Morris v Baron and Co

[1918] A.C. 1

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(Decision by: Lord Parmoor)

Between: Morris - Appellant
And: Baron and Company - Respondent

Court:

Judges: Lord Finlay LC
Viscount Haldane
Lord 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

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Decision by:
Lord Parmoor^[F1]

My Lords, in my opinion, the determining factor, on which the appeal depends, is the intention of the parties at the time when the parol arrangement was made in April, 1915. This question is one of fact, and depends on the conclusions to be drawn from the acts and conduct of the parties. The parol arrangement does not comply with the conditions of s. 4, sub-s. 1, of the Sale of Goods Act, 1893, and, if it is to be regarded as a contract of sale, is consequently not enforceable by action against the appellant. I think that in substance the contract is a contract of sale, and therefore within s. 4, sub-s. 1, of the Sale of Goods Act, 1893. Some question was raised at the hearing before your Lordships as to the terms of the parol arrangement. The case has, however, proceeded throughout on the basis that these terms are contained in the note of April 22, 1915, and it is unnecessary to further consider the evidence under this head.

There can be no doubt that, if it is admissible in evidence, the crucial factor, in determining the conclusions to be drawn from the acts and conduct of the parties, is the parol arrangement. If this arrangement expressed in clear language an intention to rescind the earlier contract in September, it would, in the absence of explanation, be decisive. I am unable to understand any principle on which it can be said that the terms of the parol arrangement are not admissible in determining the intention of the parties in April, 1915. If a factor of such importance was eliminated from consideration under any technical rule, there would be great danger of coming to a conclusion contrary to that which was really intended by the parties. I can find no authority for any such proposition, and it is not to be found in the decision of Noble v. Ward, to which frequent reference was made during the hearing of the argument. With all respect to the opinion of Sankey J. in the case of Williams v. Moss' Empires, Ld., I cannot agree that if a subsequent contract is unenforceable, as being one which is required to be in writing, and is not in writing, it cannot be treated as evidence that the original contract has been rescinded, and the original contract therefore remains in force. In his judgment in the Court of Appeal Bankes L.J. approved the opinion of Sankey J., but, as stated above, it does not appear to me to be correct, or supported by authority.

The next point which arises for consideration is whether, taking into consideration the parol arrangement of April as part of the acts and conduct of the parties, there was an intention to rescind the earlier contract of September, 1914. The note of April 22, 1915, was drawn up in confirmation of terms agreed upon to compromise an action brought, and a counter-claim made, on the September contract. It provides that both parties shall withdraw the legal proceedings on terms, each party to pay his own costs and the appellant to allow 30l. to the respondents to meet expenses incurred through not fulfilling the orders. I agree in the construction placed by Mr. Tindal Atkinson on the latter portion of the terms of the note. The account due to the appellant is to be left over for three months so as to give the opportunity of selling the goods - that is to say, the goods already delivered to the respondents. The goods not delivered to the respondents are to be kept for them if they ask for them.

A further option is given to the respondents of taking up the balance of pieces to complete the order, giving time to make. It is clear that these terms are an alteration of the September contract, but this in itself would not be sufficient to support the plea of rescission. It is necessary further to inquire whether the conditions have been so changed in their essential character that there is a substantial inconsistency, such as to lead to the inference that the parties did intend to rescind the earlier contract of September. It is not possible to lay down any general principle, but where the alteration is such that the conditions of the earlier contract cannot be restored without placing one of the parties under a permanent and substantial disability there is a strong prima facie probability of an intention to rescind. This factor applies in the present case, and is supported, not only by the acts and conduct of the parties at the time, but by the whole course of their subsequent acts and conduct. The case before Bailhache J. was fought on the construction of the April contract, and I cannot find that the September contract was regarded as material until this issue was raised in the argument before the Court of Appeal. It was pointed out in argument that the April contract refers to the earlier contract, but the answer is that it does so only so far as is necessary to identify the subject-matter, and that from a business aspect the two contracts are essentially different. I have therefore come to the conclusion that it was the intention of the parties at the time when they made the parol contract in April, 1915, to rescind and put an end to the earlier contract of September, 1914.

To prevent misapprehension I desire to refer to the later portion of the judgment of Swinfen Eady L.J., in which he refers to the case of Noble v. Ward and the opinion stated by Shearman J. in the case of Williams v. Moss' Empires, Ld. In my opinion the case of Noble v. Ward was decided on the ground that it was the intention of the parties in the subsequent contract not to rescind the earlier contract, but only to vary it. It is a settled principle that a contract, which is required to be in writing, and is not in writing, cannot vary the terms of an earlier contract, where such earlier contract is required by statute to be in writing in order to be enforceable by action. If, therefore, the right conclusion should be that the parties intended not to rescind the earlier September contract, but to introduce a variation in these terms, I think that the principle in Noble v. Ward would have applied. There is no reason to dissent from the opinion expressed by Shearman J. in Williams v. Moss' Empires, Ld. and approved by Swinfen Eady L.J., although, for the reasons given above, it is not, in my opinion, applicable to the present case.

"The principle as laid down by Willes J., who delivered the judgment of the Court, in Noble v. Ward is where there is alleged to have been a variation of a written contract by a new parol contract, which incorporates some of the terms of the old contract, the new contract must be looked at in its entirety, and if the terms of the new contract when thus considered are such that by reason of the Statute of Frauds it cannot be given in evidence unless in writing, then being an unenforceable contract it cannot operate to effect a variation of the original contract. That principle is to be found in a number of cases, which I need not refer to in detail."

