succeed herein.
But, beyond all that and the relevant law I cite as to one aspect of the case, there is to my mind clear and convincing evidence to be inferred from the steps taken by and the conduct of both parties, that there was a well understood mutual rescission of any contract that by any possible conception of the facts may have existed.
Moreover there seems no ground whatsoever upon which to rest the judgment recognizing a right to insist on delivery of the goods after the times specified in the contract.
If the times fixed thereby are to be observed, then the time for delivery as to the first 4,000 pounds was on the 14th August, subject always, of course, to the shipping order and by the time that had been given in the letter of 2nd October, the time had then elapsed for immediate shipment of at least 6,000 pounds, and for another 2,000 pounds before respondents had thought of buying a single pound to ship.
I am unable to understand how in any view of the facts the respondents could claim any rights as to these early instalments, whatever might be said as to the later instalments on another view of the facts than I hold.
[Page 157]
And as to these later instalments if the contract could be held on foot, that would seem to have been ended and reduced to a question of damages by the frank declaration of appellant that it could take no further deliveries and must submit to compensation in cases where the contract still in force.
An armistice having been declared on the 11th November, 1918, the appellant made an appeal to all those who had sold it goods to cancel their contracts and adjust on an equitable basis.
That to the respondents, dated 27th November, 1918, reads as follows:—
Washington, D.C.,
November 27th, 1918.
Geddes Brothers,
Sarnia, Ontario, Canada.
In Re: Order Washington 1787.
Gentlemen:—
On November 20th the War Council of the American Red Cross sent you the following telegram:—
“In view of the signing of the armistice the needs of the Red Cross for merchandise have been very much reduced. We would appreciate it therefore if you would be willing to cancel on an equitable basis such part of our contract with you as has not already been shipped. Will you be good enough to advise us if you will assist us in this matter?
War Council, American Red Cross.”
We have have not as yet heard from you in reference to this telegram and we hope very much that you will be able, on an equitable basis, to do something in the way of cancellation of unshipped part of order.
I will be in Washington the first four days of next week, and will appreciate, very much, if you could take the matter up with me then.
Respectfully yours,
Edward T. Reed,
Associate Director. Bureau of Purchases.
[Page 158]
And to that respondents replied as follows:—
Sarnia, Canada,
Dec. 2, 1918.
Mr. Edward T. Reed, Associate Director,
Bureau of Purchases, American Red Cross,
Washington, D.C.
Dear Sir:
We have your letter of November 27th, and beg to state that we did not receive telegram from the War Council of the American Red Cross. Your letter is the first intimation that you desire to cancel the balance of your order.
We suggest that you outline to us the basis on which you desire us to accept said cancellation, and we will do anything possible to meet you.
Yours very truly,
Geddes Bros., per Gordon G. Geddes.
And then appellant made a special appeal to respondents by the letter of 5th December, 1918, as follows:—
December 5, 1918.
Geddes Brothers,
Sarnia, Ontario, Canada.
In Re: Order Washington No. 1787.
Gentlemen:—
We are in receipt of your letter of December 2nd and have wired you as per enclosed “confirmation telegram.” We would like to have you accept cancellation for the unshipped portion of this order, as you know, owing to the present conditions the needs of the Red Cross have been very greatly lessened and we are not in position to use the supplies of yarn we have on hand and bought. This yarn was not bought for business purposes, and we are not in position to, and should not, throw a lot of yarn on the market, and we have asked firms to accept cancellation.
We have been very much pleased with the manner in which practically all of the firms, having orders from us, have accepted cancellation, and we certainly hope that you can do the same. We believe you appreciate, fully, the situation and the facts that the Red Cross is not organized, and should not be organized to dispose of merchandise, and we hope that you can accept cancellation of the unfilled portion of this order and relieve us of this amount of yarn.
[Page 159]
In reference to this cancellation you will remember that we placed an order with you—No. 1788, for 20,000 pounds of yarn and had entered into this contract in good faith with you, and you cancelled this order—and without making any trouble in regard to it, we accepted this cancellation on your part although we had grounds for demanding the delivery of this yarn, and we hope that you will go over this matter carefully and Consider it from every side.
