[HOUSE OF LORDS.]

AND

Sale of Goods - C.i.f. Contract - Terms Net Cash - Payment against Shipping Documents - Delivery - Sale of Goods Act, 1893 (56 & 57 Vict. c. 71), s. 28.

A contract for the sale of hops to be shipped from the Pacific Coast to this country provided that the buyer should pay for the hops at the rate of ninety shillings sterling per 112 lbs. "c.i.f. to London, Liverpool or Hull. Terms net cash." The contract contained no term expressly providing for payment against shipping documents:-

Held, that the seller was entitled to payment upon his shipping the goods and tendering to the buyer the bill of lading and insurance policy.

Decision of the Court of Appeal [1911] 1 K. B. 934, reversed.

APPEAL from an order of the Court of Appeal in England (1) reversing the judgment of Hamilton J. (2) in an action for breach of contract.

By an agreement in writing dated October 13, 1904, and made at Sunderland between the defendants (the present appellants), of San Francisco and London, parties of the first part, and C. Vaux & Sons, Limited, of the city of Sunderland, parties of the second part, it was provided as follows:-

"The parties of the first part to sell to the parties of the second part one hundred (100) bales equal to or better than choice brewing Pacific Coast hops of each of the crops of the years 1905-1912 inclusive.

"The said hops to be shipped to Sunderland. The parties of the second part shall pay for the said hops at the rate of ninety (90) shillings sterling per 112 lbs. C.I.F. to London Liverpool or Hull.

"Terms net cash.

"It is agreed that this contract is severable as to each bale.

"The sellers may consider entire unfulfilled portion of this contract violated by the buyers in case of refusal by them to pay for any hops delivered and accepted hereunder or if this contract or any part of it is otherwise violated by the buyers.

(1) [1911] 1 K. B. 934.

(2) [1911] 1 K. B. 214.

"Time of shipment to place of delivery or delivery at place of delivery during the months (inclusive) of October to March following the harvest of each year's crop.

"If for any reason the parties of the second part shall be dissatisfied with or object to all or any part of any lot of hops delivered hereunder the parties of the first part may within thirty days after receipt of written notice thereof ship or deliver other choice hops in place of those objected to."

A second agreement, dated December 21, 1904, and made between the same parties, was in precisely the same terms as the first, except that it provided for the sale by the defendants to C. Vaux & Sons, Limited, of fifty bales of British Columbian hops of each of the years 1906 to 1912 inclusive at the same price, c.i.f. to London.

On August 11, 1908, C. Vaux & Sons, Limited, assigned for value to the plaintiffs (the present respondents) all their rights and benefits under these two contracts, and in September, 1908, the plaintiffs gave the defendants written notice of the two assignments.

On January 29, 1910, the defendants wrote to the plaintiffs: "With reference to our hop contracts assigned to you by Messrs. Vaux we are now ready to make shipment to you of the entire 150 bales 1909 crop of the contracted quality and according to the terms of the contract. .... For the invoice price less freight we will value on your good selves at sight with negotiable bills of lading and insurance certificates attached to draft and if you wish we will also attach certificates of quality of the Merchants' Exchange, San Francisco or other competent authority to cover the shipments."

On February 1, 1910, the plaintiffs wrote to the defendants in reply that they were prepared to take delivery on the terms of the contracts, and they continued: "It is in accordance with the universal practice of the trade and the custom adopted by you in your dealings with other purchasers of your hops and it has also been your custom with our assignors to submit samples and the samples having been accepted to give delivery in bulk in accordance with the samples but if you decline to adopt the usual and undoubtedly most convenient course we can only pay for the hops against delivery and examination of each bale. We

cannot fall in with your suggestion of accepting the certificate of quality of the Merchants' Exchange San Francisco."

On February 5, 1910, the defendants' solicitors wrote to the plaintiffs' solicitors that as the defendants had intimated their willingness to fulfil their obligations in strict accordance with the contracts, and as by their letter of February 1, 1910, the plaintiffs had refused to pay the contract price except upon terms not provided by the contracts, the defendants, accepting the said refusal as a clear breach of the contracts by the plaintiffs, would not ship the 150 bales to the plaintiffs and reserved their rights in respect of the breach by the plaintiffs.

On March 11, 1910, the plaintiffs issued the writ in the action claiming damages against the defendants for breach of contract in refusing to deliver the hops. The defendants denied the breach and counterclaimed for damages in respect of the non-acceptance of the hops.

Hamilton J. held that under a c.i.f. contract the buyers were bound to pay the agreed price in exchange for the shipping documents even though payment was not expressed to be "against documents," and he gave judgment for the defendants upon the claim. He also gave judgment for the defendants upon the counter-claim for 175l., that being the difference between the contract price and the highest price which the defendants were able to get quoted when after the plaintiffs' repudiation they sought to sell the goods upon the same contractual terms.

The Court of Appeal (Kennedy L.J. dissenting) reversed the judgment of Hamilton J. and gave judgment for the plaintiffs; and at the request of the parties the Court assessed the damages on the claim at 481l. 5s. Upon the counter-claim all the Lords Justices were of opinion that in any view of the case Hamilton J. had proceeded upon a wrong principle in assessing the damages, and that the defendants had failed to prove any substantial loss by reason of the plaintiffs' non-acceptance of the hops.