After referring to the cases of Goss v. Lord Nugent, Stead v. Dawber, Giraud v. Richmond, Marshall v. Lynn, and Stowell v. Robinson, the learned judge continues:

"Those cases show that whenever the parties vary a material term of an existing contract they are in effect entering into a new contract, the terms of which must be looked at in their entirety, and if the new contract is one which is required to be in writing but is not in writing, then it must be wholly disregarded and the parties are relegated to their rights under the original contract."

Unless the principle is maintained that it is not admissible to vary the terms of a contract in writing by a subsequent parol contract, which in itself would be required to be in writing to be enforceable, the safeguards provided either by the Statute of Frauds or the Sale of Goods Act, 1893, might be practically evaded and rendered of little value as a protection against fraud or to ensure certainty.

The case of Noble v. Ward has been so fully considered by other members of your Lordships' House that it is unnecessary to refer further to it. There are, however, two cases to which I would desire to refer your Lordships. In Goss v. Lord Nugent Denman C.J. says:

"It should rather seem that a written contract concerning the sale of lands may still be waived and abandoned by a new agreement not in writing, and so as to prevent either party from recovering on the contract which was in writing."

In the case of Maddison v. Alderson Lord Selborne states the law applicable to contracts not enforceable through non-compliance with statutory requirements:

"It has been determined at law (and, in this respect, there can be no difference between law and equity), that the 4th section of the Statute of Frauds does not avoid parol contracts, but only bars the legal remedies by which they might otherwise have been enforced: Crosby v. Wadsworth; Leroux v. Brown; Britain v. Rossiter. Crosby v. Wadsworth was an action of trespass brought by the trespasser against the vendor of a growing crop. The contract was by parol, and it was held to be concerning an interest in land, within the 4th section of the statute.

'But'

(said Lord Ellenborough)

'the statute does not expressly and immediately vacate such contracts, if made by parol; it only precludes the bringing of actions to enforce them by charging the contracting party, or his representatives, on the ground of such contract, and of some supposed breach thereof; which description of action does not properly apply to the one now brought, viz., a mere general action of trespass, complaining of an injury to the possession of the plaintiff, however acquired, by contract or otherwise.'"

In the same case Lord Blackburn says: "I think it is now finally settled that the true construction of the Statute of Frauds, both the 4th and the 17th sections, is not to render the contracts within them void, still less illegal, but is to render the kind of evidence required indispensable, when it is sought to enforce the contract." It is not necessary further to consider the opinion so expressed by Lord Blackburn in the present case, but it is noticeable that Lord Blackburn had been a member of the Court when Willes J. gave judgment in Noble v. Ward.

If the original contract of September, 1914, has been rescinded, and the later contract of April, 1915, is not enforceable against the appellant as not complying with the conditions in s. 4, sub-s. 1, of the Sale of Goods Act, 1893, the appellant succeeds in his appeal. Assuming, however, that the case had to be determined on the terms of the later contract, I agree with the judgment of Bailhache J. Under the April contract the appellant was entitled to the payment of his account after a period of three months. Bailhache J. has found that during this period no firm offer was given to the appellant by the respondents under the contract, and that at the end of this period the appellant had done nothing in breach of his obligations. On July 27, 1915, the appellant wrote to the respondents claiming the payment to which he was then entitled under the April contract. On July 28 the respondents answered:

"Referring to yours of yesterday's date, we shall be pleased to pay your account if you deliver the balance of the blue pieces to complete the order, as stated in our letter of April 22nd."

This condition the respondents were not entitled to make, and they withheld payment because they conceived that they had a counter-claim for damages exceeding the amount of their indebtedness. In a letter of August 17th the respondents maintained the same attitude, and, although there was a subsequent attempt to settle, they did not recede from the view as to the nature of their rights stated in the letter of July 28. No firm order was ever given by the respondents in accordance with the terms of the April contract. They were insisting that they had a right to give an order, not under the terms of the April contract, but of a different contract to which the appellant had never been a consenting party. There was no justification for this attitude. The difference on which the respondents continuously insisted had reference to a matter of essential substance, namely, the claim of the appellant to be paid his account of 888l. 4s., irrespective of further deliveries.

The question then arises whether the persistent maintenance of an untenable construction of a contract on a matter of essential substance should be regarded as not consistent with a continuing intention to observe the contractual obligations. I think that the answer should be in the affirmative. If this is so, the respondents could not substantiate their counter-claim for damages, even on the assumption that they were entitled to enforce their right under the April contract by action against the appellant. This conclusion renders it unnecessary to consider whether the payment of his account to the appellant was a condition precedent to the giving of a firm order under the contract, and I do not understand that the judgment of Bailhache J. depended on the acceptance of any such construction of the contract.

My Lords, in my view the appellant succeeds and the appeal should be allowed with costs here and below.

Order of the Court of Appeal reversed and judgment of Bailhache J. restored. The respondents to pay the costs in the Courts below and also the costs of the appeal to this House.

Lords' Journals, Oct. 19, 1917.

Solicitors for appellant: Ward, Bowie, Porter & Co., for Walter & E. H. Foster, Leeds.

Solicitor for respondents: F. B. Brook, for Albert V. Hammond, Bradford.