I will appreciate it if you could advise me by wire, promptly, as to what you will do in the matter.
Respectfully yours,
Associate Director,
Bureau of Purchases.
That of the 27th November, and this, of course, was an appeal in respect of order No. 1787, and so recognized by the respondents’ reply to the former. They made no allusion to order No. 1788, and no reply to this later one.
Meantime respondents were assiduously working away through Bates & Bates, to get ready to tender goods under order 1788.
The goods had not yet been shipped or delivered f.o.b. as nominated in the bond. And they never were so. The contract provided for the delivery at Sarnia, f.o.b., and that term never was departed from, but unfortunately escaped the observation of the court below or I imagine we never would have been troubled with this appeal.
I, therefore, fail to see how respondents are entitled to recover by virtue of a tender at a place other than that specified in the contract, and never named or dreamed of.
I think the appeal should be allowed with costs throughout, and the action dismissed with costs.
DUFF J.—I am unable to agree with the conclusion at which the Appellate Division arrived. I do not find it necessary to pass any opinion upon the point whether the seller, having made default in delivery of part of the goods, the subject of a sale in which delivery
[Page 160]
is to be made by instalments, and such default in itself either constitutes sufficient evidence of an intention of the party to abandon the contract, or is accompanied by a declaration on his part to that effect, it is necessary that the buyer must notify his intention to concur in the abandonment of the contract before tender by the seller of delivery of an instalment deliverable at a later date.
There are two grounds upon which, in my opinion, the respondent’s action fails.
First: The basis upon which the parties entered upon their agreement was, I think, the fact, which the appellants believed upon the representation of the respondents, that they had 4,000 pounds of yarn ready for immediate delivery; and the delivery of that quantity of yarn forthwith upon the receipt of shipping instructions was, I think, an essential term of the contract breach of which invested the appellants with the right to treat the contract as no longer binding upon them, and I see nothing whatever in the course of events as divulged by the evidence which could be successfully relied upon by the respondents as depriving the appellants of their right to declare their election after the tender of delivery by the respondents.
Secondly: It is abundantly shown that the respondents quite plainly declared their intention not to fulfil the terms of the contract, and that they interpreted the conduct of the appellants as expressing an intention on their part to concur in that abandonment. I think that was a perfectly reasonable interpretation to put upon the appellants’ conduct when viewed by the respondents as a whole including the pressing communications of the 26th September, and the 2nd of October, followed by the silence which succeeded the despatch of the respondents’ letter of the latter
[Page 161]
date. That was a perfectly reasonable interpretation and was the interpretation upon which the respondents continued to act until circumstances arose which seemed to offer them more favourable prospects in another direction. It is equally clear that the appellants intended to acquiesce in the abandonment of the contract by the respondents. We have here, then, a declared intention to abandon on part of the seller and a concurrence in fact on the other side accompanied by conduct which was treated by the seller as evidencing such concurrence.
The appeal should be allowed and the action dismissed with costs.
ANGLIN J.—The facts out of which this litigation has arisen are fully stated in the judgments delivered by Mr. Justice Rose and in the Appellate Division. After much consideration and not a little hesitation—the latter due largely to the respect in which I hold the opinion of the learned trial judge unanimously affirmed by the Divisional Court—I have reached the conclusion that this appeal must be allowed and the action dismissed.
Although the defendants have pleaded that the acceptance of their order by the plaintiffs was conditional—and this would seem to have been the position taken by the plaintiffs in their letters of the 24th of August and the 2nd of October—the evidence puts it beyond reasonable doubt that the sending of the order itself was an unconditional written acceptance or confirmation of acceptance by the defendants of an oral proposal made by the plaintiffs, which had probably been orally accepted by the defendants when made, and that there was in fact a firm contract in the terms of that order.
[Page 162]
Parol evidence adduced to show that the definite terms of delivery clearly specified were not intended to bind the plaintiffs, but that they were entitled to deliver the wool contracted for as speedily as it could be procured, was, I think, inadmissible. The real question on this branch of the case is whether the contract was rescinded—whether the conduct of the parties was such that the proper inference from it is mutual rescission, or whether the plaintiffs so acted as to justify the defendants in declining to carry out the contract when they did.
