Tallerman & Co Pty Ltd v Nathan's Merchandise - [1957] HCA 10 - HCA 1957 case summary — Zoe

CTHHCA

Tallerman & Co Pty Ltd v Nathan's Merchandise

[1957] HCA 10

High Court of Australia|1957-07-01|Before: Taylor JJ, Fullagar J, Clancy J

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Source facts

Court

High Court of Australia

Decision date

1957-07-01

Before

Taylor JJ, Fullagar J, Clancy J

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

The application referred to in the opening words of the second paragraph of this letter was a request which had been made to the appellant's Melbourne representative for a delivery of some 200,000 bullets. This request was subsequently complied with by a delivery made at the beginning of April 1952.

[2]

The respondent does not appear to have been interested in the suggestion made in the last paragraph of the last-mentioned letter and on 21st March its solicitors wrote in the following terms: "We are in receipt of your letter of 18th instant and have discussed the contents thereof with our client. Our client has instructed us to inform you that finance has nothing whatever to do with its attitude and it is somewhat surprised that your client should raise the question. Our client adheres to its previous statement that there was an Agreement with Tallerman & Co. Pty. Ltd. of Melbourne that delivery of the bullets would be made as and when our client required them. The deliveries made to our client appear to support that statement. We informed you in our letter of 6th instant that our client intended to carry out the agreement for delivery but it is prepared without prejudice to its legal rights to depart therefrom to the extent that it will undertake that delivery instructions covering the balance of bullets will be given so that the final delivery will be made not later than 30th September next. Our client recently requested Tallerman & Co. Pty. Ltd. of Melbourne to deliver 200,000 bullets but the request has not yet been complied with our client still requires delivery of that number. Under the contract delivery is to be made into our client's store at 559 Lonsdale Street this city. Our client is not prepared to accede to your client's suggestion that our client should instruct Youngs of Sydney to take the goods into their store. Our client considers that your client should take delivery thereof or arrange the storage and if it does so our client will agree that such action on the part of your client shall be without prejudice to the determination of liability for the Railway Storage Charges."

[10]

In asserting that a new contract was made in Sydney the appellant contended that in law, it is impossible by a subsequent agreement, merely, to vary or modify an existing contract. Any agreement which purports to vary an existing contract operates, it is contended, first of all to abrogate entirely the existing contractual relationship and, then, to reinstate the terms of the old contract as varied or modified by the new agreement. In argument the appellant sought to support the statement made by Professor Williams in The Statute of Frauds (1932), s. 4, p. 178 that "Every variation, it would seem, is in the nature of a substituted contract, which, if it is to operate, must first rescind the prior varied contract". But the argument advanced in support of this proposition misconstrued observations made by Denman C.J. in Goss v. Lord Nugent [6] and by Baron Bramwell in Sanderson v. Graves [7] in relation to the facts under consideration in those cases. I agree with the view of the Full Court that the appellant's submission on this point should be rejected. It is firmly established by a long line of cases commencing at least as early as Goss v. Lord Nugent [1] and ending with cases such as Morris v. Baron & Co. [2] and British & Beningtons Ltd. v. North Western Cachar Tea Co. Ltd. [3] - and, indeed, including Goss v. Lord Nugent [1] itself - that the parties to an agreement may vary some of its terms by a subseuqent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. Variation, of course, may involve partial rescission as is pointed out in Salmond and Williams on Contracts, 2nd ed. (1945), pp. 488, 489, but "Partial rescission does not completely destroy the contractual relation between the parties. It merely modifies that relation by cutting out part of the rights and obligations involved therein, with or without the substitution of new rights and obligations in their place. Partial rescission is not the extinction of the contract but the variation of it." Hence it is said "A contract may be varied (1) by way of partial rescission without the substitution of new terms in place of those rescinded, or (2) by way of partial rescission with the substitution of new terms for those rescinded, or (3) by the addition of new terms without any partial rescission at all." These passages, in my view, correctly state the accepted view of the manner in which an agreement by way of variation operates.

[19]

