Hui Oi Chow v. Universal Traders

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION No. 82 of 1946.

Coram: H.W.B. Blackall, CJ

Date of Judgment: 13 May 1947.

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JUDGMENT

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1. The defendants by a contract dated 15th May, 1946, agreed to sell to the plaintiff 100 tons of Rolled whole oats, husks included, at "H.K. $600 per ton c.i.f. Hong Kong ex Kowloon Godown".

2. In pursuance of the contract the defendants delivered 58 tons which was accepted by the plaintiff without demur, but when the remaining 42 tons arrived in August, 1946, the plaintiff refused to take delivery on the ground that the oats were not of the quality contracted for, and informed the defendants that he wished to have the cargo surveyed before deciding whether he would accept it. The defendants' solicitors on 21st August replied that they did not consider it reasonable for the plaintiff to inspect the balance of the cargo which was the same as the first shipment in all respects, and they reiterated their previous demand that the plaintiff should pay for and take delivery on or before 24th. The plaintiff thereupon refused to take delivery on the ground that the defendants had unreasonably refused to allow him to inspect the balance, and although the defendants on 28th August agreed to permit him to do this, the plaintiff persisted in his rejection and treated the contract as at an end.

3. Section 34 of the Sale of Goods Ordinance (4/1896) provides that "unless otherwise agreed when the seller tenders delivery to the buyer he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract". That was the rule at common law, but the right of inspection is excluded in a c.i.f. contract. The first point then to be determined is whether the present is such a type of contract.

4. It is contended by the plaintiff that although it is expressed on the face of it to be c.i.f., that is a misdescription, and the true nature of the contract should be ascertained by an examination of its terms as a whole. It was submitted that several of the Terms and Conditions of Sale printed on the back of the contract are inconsistent with c.i.f, and particular reliance was placed upon the words "ex Kowloon Godown". As to this, it was argued by Mr. Loseby that unless the consignee takes delivery ex ship, there can be no true c.i.f. contract and that the present one is therefore what he termed an "ex Godown" contract. Now it is agreed that it is a common though not universal practice in Hong Kong for cargo to be landed by the steamship companies into a godown from which delivery is taken by the consignee, and this usage was followed in the present case. It does not appear to me, however, that the mere fact that delivery was to be taken ex godown would, in itself, change a contract expressed to be c.i.f. into something else.

5. With regard to the printed Terms and Conditions, it is a well-settled rule of law that where the first words have a clear meaning, but those that follow are inconsistent with them, the latter should be rejected. Now c.i.f. is a type of contract which is more widely and more frequently in use than any other contract used for purposes of sea-borne commerce. When then merchants enter into a contract expressed to be c.i.f., very strong evidence indeed would be required to satisfy the Court that the parties intended some other type of contract. Moreover, in the present case the plaintiff had already treated the contract as c.i.f. when he took delivery of the first shipment, and I entertain no doubt that the contract was intended to be c.i.f., and I hold that it was such a contract. If then any of the printed terms on the back should be inconsistent with such a contract, they would be rejected as inapplicable in accordance with the rule of construction mentioned.

6. The question then is whether the defendants by their letter of 21st August, 1946, repudiated their own obligations under the contract and thereby entitled the plaintiff to rescind it. That letter was in reply to the plaintiff's demand for a survey before deciding whether to accept delivery. Now the plaintiff in making that demand was treating the contract as though it wrere not c.i.f. so if the defendants' observations are to be regarded merely as an expression of opinion, I think they were justified. But even if his solicitor's letter is to be construed as a refusal to allow any inspection, this would not necessarily entitle the plaintiff to set aside the contract, for a mere honest misapprehension, especially if open to correction, will not justify a charge of repudiation (Smyth v. Bailey 1940, 3 A.E.R. at p.72). In the present case, there is nothing to show that the defendants wished to repudiate the contract: on the contrary I think their letter of 21st August was written with the object of preventing the plaintiff wriggling out of it, as was their action in subsequently sending an order for inspection to the plaintiff which, as already mentioned, the plaintiff refused.

7. This correspondence makes it perfectly clear that the plaintiff was seeking for a pretext to get out of the contract and the argument that the defendants repudiated it is quite unsubstantial. Repudiation of a contract is a serious matter not to be lightly found or inferred. Lord Selborne in Mersey Steel and Iron Co., v. Naylor, Benzon & Co., (9 App. Cases 434) said the Court must look at the:

"... actual circumstances of the case in order to see whether the one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is, so as to see whether it amounts to a renunciation, to an absolute refusal to perform the contract, such as would amount to a rescission if he had the power to rescind, and whether the other may accept it as a reason for not performing his part....".

8. Applying these principles to the case before the Court, I hold that there was no repudiation by the defendants and that the plaintiff was not entitled to rescind the contract. There will be judgment for the defendants with costs both on the claim and counter claim.

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