There is no reason for not fully accepting the view, which I gather prevailed in the trial court and on appeal, that both the plaintiffs and the defendants acted throughout in entire good faith. That of the defendants is not impugned and the fact that the plaintiffs made purchases at the beginning of November, before there was any material decline in prices, to enable them to carry out their contract would seem sufficient to establish that they were also acting bonâ fide. The defendants believed the contract was put an end to by the plaintiffs’ letter of the 2nd of October; the plaintiffs early in November believed that it was still on foot and that they might be held to performance.
But it must be at least equally clear that both parties were sadly lacking in ordinary business diligence. A letter written by either of them to the other within a reasonable time after the receipt of the letters of the 2nd of October, 1918, which crossed, such as ordinary prudence would seem to have required from each, would have prevented the situation now existing from which serious loss must inevitably fall on one or the other.
[Page 163]
If the case should be viewed purely as one of anticipatory breach effected by the plaintiffs’ letter of the 2nd of October intimating that they could not supply the yarn for which they had contracted, I should have agreed that the defendants could not succeed because of their failure to communicate by word or act their election to accept this declaration as a renunciation of the contract and to treat the attitude of the plaintiffs as having put an end to it. Scarfe v. Jardine, at pages 360, 361; Johnstone v. Milling, at pages 469, 471; Ewart on Waiver Distributed, pp. 89 and 95. The first intimation of acceptance is found in defendant’s letter of the 5th of December. Long before that letter was written the plaintiffs had changed their position in the belief that they were still bound by their contract.
But, in my opinion, the subsequent conduct of the parties is in this case of paramount importance and, as put by Lord Coleridge C.J., in Freeth v. Burr, at page 213, “the real question for consideration” is whether, having regard to the terms of the contract and viewed in the light of the plaintiffs’ letters of the 24th of August and the 2nd of October, their subsequent inaction and silence
do not amount to an intimation of an intention to abandon and altogether to refuse performance of the contract * * * (do not) evince an intention no longer to be bound by the contract.
After referring to this passage from Lord Coleridge’s judgment with approval in Mersey Steel and Iron Co. v. Naylor, Benzon & Co., the Earl of Selborne L.C., adds, at pp. 439 and 440:
[Page 164]
It appears to me according to the authorities and according to sound reason and principle that the parties might have so conducted themselves as to release each other from the contract, and that one party might have so conducted himself as to leave it at the option of the other party to relieve himself from a future performance of the contract The question is whether the facts here justify that conclusion.
The same extract from the judgment of Lord Coleridge was again accepted as stating “the true test” by Lord Collins in General Bill Posting Company v. Atkinson, at page 122.
Now what was the conduct of the parties material to the question at issue? Having intimated by their letter of the 2nd of October that they would be unable to fulfil their contract, the plaintiffs made default in delivering 4,000 pounds of yarn which, according to its terms, should have been shipped as soon as reasonably possible after the 5th of October, when shipping instructions reached them, and they again made default in shipping the first monthly instalment of 2,000 pounds which should have been put in transit about the 5th of November. No explanation was made by them of these failures to carry out the contract and no complaint or demand for delivery came from the defendants. Indeed both parties acted as if the contract had ceased to exist—as if the defendants were acquiescing in the plaintiffs’ request to be relieved from it and in their treating it as abandoned.
Meantime deliveries were being made by the plaintiffs upon, and correspondence took place in regard to, another order for yarn (No. 1787) placed with them by the defendants at the same time as the order now in question (No. 1788). This state of affairs continued down to the 10th of December. No doubt the plaintiffs made successful efforts to obtain the yarn during the month of November. But because uncom-
[Page 165]
municated to and unknown by the defendants, except as indicative of their honesty of purpose and as establishing a change of position which precluded subsequent acceptance of their letter of the 2nd of October as an anticipatory breach, those purchases are quite as irrelevant to the issue to be determined as is the defendants’ entry in their own books of the cancellation of contract No. 1788 on receipt of the plaintiffs’ letter of the 2nd of October. Although in a letter written on the 5th of December in regard to contract No. 1787, the defendants state that the plaintiffs had cancelled contract No. 1788 and that they (the defendants) had accepted that cancellation without making any trouble about it, it was not until the 10th of December that the defendants were apprised of any departure by the plaintiffs from the attitude of inability to fulfil the latter contract intimated in their letter of the 2nd of October and of their intention to carry it out.
