Ambrose J:

The plaintiffs are manufacturers of chicken essence in the State of New York, and the defendants are importers in Singapore. From 1956 both parties worked together to capture the market for chicken essence in Singapore and Malaya from the manufacturers of "Brand's" chicken essence. Towards the end of 1956, the plaintiffs succeeded in producing a chicken essence which, in the opinion of the defendants, was identical with "Brand's" chicken essence. As from 1 May 1957 the defendants became exclusive distributors for a period of five years in Singapore, Malaya, Sarawak, North Borneo, Brunei, Thailand and Hongkong, of chicken essence manufactured by the plaintiffs and sold under the "Apollo" trade mark, of which the defendants were the registered proprietors. An agreement to this effect, Ex AB 1 and 2, was signed by both the plaintiffs and defendants on 12 and 19 November 1957, respectively. By a letter dated 20 May 1958, Ex 2 AB 10, the defendants complained to the plaintiffs about the cloudiness and sediment in the chicken essence supplied by the plaintiffs. The plaintiffs' reply dated 28 May 1958, Ex 2 AB 14, stated that this was due to the natural high protein content. By a further letter dated 2 August 1958, 2 AB 18, the defendants asked the plaintiffs to take back, recondition and return the chicken essence supplied to them. The plaintiffs' reply dated 21 August 1958, Ex 2 AB 19, stated that one of the controls could have slipped during production to bring about the cloudy condition; and that the plaintiffs would stand behind their product and accept the cloudy jars for reconditioning. By a further letter dated 24 November 1958, Ex AB 8, the defendants informed the plaintiffs that they were discouraged by the number of jars rejected owing to the cloudy appearance; and stated that they were jeopardizing the future of their agency by continuing with the sale of the cloudy stocks, which should be dumped in the sea or destroyed in the incinerator. On 24 November 1958, O'Keefe, a director of the plaintiff corporation, wrote a letter, Ex AB 233 and 234, to Watt, the chairman of the defendants' board of directors, stating that the plaintiffs had succeeded in producing a chicken essence of outstanding quality and clearness and that they would like the defendants to place new orders, and suggesting that the defendants arrange with the plaintiffs for a replacement of their existing stocks amortized over a year and a half. Watt's reply to O'Keefe dated 5 December 1958, Ex AB 235, stated that the latest samples of "Apollo" chicken essence looked very good, and that the defendants were prepared to consider the suggestion as to replacement of the existing stocks. On 9 December 1958, Vanelzas, the president of the plaintiff corporation, wrote a letter, Ex AB 237, to Watt thanking him for his concurrence regarding an amicable arrangement as to amortizing the replacement of the sub-standard stocks during a period of 12 to 18 months, and stating that Watt would receive all of the details regarding any arrangement from Moeloek. Moeloek was an Indonesian and a vice-president of the plaintiff corporation.

On 4 January 1959, Moeloek saw the defendants. And on 5 January 1959, Moeloek and the defendants sent off a cablegram to the plaintiffs as follows:

"REVISED STOCK AT 31/12 3783 AND 1170 EXPECTED SALES NEXT QUARTER 1500 LEAVING 3400 TO BE AMORTIZED MCALISTER'S COUNTER-PROPOSAL 50% AMORTIZATION OF FIRST ORDER 3000 CARTONS 3'bd OZ THEN AFTERWARDS 10% PROVIDED NO. INCREASE PRICE UNTIL TOTALLY AMORTIZED STOP EXPECTED INDENTS 1959 12000 CARTONS PLEASE ADVICE."

The plaintiffs replied by cablegram on 7 January 1959, as follows:

"RE YOUR TEL FIFTH COUNTER PROPOSAL ACCEPTED IN FULL."

The cablegrams were confirmed by the defendants' letter of 8 January 1959, Ex AB 9, and the plaintiffs' letter of the same date, Ex AB 10.

It seems to me clear from O'Keefe's letter of 24 November 1958, Ex AB 233, Watt's reply of 5 December 1958, Ex