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ZAKOUR v. PILLSBURY MILLS INC.


  • appeal
  • 1961-06-26
  • SUPREME COURT
  • GLR 401-405
  • Print

KORSAH C.J., SARKODEE-ADOO AND AKIWUMI JJ.S.C.


Summary

Mercantile law?-Essential features of c.i.f. contract?-Delivery of goods?-Action for money due on bills of exchange?-Whether counterclaim can lie for goods damaged in transit.

Headnotes

The plaintiffs (respondents herein) a corporation resident in the United States of America, received orders from the defendant (appellant herein) for the supply of flour on c.i.f. contract. The goods were accordingly supplied to the defendant at 30 days sight bills of exchange drawn on the defendant, which were duly accepted by him, after which he took delivery of the goods covered by the said bills.The plaintiffs sued the defendant for the sum of G97,264 10s. 9d. being the amount represented by the bills of exchange. The defendant admitted acceptance of the bills and taking delivery of the goods, but contended that some of the goods to the value of G47,000 covered by the said bills were damaged in transit and that he was therefore not liable for that amount, in respect of which he counterclaimed.Acolatse, J. in the High Court, Accra, gave judgment for the plaintiffs for the sum of G46,869 18s. 9d. after the plaintiffs had agreed that the defendant was entitled to be credited with certain sums. The learned judge relying on dicta of McCardie, J. in Manbre Saccharine Co. Ltd. v. Corn Products Co. Ltd. [1919] K.B. 198 and C. Groom Ltd. v. Barber [1914] K.B. 316 held that a c.i.f. contract is performed by the delivery of documents and not by the actual physical delivery of the goods. He further found that:"there was valuable consideration between the plaintiffs and the defendant in the transaction under c.i.f. terms in that the plaintiffs have discharged their obligation by delivery of the necessary documents and the [p.402] defendants have taken delivery of the goods by means of the acceptance of the documents by signing the bills of exchange."On appeal to the Supreme Court, it was argued on behalf of the defendant, inter alia, that the learned trial judge failed to see that the plaintiff brought his action on bills of exchange and not on contract or contracts involving c.i.f. terms. His judgment based on contract involving c.i.f. terms was therefore wrong. Counsel for the defendant, however, admitted that the orders placed by the defendant were on a c.i.f. basis, and there was evidence that the defendant had successfully claimed against the insurance company in respect of some of the goods damaged in transit.

Judgement

APPEAL by the defendants from the judgment of Acolatse J. in the High Court, Accra, delivered on the 22nd April, 1960 (unreported) in an action by the plaintiffs for sums owing to them under bills of exchange. The facts are set out in full in the judgment of the Supreme Court.

JUDGMENT OF KORSAH, C.J.

Korsah, C.J. delivered the judgment of the court. The plaintiffs sued the defendant for the sum of G97,264 10s. 9d. being amount representing 50 bills of exchange drawn by the plaintiffs in New York in the United States of America payable to the plaintiffs at 30 days sight, and which were accepted by the defendant.

[p.403]

The facts in this case briefly stated are that the plaintiffs, a corporation resident in the United States of America, received orders from the defendant for the supply of flour on c.i.f. contract; the goods were accordingly supplied to the defendant at 30 days sight bills of exchange drawn on the defendant which were duly accepted by him, after which he took delivery of the goods covered by the said bills. The defendant does not deny acceptance of the bills nor taking delivery of the goods, but contends that some of the goods to the value of G47,000 were damaged in transit and as such, he is not liable for that amount in respect of which he has counterclaimed.

In the course of the proceedings the plaintiffs agreed that the defendant was entitled to be credited with the sum of G40,594 12s. made up as follows: (a) bills paid G2,436 11s 3d.; (b) bills abandoned G10,936 15s.; (c) sum admitted G27,221 5s. 9d; leaving an amount of G56,669 18s. 9d. for which judgment was entered less the sum of G9,800 being commission due to defendant and in the result the balance in favour of plaintiffs is G46,869 18s. 9d.

The defendant has appealed against this judgment on the following grounds:

"1. The learned trial judge failed completely to appreciate the nature of the case or issue before him and as a result of the said misconception or misdirection arrived at a wrong conclusion. He failed to see that the plaintiff brought his action on bills of exchange and not on contract or contracts involving c.i.f. terms. His judgment based on contract involving c.i.f. terms is therefore wrong.

2. The learned trial judge misdirected himself on the facts of the case. His finding of fact, namely, that the `onus is upon the defendant to prove the loss suffered by him and I hold that he has not discharged that burden' is wrong as the defendant proved abundantly that the greater portion of the goods supplied by the plaintiff were damaged before he took delivery."