While the defendants cannot be heard to aver that the contract now in question was terminated by their uncommunicated acceptance of the plaintiffs’ declaration of inability to carry it out and acquiescence in its thus being put an end to, the plaintiffs’ subsequent failure to deliver the instalments due in October and November, although possibly not such non‑performance as would per se justify rescission by the defendants, viewed in the light of their letter of the 2nd of October in my opinion
amounted to an intimation of an intention to abandon and altogether to refuse performance * * * evinced an intention no longer to be bound by the contract,
and this, as Lord Selborne puts it, gave the defendants the option
to relieve themselves from a further performance of the contract.
[Page 166]
See also Millar’s Karri v. Weddel, at page 129, per Bigham J.; Cornwall v. Hensen, at page 303, per Collins L.J.; Bloomer v. Bernstein. That option they promptly exercised by rejecting on its arrival the first yarn shipped to them by the plaintiffs’ agents and by writing their letters of the 10th of December, on receipt of the first invoice, to the plaintiffs and their agents, Messrs. Bates & Bates, respectively.
The principle of the decision in Morgan v. Bain, I think, applies and governs. That was the converse case of tender of price and demand for performance by a purchaser who, after he had notified his insolvency to the vendor, had allowed the dates specified for delivery of two instalments to pass without protest, and without any offer to pay the price on delivery or any demand for explanation. On receipt of his subsequent demand of delivery the vendor promptly repudiated any obligation on the ground that the contract had been put an end to. The notice of insolvency did not terminate the contract but gave to the subsequent failure to deliver and to the absence of protest from the purchasers and of tender of price by them a significance as evidence of abandonment which they would not otherwise have had.
So here the plaintiff’s letter of the 2nd of October, while ineffectual to put an end to the contract because acceptance of it was not communicated and although it should be regarded, as the plaintiffs now contend, not as an intimation of abandonment or refusal to perform but merely as a request to be relieved from the obligations of the contract, gave to the subsequent non-delivery by them and to the defendants’ silence in regard thereto a significance as indicative of a deter-
[Page 167]
mination to renounce the contract that they might otherwise have lacked. From the non‑delivery under the circumstances the defendants had a right to conclude that the plaintiffs had abandoned their contract and, if they did so conclude, to abandon it themselves. Their announcement that they regarded the contract as at an end by their letters written as soon as they had the first intimation of the plaintiffs’ intention to treat it as still subsisting and to carry it out was, I think, a sufficient exercise of the option which the plaintiffs’ conduct had given them to decline performance, notwithstanding that those letters were written on the erroneous assumption that the acceptance of the plaintiff’s withdrawal from the contract on the 2nd of October, entered in their books, though unnotified, had already terminated it.
Treating the notice of insolvency in the Morgan Case, as practically of the same legal value as the unaccepted notice of inability to perform in the case at bar (Tolhurst v. Associated Portland Cement Manufacturers, at page 671) the material circumstances of the two cases are scarcely distinguishable. In both there was non-delivery of two instalments, silence in regard to the defaults and equally prompt repudiation when the party who had given the notice subsequently sought to treat the contract as still subsisting and enforceable. If not (as I incline to think it may be) a case of termination by mutual abandonment, as put by Keating J., in Morgan’s Case16—the view of that case also taken by Jessel M.R., in In re Phoenix Bessemer Steel Co., at page 114—we have here a case of conduct of the vendors warranting an inference of intention to renounce, and an exercise by the purchasers of the
[Page 168]
option to withdraw thus afforded them, which seems to have been the ground of decision of Lord Coleridge in Morgan v. Bain16.
