Tallerman & Co Pty Ltd v Nathan's Merchandise

The suggestion contained in the third paragraph of this letter was rejected by a letter dated 26th March written by the appellant's solicitors: "We received your letter of the 21st instant and submitted same to our clients for their instructions. We understand the matter was dealt with at a board meeting today, and we have been instructed to write you in reply. According to our instructions, there was no such agreement as you refer to in the second paragraph of your letter. With regard to the third paragraph, our clients cannot see their way to agree to the suggested arrangement for delivery, but they are prepared to extend the time for payment over three months as already mentioned, or alternatively they will make an allowance of 2½% for prompt payment provided that delivery is taken and responsibility for storage and railway charges accepted by your clients. With regard to the fourth paragraph, instructions are being sent to Melbourne to deliver the 200,000 bullets which have been asked for. Regarding the fifth paragraph of your letter, our clients accept the suggestion that the goods should be taken up from the railway and stored without prejudice to the question of the liability for the railway storage charges as mentioned therein. These goods will be stored with Youngs in the name of our clients on account of your clients pending arrangements being made for delivery. Will you please submit these suggestions to your clients and see whether the matter can be adjusted amicably on the above lines."

Two further letters, one dated 3rd April 1952 from the respondent's solicitors, and the other dated 4th June 1952 from the appellant's solicitors, were in evidence. These were as follows: "We are in receipt of your letter of 26th ultimo the contents of which have been considered by our client. Our client will not agree to either suggestion set out in the third paragraph of your said letter and it is not prepared to vary the proposal for delivery made in our letter to you of 21st ultimo. Delivery of 200,000 bullets was recently made to our client pursuant to its request to Tallerman & Co. Pty. Ltd. of Melbourne."

"We refer to your letters of 21st March and 3rd April and have now been instructed to accept your client's offer contained in the letter of 21st March to the effect that delivery of the balance of this order for bullets will be accepted not later than 30th September next. With regard to the 200,000 bullets recently delivered by our client at your client's request, our client would be obliged if you would request your client to let it have payment for the same amounting to £1,100."

It is the appellant's contention that this correspondence evidenced an agreement whereby the respondent undertook that delivery instructions for the 1,600,000 bullets lying in store in Sydney after the beginning of April would be given no later than 30th September 1952 and since no such instructions were given and the respondent refused to accept the bullets in question the appellant commenced proceedings against the respondent by the issue of the writ previously referred to.

As already appears the appellant by its writ sued both in debt and damages and its writ was endorsed for service out of the State of New South Wales and in the State of Victoria. This and other endorsements on the writ appear to have been in the form required to make the writ effective for service under the Service and Execution of Process Act 1901-1950. But after service upon the respondent it moved to set aside the service of the writ on the ground that the causes of action sued upon arose in Victoria and that the respondent did not carry on business in New South Wales. This motion may, possibly, be thought to have raised for consideration some of the matters involved in the apparent conflict between cases such as Ex parte Gove [1] and Braemar Woollen Mills Co-op. Ltd. v. Poinsettia Hosiery Mills Pty. Ltd. [2] on the one hand and other cases such as John Sanderson & Co. v. Crawford [3] and Swan Hill Co-op. Society Ltd. v. Richardson [4] but the appellant's attitude in this proceeding indicated an acceptance of the validity of the decision in Ex parte Walker; Re Caldwell's Wines Ltd. [5] . In other words it was prepared to concede, in the circumstances of the case, that unless it could establish that the contract out of which the causes of action sued upon arose was entered into in New South Wales service of the writ should be set aside. The rule of practice settled by Ex parte Walker [5] has prevailed for a long time in New South Wales and, perhaps, it may be said that the validity of that decision is in no way affected by the differences of opinion expressed in the earlier cases referred to.

1. (1921) 21 S.R. (N.S.W.) 548; 38 W.N. 189. 2. (1933) 51 W.N. (N.S.W.) 6. 3. (1915) V.L.R. 568. 4. (1930) A.L.R. 156. 5. (1931) 31 S.R. (N.S.W.) 494; 48 W.N. 189. 6. (1931) 31 S.R. (N.S.W.) 494; 48 W.N. 189.

