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1944 Supreme(SC) 46
Privy Council At Eastern Africa
Sir John Beaumont, Sir Madhavan Nair , Goddard, Wright , Justice Lords Thankerton, JJ.
Twentsche Overseas Trading Co. Ltd. -Appellant
Versus
Uganda Sugar Factory Ltd. -Resopndent
Privy Council Appeal No. 26 of 1943
Decided On : 20-12-1944
Dawe, Lattey, Hugh V. Harraway and Son, Arthian Davies, Cecil Havers , R.J. Sutcliffe, C.T. LeQuesne
A contract is not frustrated if only one of several possible methods of performance becomes illegal or impossible, provided that specific method was not an express term or the essential foundation of the agreement.
Headnote:(A) Law Reform (Frustrated Contracts) Act, 1943 - Doctrine of Frustration - Contract for supply of goods - Performance becoming illegal due to war - Whether a contract is frustrated when the contemplated source of supply is in an enemy country but not expressly mandated by the contract - A contract is not frustrated if only one of several possible ways of performing it becomes illegal and impossible.
(B) Collateral Agreements - Nature and Proof - Collateral contracts are viewed with suspicion by law and must be proved strictly - The existence of an animus contrabendi on the part of all parties must be clearly shown to vary or add to the terms of a written contract.
Facts of the case:
A contract was entered into for the supply of railway tracks with specific technical specifications to ensure compatibility with existing infrastructure. Following the outbreak of war, the supplier failed to deliver the goods, contending that the contract was frustrated because the goods were intended to be sourced from a firm in an enemy country, making performance illegal and impossible.
Findings of Court:
The written contract contained no provision regarding the source of the goods. The technical specifications were intended for compatibility and did not mandate a specific manufacturer. No collateral oral agreement was proved to restrict the source of supply to a specific firm or country.
Issues: Whether the contract was frustrated by the outbreak of war on the ground that the parties contemplated the goods would be supplied from a specific firm in an enemy country, despite the absence of an express contractual requirement to do so.
Ratio Decidendi: The doctrine of frustration applies when the common basis or essential condition of the contract fails. Where the contract is silent on the source of supply and multiple sources are available, the fact that the seller's contemplated method of performance becomes illegal does not frustrate the contract, as it was merely a convenient method rather than the foundation of the agreement.
Result: Appeal and cross-appeal dismissed.
Legal Category Hierarchy
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contract law
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frustration
- impossibility of performance
- unascertained goods
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contract formation
- collateral contracts
- written terms
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frustration
Lord Wright.-
This is an appeal from a judgment of the Court of Appeal for Eastern Africa at Mombasa, reversing a decision in favour of the appellants of the High Court of Uganda, sitting at Kampala, Uganda. The Court of Appeal held that the respondents were entitled to recover damages in an action brought by them as plaintiffs against the appellants as defendants for breach of a contract to deliver steel rails. But the Court decided an issue as to the contract price in favour of the appellants. On that part of the decision the respondents have brought a cross-appeal. The appellants are a company incorporated in Holland, having a branch at Kampala, Uganda. The respondents own and operate a sugar factory in Uganda, on and for the purposes of which they operate about 72 miles of railway. The contract was in writing and was contained in the following document :
Kampala,
12th August 1939,
N. V. Twentsche Overzee Handel Mij.
Twentsche Overseas Trading Co. Ltd.
To: Messrs. Uganda Sugar Factory Ltd.,
Lugazi.
Dear Sir,
We beg to report as follows on your order as per your Indent No, 92/Tech.
Yours faithfully,
N. V. Twentsche Overzae Handal Maatschappi J.
(Twentsche Overseas Trading Co. Ltd).
No. 92/Teoh. (Sd.) W. SAMUEL.
Description of Goods: 3 (three) miles of New Unmounted Light Railway Track for 24" Gauge, consisting of 70 mm. high 20 lbs. rails, Krupp Section E. 10C in dead lengths of 5 m. with 2900 steel sleepers per mile 130 mm. wide, weighing about 11 lbs./yds., Krupp Section K. 105B of 1000 mm. cut off length, with closed ends and with 2 holders pressed on, complete with all accessories, i.e., fishplates, fishbolts, nuts, clips, clipbolts and nuts, etc. Approximate weight per mile of track 50,300 kg.
Price £390 per mile of track c.i.f. Mombosa, not landed.
Terms: At 90 days sight in London.
Shipments: One mile each in November 1939, December 1939, January 1940.
For and on behalf of:-
Uganda Sugar Factory Ltd.
(Sd.) R. G. VEDD.
General Manager.
Order Accepted by H.O. Technical O.C. 1244.
Please return one copy duly signed by you.
Prices without engagement unless otherwise stated in this report.
This document to which both appellants and respondents were parties, and which both Courts have held to embody the bargain between them, contains no provision as to the source from which the appellants were to obtain the goods. The reference in it to Krupps does not indicate a source of supply; it is merely an item in the specification of the
goods required by the respondents because they were using rails manufactured by Krupps, and it was necessary that the rails ordered under the contract should correspond to those made by Krupps, so that the new rails should, when supplied, fit the rails already in use. The respondents claimed however that the rails specified under the contract were to be rails manufactured by a German firm called Ferrostaal, and by that firm only. On this they based their claim to be excused from their failure to deliver the goods, because to do so, they said, would have involved a dealing with alien enemies and hence the performance of the contract became impossible and illegal. Their case was that the manufacture of the goods in Germany and their importation from Germany was the only mode of fulfilling the contract and was the only mode of fulfillment which was contemplated by the parties and was the condition upon which the appellants entered into the contract. In the first place, they based this contention on an allegation that there was a collateral oral agreement between them and the respondents that the goods should be manufactured by and procured from the Ferrostaal Company in Germany. They failed on that warranty contention as both the trial Judge and the Court of Appeal held. It depended on proving an oral agreement said to have been made about three weeks before 12th August 1939. As they failed on that issue of fact, it need not now be further considered. Whatever was said between the parties at the earlier date was superseded by t
