Earl Loreburn :-

This is a dispute arising out of contract between Messrs.

Foley Brothers and Messrs. McIlwee Sons.

Messrs. McIlwee, who are the plaintiffs, agreed to construct a tunnel some 5 miles long. It would be necessary to make the tunnel from both ends.

In September 1914 a quarrel arose between Mr. Dennis, who was acting on behalf of Messrs. Poley Brothers, and Mr. McIlwee, acting on behalf of his firm. Mr. Dennis in his haste sent a notice cancelling, at all events, part of the contract, and he also thereupon stopped the supply of air which was necessary to enable the work to continue. After some fruitless interviews, Mr. McIlwee broke up his staff, and treated the contract as ended, inasmuch as the action and the notice of Mr. Dennis went to the very root of the contract. Their Lordships feel no doubt that the letter of the 24th September containing the notice and the action of Messrs. Foley Brothers through Mr. Dennis justified Messrs. McIlwee in treating the contract as having been repudiated in respect of matters going to the root of it. The work was in fact discontinued by Messrs, McIlwee and Co. because of the action of and the notice that had been given by Mr. Dennis.

An argument was addressed to the Board to the effect that this discontinuance of the work and the cancellation or annulment of the contract was due to a common agreement by both sides. This view seems to be quite untenable. It did not commend itself either to the Trial Judge or the Court of Appeal, and it is not necessary to elaborate the facts bearing upon that issue.

Messrs. McIlwee thereupon brought an action, and certainly are entitled to damages; but an important question has been raised upon what principle those damages ought to be assessed. With regard to that matter, the Trial Judge, Mr. Justice Clement, and the Court of Appeal differed and it is desirable to explain how that difference arose. The unwise letter of the 24th September had hardly been written, and action hardly taken, before the author of it appeared to have had some misgivings, and he wished and his principals wished that the contract should be continued. Messrs. McIlwee for obvious reasons were anxious to continue the contract, but seem to have been annoyed at the treatment they thought they had unjustly received. Thereupon two offers were made by Mr. Dennis on behalf of Messrs. Foley Brothers. He offered upon the 9th October that the work should be continued, and that Messrs. Foley Brothers should pay damages up to date. At this time the workmen originally engaged had been discharged by Messrs. McIlwee and Co., and part of the staff - nearly all of the staff, apparently - had been disbanded. Of course, the damage arising from the breach of contract might continue beyond the date of the 9th October. Messrs. McIlwee professed to be ready to renew the contract but were uncertain as to whether the terms of the offer included damage which might occur after the 9th October. They could not obtain any assurance that this was intended, or that this was offered, and they would not renew the contract without being satisfied upon that point. The Court of Appeal thought this was reasonable; their Lordships agree with that view, and must regard the letter of the 9th October as being, to say the least, doubtful in construction.

The second offer was made upon the 10th November, by which time five more weeks had elapsed, and Messrs. McIlwee had now been kept from work for six weeks. The offer by Messrs. Foley Brothers amounted to this - that they would pay all damage of every kind arisen or to arise from the breach, and would restore the terms of the old contract. By this time it had become necessary that considerable modifications should be made in the old contract to meet the new situation, as regards the time, for example, and other matters, Messrs. McIlwee expressed their demands in a letter of the 11th November. If any legal adviser, by which is meant any person competent to give an impartia