In support of these grounds it is contended on behalf of the appellant that as the claim was based upon bills of exchange the principles governing partial failure of consideration applied, and in view of the fact that some of the goods were damaged in transit the value of the goods alleged to be damaged in transit must be deemed to be partial failure of the consideration for which the bills were accepted.

In support of his contention counsel has referred to the cases of Oscar Harris, Son Co. v. Vallarman Co.,1 and Tye v. Gwynne.2

The case of Oscar Harris, Son Co. v. Vallarman Co.,1 relates to a claim based on bills of exchange pure and simple without any reference to the terms of any contract the parties had entered into; and it was in respect of an inherent defect in machines supplied by the plaintiffs that the defence of failure of consideration was set up. In the case of Tye v. Gwynne2 it was held that in an action on a bill of exchange accepted for the price of goods purchased for exportation, the defendant cannot give evidence [p.404] that the goods were of a bad quality, and improperly packed, but is driven to his cross-action.

Clearly these cases are not relevant to the issues raised in this case and do not support the contention of the appellant. The former case relates to the issue of breach of warranty in the machines supplied and in the latter case the defendant could not avail himself of the plea of failure of consideration though he might avail himself of a cross-action.

Counsel for the appellant admits that in a transaction based on c.i.f. contract the property in the goods passes from the consignor to the consignee when the goods are put on board and the necessary documents are received by the consignee as in this case. We would further refer to the following statement made by the same counsel during the trial, thus:

"The orders my client placed are on c.i.f. basis which relate to exhibits A1-A42. We say that we have collected the goods upon exhibits A1-A42 but they were damaged and not marketable and therefore we are not liable for payment upon exhibits A1-A42 to the plaintiff which we have signed against exhibits B1-B42."

Upon these admissions it is obvious that the parties are bound by their contract for the supply of the goods and the defendant's liability must be ascertained from the nature of the contract which the parties entered into and that the resort to the bills of exchange as the media for settlement of the amount due under the contract cannot operate to deprive the plaintiffs of their rights thereunder.

There is evidence on record not disputed by the appellant that in respect of some of the goods he alleged had been damaged in transit he had successfully made claims against the insurance company although in respect of others his claim was unsuccessful because he was unable to prove that the goods were damaged in transit.

In any event, this is clear evidence that the defendant is aware of his rights under the c.i.f. contract whereby the property in the goods passed from the consignor to the consignee when the goods were put on board and the necessary documents, i.e. bills of lading, invoice and insurance papers are received by the consignee. We are fortified in this view by his counsel's statement at the trial thus:

"This is not a case being tried by affidavits. The plaintiffs must prove their claim upon the writ of summons. The defence is that the transaction was based on costs insurance and freight. They insured the goods with the insurance company in the United States unknown to us and it is the custom for plaintiffs to claim upon the insurance company on our behalf."

The essential feature of a c.i.f. contract is that delivery is satisfied by delivery of documents and not by actual physical delivery of goods. As Lord Porter said in Comptoir D'Achat etc. v. Luis de Ridder Ltda. (The Julia).[p.405]

"The vital question...is whether buyers paid for the documents as representing the goods or for the delivery of the goods themselves.

In the same case Lord Simonds stated that the

"salient characteristic [of a c.i.f. contract] which alone is relevant, [is] that the property in the goods not only may but must pass by delivery of the documents against which payment is made."4

The whole question was considered at some length by the House of Lords in this case, and the view plainly expressed was that the criterion of a c.i.f. contract was that the buyer undertook to pay for and accept the documents as representing the goods rather than the goods themselves. On presentation of the shipping documents, if they are complete and regular, the buyer is bound to pay the price, irrespective of the arrival of the goods; but by paying he is not precluded from subsequently rejecting the goods or recovering damages for breach of the contract of sale if on examination the goods are found not to be in accordance with the contract. If the goods are lost in transit or arrive in a damaged condition the buyer ordinarily has his remedy under the policy of insurance or against the shipowner, under the contract contained in the bill of lading. Whether in any particular case such remedy is available to him depends upon the terms of the policy of insurance and the bill of lading.

We are clearly of the opinion that there is no merit in this appeal which is accordingly dismissed.

Decision

Appeal dismissed.

Plaintiff / Appellant

G. Koranteng-Addow f

Defendant / Respondent

H. V. A. Franklin

Referals

(1)  Oscar Harris, Son & Co. v. Vallarman & Co. [1940] 1 All E.R. 185, C.A. 

 (2)  Tye v. Gwynne (1810) 2 Camp. 345; 170 E.R. 1179

 (3) Comptoir D'Achat etc. v. Luis de Ridder Ltda. (The Julia) [1949] A.C. 293; [1949] L.J.R. 513; [1949] 1 All E.R. 269, H.L.

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