Moreover, in order to succeed in this action, the plaintiffs must prove delivery or tender of delivery in accordance with the terms of the contract. Under those terms delivery of six or at the most eight thousand pounds of yarn had fallen due at the beginning of December. The amount shipped was 10,332 pounds. The contract provided that delivery should be made in monthly instalments of 2,000 pounds each, commencing a month after the first “spot” delivery of 4,000 pounds. Such stipulations in mercantile contracts are not negligible. Bowes v. Shand, at pages 465-6, per Cairns L.C. While not disposed to attach much importance to the fact that the shipment was made from Montreal instead of from Sarnia, since any difference in freight rates would be readily adjustable, I question the sufficiency of the tender of over 10,000 pounds actually made by the plaintiffs early in December to support the averment of performance essential to their claim. Hoare v. Rennie.
It would rather shock one’s sense of what is just and fair between man and man if, upon the state of facts presented in this case, the purchasers should be legally bound to accept and pay for the goods in question, notwithstanding the vendor’s early intimation of their inability to carry out their contract, their subsequent undoubted default in delivery of at least two instalments (nearly one-third of the whole) and the complete change in circumstances brought about by the armistice. The conclusion that they are not so bound is therefore all the more satisfactory.
[Page 169]
I do not find in the circumstances enough to warrant a departure from the ordinary practice that costs throughout should follow the event.
MIGNAULT J. (dissenting).—This case possesses some features which render it rather a hard one for the appellant, but that is certainly no reason why perfectly settled legal principles should not be applied regardless of the hardship entailed thereby, and for the existence of which the appellant is not without blame. Nevertheless these features have received my very serious consideration, for the question, as it is now presented to this court, is, in final analysis, whether the conduct of the respondents has been such as to deprive them of recourse under the contract which they admittedly made with the appellant for the sale to the latter of 20,000 pounds of Oxford woollen yarn under order No. 1788.
Admitting the existence of a valid contract, the letter of the respondents of October 2nd, 1918, was either a request to be freed from their contractual obligations, a request which was not granted, or an anticipatory breach of their contract.
Taking it to be an anticipatory breach of contract, it gave the appellant the option either to insist on the performance of the contract or to take the repudiation of the respondents as a definite breach and treat the contract as rescinded. For obviously one contracting party cannot of his own will and without the assent of the other rescind a valid contract. Obviously also this option required due notice to the respondents of the choice made by the appellant.
As far as the appellant is concerned there was, after the anticipatory breach, no valid exercise of this option. The appellant did not answer the respond-
[Page 170]
ents’ letter of October 2nd, but made an entry of cancellation of order No. 1788 in its books, which, not being notified to the respondents, could not operate as an exercise of its option or as a rescission of the contract.
So far there can be no difficulty. But it is now argued that the subsequent conduct of the respondents and their failure, after receiving the shipping instructions of the appellant, also dated the 2nd of October, 1918, to make shipments according to the terms of the order, 4,000 pounds at once and 2,000 pounds per month, and their silence until December when the shipments in question were made and notice thereof given to the appellant, amounted to an abandonment of the contract disentitling the respondents to ship the yarn in December and claim payment from the appellant.
A careful examination of the record has convinced me that this issue of abandonment—as distinguished from the question whether the anticipatory breach of the respondents and their failure to make deliveries in time had relieved the appellant from liability under the contract—was not submitted to the courts below. In the appellant’s plea the ground taken is: 1. That the respondents had repudiated the contract and that thereafter the appellant treated the same as terminated, and purchased other yarn to take the place of the yarn which it had intended to purchase from the respondents, no proof of the latter statement having been made; 2. That the respondents made default in delivering the yarn within the time specified in the appellant’s order and shipping instructions and consequently there was no effective tender of delivery by the respondents under the alleged contract. These two grounds were also taken in the appellant’s appeal to the Appellate Division as follows:—
[Page 171]
3. If there was a concluded contract between the parties the plaintiffs’ letter to the defendants of 14th August, 1918, was a repudiation thereof and such repudiation continued until after the expiration of the time for delivery under the terms of such contract.
4. If there was a concluded contract between the parties and no effective repudiation thereof the plaintiffs did not make deliveries within the times specified in such contract.