Consistently with the attitude adopted by it the appellant, however, resisted the respondent's application, maintaining that the arrangement evidenced in the correspondence above set out brought into existence a new contract for the sale by it to the respondent of the balance of 160 boxes of bullets. This contract, it was said, was made in Sydney because the offer which was the basis of the arrangement was accepted by a letter despatched by the appellant from that city. In the peculiar circumstances of the case this last proposition raises difficulties of its own but for reasons which will appear it is unnecessary to consider them.

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.

1. (1833) 5 B. & Ad., at pp. 64, 65 [110 E.R., at pp. 715, 716]. 2. (1875) L.R. 10 Ex. 234. 3. (1833) 5 B. & Ad. 58 [110 E.R. 713]. 4. (1918) A.C. 1. 5. (1923) A.C. 48. 6. (1833) 5 B. & Ad. 58 [110 E.R. 713].

In applying the proposition advanced by the appellant in the present case it was contended that the arrangement evidenced by the correspondence referred to was contractual in its nature and that, instead of merely modifying or qualifying the existing contractual rights and obligations of the parties, it operated to bring into existence, in the manner indicated, a new contract which redefined their rights. Since the last arrangement is said to have been made in Sydney it is contended that the contract upon which the appellant was entitled to sue was wholly made in New South Wales.

Upon the hearing of the respondent's motion to set aside service of the writ the matter took a curious turn. The contention abovementioned was advanced by the appellant and, ultimately, that motion was, with the consent of the respondent, dismissed. But it was dismissed only upon an undertaking, given by the appellant that it would, for the purposes of clarification, amend the endorsement of the particulars of its claim contained on the writ of summons. In its amended form the endorsement read as follows: "The Plaintiff claims the sum of Eight thousand eight hundred pounds (£8,800.0.0) in respect of a contract made between the Plaintiff and the Defendant whereby the Plaintiff undertook to supply and the Defendant undertook to accept and pay for inter alia 1,600,000 bullets at the price of £5.10.0 per thousand."

"Alternatively the Plaintiff claims from the Defendant damages for breach of the said contract made between the Plaintiff and the Defendant for delivery to the Defendant by the Plaintiff of the said bullets of which the Defendant has either failed to take delivery or alternatively failed to pay for."

The purpose of the amendment - which does not seem to have been achieved - was to make it clear that in the action the appellant rested his case solely upon a contract made, as suggested in the contention outlined above, in Sydney. Subsequently to the dismissal of the motion the plaintiff declared upon common money counts for money payable for goods bargained and sold and for goods sold and delivered and in the second and third counts of the declaration sued to recover damages for breaches, on the part of the respondent, of a contract to purchase 1,600,000 bullets. In the second count the breach alleged is a refusal to accept delivery, and in the third, repudiation of the contract.

It is difficult to see how the contention of the appellant could advance his case beyond, perhaps, establishing that the contract sued upon was wholly made in Sydney. But if the contention is erroneous and the contracts out of which the causes of action arose were the earlier contracts as modified or varied by an agreement made later in Sydney he would have been in a no less advantageous position; on that hypothesis the contracts sued upon did not assume their final form until the subsequent agreement was made and that, it is said, was made in Sydney. Indeed the distinction drawn by the appellant was, for all practical purposes, a matter of words only. Nevertheless, in the circumstances of the case, it assumed a vital importance and gave to the proceedings an air of complete unreality.

Reference has been made to the endorsement on the writ and to the form of the declaration but it is of little importance in this appeal whether their form operated to limit the appellant's claim to causes of action arising out of an agreement alleged to have been made wholly in Sydney. The fact is that the parties intended the issues in the action to be so confined and both the action itself and the subsequent appeal were determined on this basis. It should be added that the appellant does not now contend that they should have been decided upon any wider basis.