The defendants appealed.

Atkin, K.C., and F. D. Mackinnon, for the appellants. Under a contract for the sale of goods on c.i.f. terms the seller fulfils his obligations by shipping the goods and tendering to the buyer

the bill of lading and insurance policy, and the buyer has to pay the agreed price in exchange for those documents, whether the contract does or does not in terms provide that payment shall be made "against documents": see Ireland v. Livingston (1), per Blackburn J. The respondents' contention, namely, that the time for payment does not arise until the goods are delivered in the destined country and the buyer has had an opportunity of examining them, involves that the seller must pay the landing charges at the port of discharge, which is inconsistent with the terms of the contract. The construction contended for by the appellants does not interfere with the right of the respondents to reject the goods, if, upon examination, they should be found to be not in conformity with the contract. The terms of payment in this contract read in conjunction with s. 28 of the Sale of Goods Act, 1893, are cash against delivery, and delivery here means delivery of the shipping documents. Delivery may be actual or constructive, and in the case of seaborne goods delivery of the bill of lading is a symbolical delivery of the goods: Sanders v. Maclean. (2) The appellants desire to adopt the reasoning of Kennedy L.J. in the Court of Appeal.

[They also contended that Hamilton J. had followed the right principle in assessing the damages on the counter-claim, but upon this point the House did not call upon counsel for the respondents.]

Shearman, K.C., and Eustace Hills, for the respondents. The question is whether upon this contract the respondents have agreed to buy hops without having an opportunity of examining them before payment. The construction for which the respondents contend is that cash is to be paid against physical delivery of the hops at Sunderland. This construction is supported by the subsequent clauses of the contract and particularly the clause which provides for the case of refusal by the buyers "to pay for any hops delivered and accepted hereunder." That is almost inconsistent with the appellants' contention, because it implies that the respondents are to have examination of the goods before payment; for acceptance involves examination. There is no ground for reading into this contract "cash against documents."

(1) (1871) L. R. 5 H. L. 395, 406.

(2) (1883) 11 Q. B. D. 327, 341.

In most c.i.f. contracts the words "cash against documents" or "bill against documents" are added, and Kennedy L.J. begs the question when he speaks of the fuller and the shorter form of contract and treats the two as equivalent. The provision as to freight and insurance is simply a mode of fixing the price and cannot be properly read as an agreement by the buyer to give up his right to examine the goods before payment. The respondents do not seek to charge the appellants with the landing expenses at the port of discharge. [They referred to Gibson v. Small (1) and Parker v. Schuller.(2)]

Atkin, K.C., replied.

EARL LOREBURN L.C. My Lords, in this case there has been a remarkable divergence of judicial opinion, Hamilton J. and Kennedy L.J. holding one view and Vaughan Williams and Farwell L.JJ. entertaining another. There is no doubt that the contract is of rather an exceptional and peculiar kind, as might have been inferred from the judicial difference to which I have alluded. For my part I think it is reasonably clear that this appeal ought to be allowed; and the remarkable judgment of Kennedy L.J., illuminating, as it does, the whole field of controversy, relieves me from the necessity of saying much upon the subject.

This is a contract usually called a c.i.f. contract, under which the seller is to ship a cargo of hops and is to contract for freight and to effect insurance; and he is to receive 90s. per 112 lbs. of hops. The buyer is to pay cash. But when is he to pay cash? The contract does not say. The buyer says that he is to pay cash against physical delivery and acceptance of the goods when they have come to England.

Now s. 28 of the Sale of Goods Act says in effect that payment is to be against delivery. Accordingly we have supplied by the general law an answer to the question when this cash is to be paid. But when is there delivery of goods which are on board ship? That may be quite a different thing from delivery of goods on shore. The answer is that delivery of the bill of lading when the goods are at sea can be treated as delivery of

(1) (1853) 4 H. L. C. 353.

(2) (1901) 17 Times L. R. 299.

the goods themselves, this law being so old that I think it is quite unnecessary to refer to authority for it.

Now in this contract there is no time fixed at which the seller is entitled to tender the bill of lading. He therefore may do so at any reasonable time; and it is wrong to say that he must defer the tender of the bill of lading until the ship has arrived; and it is still more wrong to say that he must defer the tender of the bill of lading until after the goods have been landed, inspected, and accepted.

Upon the question of the counter-claim, I think the Court of Appeal was right, and that there must be only one shilling damages upon the counter-claim.

Accordingly, Hamilton J.'s order ought to be restored so far as the claim is concerned. As regards the counter-claim, I think there ought to be judgment for the defendants with one shilling damages, and no costs on either side.

LORD ATKINSON. My Lords, I concur.

LORD GORELL. My Lords, I also concur.

LORD SHAW OF DUNFERMLINE. My Lords, I desire to express my adherence to the opinion delivered by Kennedy L.J., the value of which has not been overstated by the noble Earl on the woolsack.

Solicitors for appellants: Parker, Garrett & Co.

Solicitors for respondents: Nicholson, Graham & Jones.