In view of the issue thus presented to the courts below, we have not the benefit of an express finding of the learned trial judge on the question whether there had been an abandonment of the contract by the respondents acquiesced in by the appellant, as distinguished from a rescission by reason of the anticipatory breach of the respondents and the acceptance thereof by the appellant. The issues really presented were decided by both courts below, and in my opinion rightly decided, adversely to the appellant, and it was held: 1, that the anticipatory breach of the contract gave to the appellant an option to treat the same as rescinded, but that the appellant never had signified to the respondents its intention that the contract should be treated as rescinded; 2, that (I take this in somewhat abbreviated form from the judgment of Mr. Justice Hodgins in the Appellate Division) time not having been made of the essence of the contract, the failure to deliver before December was an actual breach, which, if it went to the root of the contract, would merely entitle the appellant, if it saw fit, to treat the non-performance as a repudiation of the whole contract and to sue for damages.
I cannot help thinking that the question whether the contract was by reason of the conduct of the parties abandoned by them, is entirely distinct from the two questions to which I have referred and which were really in issue. At all events, it is clear that the abandonment must have been concurred in by both
[Page 172]
parties, for both must agree to an abandonment as well as to a rescission, and an act of abandonment by one of them alone without acceptance or acquiescence by the other cannot effect the continued existence of the contract.
I may add that the question of abandonment is essentially a question of fact, being an inference to be drawn from all the circumstances of each case, and decisions in particular cases, where it has been held that the circumstances warranted the presumption of abandonment, are of little assistance, unless the circumstances are the same, a coincidence which is hardly to be expected.
I may now refer to the case of Morgan v. Bain, probably the nearest in point, which is cited in the appellant’s factum. There a purchaser of pig-iron to be delivered in specified portions at fixed dates, became insolvent subsequently to the contract and notified the vendor of his insolvency. A petition was filed by the purchaser in the Bankruptcy Court whereupon a person was appointed to collect sums due and carry on the business. A meeting of creditors was held at which a composition at 5s. in the pound was agreed to. No mention was made of the contract in the statement of his affairs submitted by the purchaser, and no deliveries under the contract were made by the vendor at the determined dates. The price of iron having risen the purchaser, who had obtained fresh capital by forming a new partnership, demanded delivery tendering cash payment, but the vendor refused to deliver. It was held under these circumstances, on a special case stating the facts, that the purchaser had abandoned the contract, and that the vendor, by not making deliveries which had become due, assented to its rescission.
[Page 173]
After full consideration I think that the Morgan Case cannot assist us here, the circumstances being different. The respondents had, it is true, declared on the 2nd of October, that they could not carry out the contract, but, on the same date, the appellant had written insisting on its performance. As matters then stood, under the authority of cases such as Frost v. Knight22, and Johnstone v. Milling, the appellant not having exercised its option to treat the contract as rescinded, on the contrary insisting on its performance, the respondents could subsequently carry it out notwithstanding their previous declaration that they would not do so. The only remaining material point is whether the respondents’ subsequent failure to deliver before December and the absence of protest by the appellant, give rise to the presumption of abandonment of the contract by all the parties thereto. I think no such presumption arises here. The anticipatory breach of the respondents was caused by their failure to obtain yarn. Subsequently, fearing that notwithstanding their letter of October 2nd they would be held to make deliveries—and the unretracted letters of the appellant dated September 26th and October 2nd, gave them every reason to believe this—they made fresh inquiries for yarn and, in the beginning of November, secured it in Montreal at a price but little below the contract price, and the appellants’ letter of December 5th was the first intimation to them that the appellant accepted cancellation of the order. There is no suggestion whatever that the respondents acted otherwise than in perfect good faith, and while it would have been more prudent no doubt to answer the appellant’s letter of October 2nd, and thus clear up the matter,—and the appellant
[Page 174]
itself was wanting in ordinary business caution in not answering the respondents’ letter of the same date—still I must find that the appellant’s insistence on the performance of the contract fully justified the subsequent conduct of the respondent and that no presumption of abandonment by reason of delay in delivery can arise.
On the whole, I fully agree with the judgments of the courts below and my opinion is that the appeal should be dismissed with costs.
Appeal allowed with costs.
Solicitors for the appellant: Tilley, Johnston, Thomson & Parmenter.
Solicitors for the respondents: Hanna, LeSueur & McKinley.
Email this Content