Upon the trial of the action, which was tried without a jury, the learned trial judge entered a verdict for the appellant for £8,800. His Honour found that the parties made a new contract in Sydney for the sale of 1,600,000 bullets. The correspondence, he thought, evidenced the "formation of a valid contract" for the sale of those goods. But his Honour omitted to say whether he found that, under this contract, the respondent became liable to pay the price of the goods in question or was responsible for damages for breach of the contract. Reference to the concluding portion of his reasons and to the amount claimed as the price of the goods makes it sufficiently clear, however, that he intended to hold that the appellant was entitled to recover the price and, indeed, there was no evidence upon which that sum could have been awarded as damages. There was evidence from which it might have been inferred that the market value of the goods in question commenced to depreciate in June 1952 - and this, no doubt, was responsible for the defendant's failure to carry out the arrangement made a few months earlier - but the evidence neither justified the inference that they had become worthless nor enabled the extent of the depreciation at the time of the alleged breaches to be assessed.

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.

1. (1876) L.R. 1 C.P.D. 220. 2. (1920) 3 K.B. 475. 3. (1950) 1 K.B. 616.

On the other hand if the arrangement made in Sydney should be regarded as the first step in an accord and satisfaction the failure by the respondent to give delivery instructions by the end of September 1952 did not give rise to any new cause of action at the suit of the appellant. As Dixon J. (as he then was) said in McDermott v. Black [1] : "An accord executory neither extinguishes the old cause of action nor affords a new one" [2] . The history of the development of the defence of accord and satisfaction is referred to in some detail in British Russian Gazette and Trade Outlook Ltd. v. Associated Newspapers Ltd. [3] and in that case views - which appear to have been unnecessary for the decision - were expressed that an accord executory is no different from any other contract and that the rights of each party thereto may be enforced in the usual manner. Greer L.J., with whom Slesser L.J. agreed, said: "In my judgment, at the present day, the law of this country is that where two people make mutual promises, the promise of each being the consideration for the promise of the other, this amounts to a contract in law for the non-performance of which an action for damages will lie. I think, however, that it is too late to say that the old rule that an accord without satisfaction does not discharge a liability after breach can be disturbed by a judgment of this Court. I think it is still the law that a mere accord without satisfaction does not put an end to an existing liability after breach, but I think it amounts to an agreement which can be enforced by a claim for damages if it is broken by one of the parties when the other has shown his readiness to perform the terms of the agreement" [4] .

1. (1940) 63 C.L.R. 161. 2. (1940) 63 C.L.R., at p. 184. 3. (1933) 2 K.B. 616. 4. (1933) 2 K.B., at p. 650.

At a later stage his Lordship observed: "It will be seen that we have not been referred to any case in which it was necessary to decide that an action will not lie on an agreement which is a mere accord, and has not been performed. On the question whether such an agreement can be a binding contract opinions of judges have varied. I therefore feel that we are now entitled to decide the question on principle, and I think at the present stage of the development of the law we ought to decide that an agreement for good consideration, whether it be an agreement to settle an existing claim or any other kind of agreement, is enforceable at law by action if it be an agreement for valuable consideration, and such valuable consideration may consist of the promise of the other party" [1] .

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.

1. (1837) 3 Bing. N.C. 915 [132 E.R. 663]. 2. (1835) 2 C.M. & R. 408 [150 E.R. 176]. 3. (1855) 15 C.B. 622 [139 E.R. 568]. 4. (1844) 6 Q.B. 249 [115 E.R. 967]. 5. (1836) 1 M. & W. 323 [150 E.R. 457]. 6. (1794) 5 T.R. 513 [101 E.R. 289].

The result therefore is that the appeal must fail but it would be doing less than justice in the peculiar circumstances of this case if the judgment directed to be entered by the Full Court continued to stand. On the record as it stands at the present it may be that the existing judgment would operate to preclude any further action which the appellant might, otherwise, be advised to bring. The present action was tried on a completely artificial basis and this, no doubt, resulted from the appellant's desire to have its case determined in Sydney. Though, no doubt, the appellant is mainly responsible for the artificial complexion which the case assumed there is no reason why the judgment should stand in the way of substantial justice being done as between the parties. Accordingly I am of opinion that that judgment should be set aside and a judgment of non-suit entered. Otherwise the appeal should be dismissed.