Morris v Baron and Co
[1918] A.C. 1(Judgment by: Viscount Haldane)
Between: Morris - Appellant
And: Baron and Company - Respondent
Judges:
Lord Finlay LC
Viscount HaldaneLord Dunedin
Lord Atkinson
Lord Parmoor
Subject References:
SALE OF GOODS
Contract required to be evidenced in Writing
Rescission
Variation
Accord and Satisfaction
Implied Rescission by unenforceable Parol Contract
Legislative References:
Sale of Goods Act, 1893 (56 & 57 Vict. c. 71) - s. 4
Judgment date: 19 October 1917
Judgment by:
Viscount Haldane
My Lords, Bailhache J., who tried the action out of which this appeal arises, decided that what was done by the respondents, as it appeared from their letters and the oral evidence, amounted to a repudiation of their contract. In order to reach this conclusion legitimately it had, as I think, to be established that the respondents did more than merely commit a breach of the particular obligation which they violated by insisting on delivery of the still undelivered goods, or on damages for their non-delivery, before paying the money which they owed for the price of the goods already delivered.
Such a refusal to pay would not be enough unless it took place in circumstances which rendered what was done inconsistent with an intention to be bound any longer by the contract as a whole. I doubt whether so much as this ought to be inferred in the case before us, and my inclination on this point is to take the view which was adopted by the Court of Appeal. But I do not think that it is necessary to decide the question, for it appears to me that the effect of the letter of April 22, 1915, coupled with the circumstances in which it was written, was to extinguish altogether the earlier contract for delivery of September 24, 1914, the only contract which the respondents could really enforce by their counter-claim.
It was argued for the appellant that he could succeed even without establishing so much as that the letter of April 22, 1915, effected a complete extinguishment. For it was suggested that, although the respondents were precluded by the requirements of s. 4 of the Sale of Goods Act, 1893, from enforcing by their counter-claim in the action any variations made by that letter of the earlier contract, still, even if the alterations amounted to no more than variations, as distinguished from total abrogation, the appellant could set them up and rely on them by way of defence. The Sale of Goods Act, which in substance follows the language, not of s. 17 of the Statute of Frauds, but of s. 4, provides merely that a contract which is not evidenced by a note or memorandum signed by the party to be charged on it, or his agent, cannot be enforced in proceedings.
The contract, it was said, therefore stands, although it is one of imperfect obligation. It was argued that it may on this account be relied on by a defendant who asserts that it contains, read together with the original contract which it sought to vary, the real and only complete terms of the bargain. If this were so the appellant contended that in the present case no claim would lie against him for damages for non-delivery. For, to begin with, the bargain of April 22, 1915, amounted to an accord and satisfaction of the claim for damages against him which had accrued and had been asserted in the previous action which was compromised. In the second place, the appellant urged that the respondents had not given an order for delivery of any goods under the terms of the agreement of compromise which varied the old contract, and that consequently there had been no breach.
My Lords, adverting first to the question whether the appellant as defendant to the counter-claim could rely on the second and informal agreement as entitling him to set up mere variations made by it of the terms of the old agreement, I think the contention of the appellant's counsel at the Bar is untenable. It is no doubt true that the provisions of s. 4 of the Sale of Goods Act relate to evidence and procedure and not to substantive validity. They follow in this respect the provisions of s. 4 of the Statute of Frauds, and ever since Leroux v. Brown settled what was finally held to be the true view, despite apparently conflicting dicta in earlier cases, it has been clear that such provisions belong to the lex fori rather than to substantive law. Lord Blackburn, in his judgment in this House in Maddison v. Alderson, adopts this view of the Statute of Frauds, and lays it down as applicable to the 17th as well as to the 4th section of that statute.
A similar view had been previously expressed, not only by the members of the Court of Appeal who decided Britain v. Rossiter, but in earlier cases, and I think that it must now be taken to be the better opinion that the 4th and 17th sections stand on the same footing in this respect. It is true that the language of the 17th section, which, like the 4th section of the Sale of Goods Act, relates to the sale of goods of the value of 10l. or upwards, differs from that of the 4th. Instead of saying, as the latter and also the 4th section of the Sale of Goods Act do, that no action shall be brought to charge any one on a contract which does not comply with it, it says that no contract which does not fulfil its requirements "shall be allowed to be good."
But these words have been construed as meaning good for the purpose of being enforced by proceedings. This being so, they do not destroy the contract for every purpose. But I think that, in addition to this, a further construction is now firmly settled which bases both the 4th and 17th sections of the Statute of Frauds upon a special rule of evidence. That rule is that where an agreement is validly entered into which has had to comply with the Statute of Frauds, and variations are afterwards sought to be introduced by parol or by a document which does not comply with the statute, these variations cannot be set up even by a defendant as an answer in proceedings to enforce the original agreement.
