PHOENIX MILLS LTD Vs. MHDINSHAW AND CO

JUDGEMENT

(1.) On August 29, 1941, the plaintiffs and the defendants entered into a contract whereby the defendants agreed to supply to the plaintiffs certain dyeing and. bleaching machinery consisting of one scutcher, one piler and one six-bowls water mangle at certain rates and on certain terms and conditions. The contract is expressed to be a c. i. f. contract, and it is important to note this because most of the controversy between the parties in this suit has turned round the rights and obligations of the contracting parties under a c. i. f. contract. On September 15, 1941, the plaintiffs paid to the defendants a sum of Rs. 3,500 being approximately the one-third price of the machinery. The plaintiffs after that wrote several letters to the defendants making inquiries as to the arrival of the goods. On February 11, 1942, the defendants replied to the plaintiffs stating that they had received the shipping documents of the articles contracted to be sold. They asked the plaintiffs to send the cheque so as to enable them to deliver to the plaintiffs the bill of lading. They also enclosed with this letter their bill. The bill sets out with some particularity the description of the goods, the rate, the price, the full amount payable under the contract, and the part-payment of Rs. 3,500 which had been received by the defendants and the final amount due and payable by the plaintiffs. On February 16, 1942, the plaintiffs wrote to the defendants pointing out that the balance of the price was to be paid on intimation by the bank that the shipping documents had arrived. That is one of the terms of the contract. The plaintiffs point out that so far they had not received any intimation from any bank; then they go on to state that as, according to the defendants, the shipping documents had arrived, they would be prepared to pay the balance against the defendants handing over all the necessary documents. It is common ground that on February 16, 1942, the plaintiffs paid the balance, viz. Rs. 7,046 to a representative of the defendants and it is also common ground that the only document which was delivered by the defendants to the plaintiffs on that day was the bill of lading. The plaintiffs have filed this suit for a refund of the full price paid by them on the ground that the defendants failed to perform their obligations under the contract and also there was a failure of consideration. The plaintiffs contention is in brief that the defendants merely gave them the bill of lading but failed to deliver to them the original invoice and a proper policy of insurance. The defendants answer to the suit is that the documents delivered by them were the proper documents which they were bound to deliver under a c. i. f. contract. In any event the defendants say the plaintiffs have waived their right to the original invoice and what according to them is a proper policy of insurance. In the alternative the defendants contend that the plaintiffs have dispensed with the performance of those obligations on the part of the defendants under Section 63 of the Indian Contract Act, 1872; and finally they also base their defence on an estoppel operating against the plaintiffs.

(2.) The incidents of a c. i. f. contract have been very clearly and precisely defined by Mr. Justice Hamilton in Biddell Brothers V/s. E. Clemens Horst Company [1911] 1 K.B. 214. He defines these incidents as follows (p. 220): A seller under a contract of sale containing such terms has firstly to ship at the port of shipment goods of the description contained in the contract; secondly to procure a contract: of affreightment, under which the goods will be delivered at the destination contemplated by the contract; thirdly to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer; fourthly to make out an invoice as described by Blackburn J. in Ireland V/s. Livingston (1872) L.R. 5 H.L. 595, 406 or in some similar form; and finally to tender these documents to the buyer so that he may know what freight he has to pay and obtain delivery of the goods, if they arrive, or recover for their loss if they are lost on the voyage. Such terms constitute an agreement that the delivery of the goods, provided they are in conformity with the contract, shall be delivery on board ship at the port of shipment. It follows that .against tender of these documents, the bill of lading, invoice, and policy of insurance, which completes delivery in accordance with that agreement, the buyer must be ready and willing to pay the price. Therefore, under a c. i. f. contract, the seller can give symbolic delivery of the goods by tendering to the buyer three documents, viz. a bill of lading, an invoice and a policy of insurance. In law the tendering of these documents is tantamount to giving delivery of the goods covered by these documents and the buyer is bound to accept these documents and pay the price. As pointed out by Halsbury's Laws of England, Hailsham Edition, Vol. XXIX, p. 210, the commercial reason for the evolution of the " c. i. f." contract lies in the length of time taken in the carriage of goods by sea. The contract which has been ultimately evolved is both for the benefit of the seller .and the buyer. It is to the seller's interest to receive the money equivalent of the goods as soon as possible after the date of the contract of sale; on the other hand, it is to the interest of the buyer to be able to deal with the goods for resale or finance as soon as possible.

(3.) As I have pointed out, the only documents that were delivered to the plaintiffs by the defendants by February 16, 1942, were the bill of lading and the defendants bill upon the plaintiffs. There is some dispute with which I shall presently deal as to whether the defendants bill constituted a proper invoice under a c. i. f. contract; but there, is no dispute and there can be no dispute-that as far as the defendants were concerned, they did not deliver a very essential document under the c. i. f. contract, namely, the policy of insurance, on February 16, 1942, when they received the price from the plaintiffs. If the plaintiffs had paid the price without more, then clearly the defendants could have contended that they had waived their rights to receiving any further documents under the contract. But the plaintiffs case is that they did not make the payment on February 16 unequivocally or unconditionally. Their case is that they made this payment only on the assurance given by the defendants representative that the remaining documents would be delivered in a day or two. Whether this is so or not is a question of fact to be determined by oral evidence and also in the light of correspondence that has passed between the parties.