In these circumstances it is clear that the verdict of the learned trial judge was erroneous unless it can be said, upon the evidence, not only that a new contract giving rise to rights enforceable by action was wholly made in Sydney in February 1952, but also that the purchase price thereunder became payable by the respondent. Upon the evidence neither of these issues can be resolved in favour of the appellant. Reference to the correspondence which has been set out shows that at the end of February 1952 a dispute arose between the appellant and the respondent. The former claimed, by the letter of 3rd March 1952, that it had delivered goods to the respondent in fulfilment of existing contracts and, inferentially, that it was entitled to be paid the stipulated price. The respondent's answer - omitting matters unworthy of mention - was that the deliveries were premature. It was not bound, it was said, to accept delivery of the goods until after it had, at its convenience, given delivery instructions and, consequently, it insisted that no liability to pay for the goods had then arisen. The substance of the arrangement thereafter made was that delivery instructions covering the whole of the goods would be given by 30th September 1952 and that the appellant would deliver in accordance with such instructions. It may well be that, in view of the express terms as to delivery appearing on the written orders, the respondent was already in breach and was in no position to insist upon deliveries being made on its instructions from time to time. But we are not concerned with trying an action based on causes of action arising out of the original contracts and it is possible that there are reasons, undisclosed by the evidence in the present case, which would induce a contrary view. Again, if the respondent was already in breach and the price had become payable, there would be sound grounds for saying that the correspondence cannot be regarded as evidencing a mere voluntary postponement of the time for acceptance of the goods or, indeed, an agreement to postpone that time: Plevins v. Downing [1] but cf. Hartley v. Hymans [2] and Charles Rickards Ltd. v. Oppenhaim [3] . On the other hand, notwithstanding a breach on the part of the respondent, it was open to the appellant to keep the contracts on foot and insist upon performance of the respondent's obligations thereunder or, by way of accord and satisfaction, to accept the respondent's promise to receive the goods in question and pay for them at some later date. The fact that there is some lack of clarity concerning the respective rights of the parties immediately before the initial letter set out above gives rise to some difficulty in saying precisely what legal effect should be given to the arrangement evidenced by the correspondence. It is plain, however, that it amounted to something more than a mere voluntary forbearance by the appellant to insist upon delivery in accordance with the condition contained in the original contracts and it is equally plain, from the terms of the correspondence, that the appellant did not intend to accept the respondent's promise to take the goods and pay for them at some future time in discharge of its existing rights under those contracts. But, at the most, from the appellant's point of view, the arrangement constituted, either, a variation of the original contractual provision as to delivery or the first step in an accord and satisfaction. On either view, however, the appellant must fail. If the arrangement constituted a variation of the original contracts the appellant must fail for it did not make out the contract upon which it sued. That is to say, it failed in its undertaking to prove a new contract wholly made in Sydney. Again, it failed to prove that the stipulated price became payable by the respondent whether the contract was wholly new or constituted by the original contracts and a subsequent variation in Sydney, for there was no delivery subsequently to the making of the arrangement in Sydney. If there was an entirely new agreement that agreement must be taken as having incorporated, as one of its terms, a provision concerning payment of the same character as that contained in the original contracts. That obligation was to pay for the goods "Nett 7 days or cash on Delivery at Seller's Option". Such a term evidences an intention that the purchaser shall not be bound to pay the price until delivery or within seven days therafter at the seller's option. Such a provision as to payment is wholly fatal to the appellant's claim to recover the price of the goods whether he sued upon a new contract wholly made in Sydney, or, upon the original contract as varied by the subsequent arrangement.

[24]

There is no doubt upon authority that an agreement which is a mere accord, and which has not been performed, does not extinguish the cause of action with which the agreement deals. This, of course, is because, by the agreement of the parties, discharge is conditional upon performance. (See Bayley v. Homan [2] ; Allies v. Probyn [3] ; Gabriel v. Dresser [4] ; Gifford v. Whittaker [5] ; Reeves v. Hearne [6] .) The giving of a negotiable security, payable at a future time, on account of a simple contract debt stands in a somewhat special position and will operate to suspend the cause of action in the meantime (Kearslake v. Morgan [7] ). But even if the suggestion is open - and, in my opinion, it is not - that an accord is binding upon the parties as a contract and that, to an action brought upon the original cause of action before the time for performance under the new agreement has arrived, the defendant may set up a cross-action for breach of the new agreement, it by no means follows that such an agreement will give rise to a cause of action at the suit of each party. In the ordinary case of accord executory the injured party undertakes to discharge the other party from liability pursuant to an existing cause of action conditionally upon the future performance of some specified condition. The injured party, in effect, says: "If the specified condition be fulfilled my existing cause of action will be extinguished but if the condition be not fulfilled my existing cause of action will, in no way, be affected." Such an arrangement is quite inconsistent with the notion that the accord itself gives rise to a right to the performance of the condition for by the express agreement of the parties the old cause of action is to subsist until performance and is to be extinguished upon, and only upon performance. In effect the so-called promisor is in the position where he may, at his option, discharge his contractual obligations either by strict performance or, alternatively, by execution of the agreement by way of accord. Of course, it is always open to the parties to a contract, of which there has been a breach, to make an agreement expressly giving to the injured party alternative rights of action. That is to say the agreement may preserve to the injured party his original cause of action until performance of some specified condition and, alternatively, give to him a new right of action for breach of the condition. But this is not the general nature of an agreement which is a mere accord; such an agreement does not, in my view, create any new cause of action at the suit of the party who has agreed that his cause of action shall be extinguished upon performance, or, against the party who is given the option of performing the condition as the price of his release.