This rule was so laid down by Sir William Grant in Price v. Dyer, and again by a later Master of the Rolls Lord Lyndhurst (at that time Sir John Copley) in Robinson v. Page. These authorities were followed not long since in Vezey v. Rashleigh by Byrne J. It shows how definite the principle thus based on the statute was considered to be that in these cases, which related to the specific performance of contracts for the sale of land, the rule was applied, notwithstanding the tenderness towards defendants which the element of discretion in decreeing specific performance sometimes admits of. But both Sir William Grant and Lord Lyndhurst intimated the opinion that complete rescission by parol, as distinguished from mere variation, stands on a different footing, and is outside the principle so established.
In the Court of Appeal in the present case it was held that the respondents as plaintiffs in the counter-claim could wholly disregard what was looked upon merely as an invalid attempt at variation and could set up a breach of the original agreement as remaining for this purpose unaltered. It seems to have been thought that this conclusion covered the whole ground, and disposed of the matter in controversy. The authority relied upon was Noble v. Ward. The judgments there interpreted the 17th section of the Statute of Frauds as establishing the same rule as the 4th, a rule which the apparently still more emphatic expression in the 17th section "shall not be allowed to be good" rendered the easier to recognize. The decision was one of high authority, for it was first given in the Court of Exchequer by Bramwell B. on behalf of that Court, and it was afterwards affirmed in the Exchequer Chamber in a judgment which Willes J. delivered on behalf of a Court consisting of Blackburn, Mellor, Montague Smith, and Lush JJ. as well as himself. Neither Bramwell B. nor Willes J. draw any distinction between the terms of the 17th and the 4th sections of the Statute of Frauds, and from the authorities referred to by them it appears as though no such distinction was in their minds. Lindley J., in delivering the judgment of the Court of Common Pleas in Hickman v. Haynes, seems to take the same view.
Now the important point here is to see, not merely what Noble v. Ward decided, but what it did not decide. I think that it did not decide, as the Court of Appeal appear to have supposed, that an agreement which complied with the statute could not have an end put to it by a subsequent parol agreement. The action had been brought on a valid written contract for the sale of goods of more than 10l. in value, to be delivered at certain times. The times of delivery under this agreement were sought to be treated as varied by a parol agreement. The question was whether what had happened was that the old contract was gone. It was held that, on the facts, there was no giving up of the old contract independently of the effect of such variations as had been attempted to be imported by the new one.
There had been a still earlier written contract than that sought to be varied, apparently a formal document, and it was treated as effectively cancelled by the language of the very parol contract which was held inoperative to merely vary the terms of the formal contract which followed the first. What was really decided was that while the parties might have entered into a parol contract to rescind simpliciter the second, just as they had so rescinded the first, they had not done so. As to the second, they had simply made a new parol contract which sought to vary the mode of carrying the second one into effect. In one sense, no doubt, the intention was to rescind, for the novation attempted to be effected by the final parol contract would, if valid, have established a new contract containing as an entirety the old terms together with and as modified by the new terms incorporated. But this could only have amounted to a partial rescission, or, in other words, a mere variation; and, as Willes J. pointed out in the Exchequer Chamber, the question whether there had taken place an independent and complete rescission, if it had been really raised, must under the circumstances have formed a separate question for the jury, a question which in fact was not put.
What was therefore decided was merely that where parties enter into an invalid contract, which purports to vary, and only to that extent to supersede or rescind, an earlier written contract, the later one does not operate validly. It was not decided by Noble v. Ward that the Statute of Frauds prevents a parol agreement, if it plainly purports to do so, from rescinding in its entirety a previous written contract. Even although itself incapable of being sued on, a parol contract may have that effect. The question is whether there is an intention in any event to rescind, independent of any further intention which may exist to substitute a second contract. I think that Noble v. Ward affirms what seems to result from principle, that in such a case the agreement to rescind must receive effect.
Even if Noble v. Ward can be taken as a decision confined to the 17th section, which I think it ought not to be, the authorities in equity to which I have referred established the principle clearly as regards the 4th section of the Statute of Frauds and of the Sale of Goods Act. No doubt it is not to be found in the expressed words of the sections. But if the construction placed by the Courts on such words is not accepted injustice will result. For it would then be in the power of a defendant to insist that the contract to be sued on by the plaintiff must be the entire new contract comprising the old one with the parol variations, and then to defeat the plaintiff by setting up the statute. The Courts, in order to avoid this result, have read the language as implying that the original formal contract is not, in any question of evidence in proceedings, to be treated as varied by a subsequent contract which is informal, and therefore of imperfect obligation. But this reason obviously does not apply to a complete rescission by parol, which does not seek to set up a new contract to be sued on, but merely terminates existing relations.
Accordingly while a parol variation of a contract required to be in writing cannot be given in evidence, the very authorities which lay down this principle also lay down not less clearly that parol evidence is admissible to prove a total abandonment or rescission.
Now there is no reason why this should not be done through the instrumentality of a new agreement which does not comply with the statutory formalities, just as readily as by any other mode of mutual assent by parol. What is, of course, essential is that there should have been made manifest the intention in any event of a complete extinction of the first and formal contract, and not merely the desire of an alteration, however sweeping, in terms which still leave it subsisting.
The Court of Appeal in the present case indorsed with their approval the judgments of the Divisional Court in Williams v. Moss' Empires, Ld., delivered by Shearman J. and Sankey J., and followed these judgments. My Lords, it is with hesitation that I differ from any statement of the law by these two able judges, just as I always hesitate in differing from Swinfen Eady L.J. and Bankes L.J. But consideration has satisfied me that Williams v. Moss' Empires, Ld. was a more than doubtful decision.
There, under a contract in writing which was not to be performed within a year, the plaintiff had been engaged by the defendants to act at their theatre on certain terms which included the payment of salary at a specified rate. During the currency of the contract, and within less than a year from its termination, the parties verbally agreed to a variation of the plaintiff's salary for a part of the remainder of the term of the engagement. Subsequently the plaintiff sued the defendants to recover salary earned since the verbal agreement at the rate specified in the original contract. It was held that the verbal agreement, being one which was to be performed within a year, and therefore not within the Statute of Frauds, was admissible in evidence to prove that the parties had substituted for the original contract a new contract embodying the variation as to salary along with the unaltered terms of the original contract.
The statement of the law made by Byrne J. in Vezey v. Rashleigh, to which I have already referred as following the previous decisions of Sir William Grant and Lord Lyndhurst, was criticized as inadequate. It was said that Noble v. Ward and other cases had laid down the law more correctly as being that where an agreement varying an agreement which would be invalid if it were not in writing "is itself of such a character that it is bound to be in writing," then, unless it is in writing, it cannot be relied on, but that it is otherwise when it need not itself be in writing. The authorities were said by Shearman J. to have left it open to the Court to hold that
"if there is nothing in the terms of the new contract which necessitates a written contract, then, although the original contract was one which was bound to be in writing, the new parol contract can be enforced because although it is not in writing it is nevertheless an effective contract."
Sankey J. put the same view in other words:
"A contract which in compliance with the Statute of Frauds is in writing may be rescinded by a new agreement. The new agreement may be one which in order to be enforceable is required to be in writing or it may be one which is valid though it is not in writing. If it is one which is required to be in writing and is not in writing it is unenforceable and cannot be treated as evidence that the original contract has been rescinded, and the original contract, therefore, remains in force. But if the new agreement is in writing, or, if verbal, is one which need not be in writing, the new agreement is valid and the original contract is rescinded."
My Lords, I find myself unable to agree with this statement of the law, which appears to me, to begin with, to put absolute rescission on the same footing with variation. In so far as it does this it is inconsistent with the authorities in the Court of Chancery to which I have referred and which were, in my opinion, correctly applied by Byrne J. in Vezey v. Rashleigh. Nor does it, for the reasons I have already given, appear to me to derive any support from Noble v. Ward, or for that matter from the preponderance of the views expressed in the earlier decisions of the common law Courts which were cited and considered in the course of the latter case.
But the difficulty does not end here. If the Divisional Court were right, an agreement which is not in writing, and if it stood by itself would not be required to be so by the statute, can vary the terms of an antecedent agreement put into writing so as to comply with requirements imposed by the statute. This appears to me, for reasons which I have already stated, to be at variance with both principle and authority, and I cannot assent to the proposition.
Now the Court of Appeal in the present case adopted the views of Shearman J. and Sankey J. as expressed in the passages I have cited from their judgments, and I am therefore compelled to differ from the opinion they have expressed as a statement of the law upon the subject.
My Lords, I have come to the conclusion that what happened in April, 1915, as evidenced by the letter of April 22, amounted to a complete rescission and abandonment of the old agreement of September 24, 1914, and the substitution of a completely new and self-contained agreement. The letter purports to set out the result of a conversation between the representatives of the appellant and the respondents which took place just before it, and it is of course the only admissible evidence of the terms then arranged. The proceedings in the old action are to be withdrawn and the sum of 30l. is to be allowed to the respondents to meet expenses incurred through not being able to fulfil orders, because, no doubt, of the asserted breach of contract by the appellant.
Then the amount due to the appellant on his account for goods already delivered is to be left over for three months so as to give to the respondents the opportunity of selling the goods already delivered, and the goods not delivered are to be kept for the respondents if they choose to ask for them. I think that there is here, in the first place, a good accord and satisfaction after breach which discharged any right of action for damages which had accrued to the respondents. In the second place, I think that although the letter does not, so far as liability on the part of the appellant is concerned, comply with the requirements of the Sale of Goods Act, either as regards signature or as regards sufficiently setting out the description of the goods or all the terms of the bargain relating to them, it not the less discloses a definite and self-subsisting parol agreement to abrogate altogether the existing arrangements under the agreement of September 24, 1914, which was no longer to be in force. I draw the inference from the letter as read with reference to the circumstances of the case that the new arrangement was to be a complete settlement of the dispute and to initiate new relations between the parties.
If I am right in this, the appeal succeeds and should be allowed with costs.