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Hayley &

Kenny v.

THE facts are set out in the judgment.

Drieberg, K.C. (with him Hayley), for plaintiffs, appellants.

Samarawickreme (with him F. H. B. Koch and Canakeratne), for defendant, respondent.

Cur. adv. vult.

December 21, 1922. DE SAMPAYO J.

This case involves a question as to the rights and obligations arising out of a contract entered into by the defendant with the plaintiffs, Messrs. Hayley & Kenny, on April 19, 1920. The plaintiffs are a firm of merchants, and part of their business is to indent for goods from England and elsewhere in Europe on the orders of local traders. The defendant is a hardware merchant, carrying on business in the Pettah of Colombo. The contract is contained in the document marked A, which is in the printed indent form of the plaintiffs, with the description of the goods and certain other particulars written at the bottom. As much of the argument on the appeal related to the construction of this document, it is convenient to quote it in full. It is as follows:


(1) I/we, the undersigned, I. L. Abdul Kudhoos, hereby request Messrs. Hayley & Kenny to order and import for my/our account and risk the whole or any part of the goods mentioned herein. after at the prices and on the terms noted below.

(2) Price to include cost, freight, and insurance, but duty and all landing and Customs charges to be paid by the indentor. Payment cash in Colombo in Ceylon currency on presentation of shipping documents, or should such documents be delayed, payment to be made on the day goods arrive in Colombo. Messrs. Hayley & Kenny are not responsible for loss sustained through the late arrival of documents.

(3) For goods sold in sterling currency the current rate of exchange on the day of payment will be taken.

(4) Should I/we fail to pay for the goods as arranged above, Messrs. Hayley & Kenny may land, clear, and store the goods at my/our expense and risk, and may at any time thereafter and without any special notice to me/us sell the goods on my/our account and risk, either by auction or by private sale, and I/we agree to make good to them immediately any loss and expense incurred thereby, and also to pay them in addition 3 per cent. re sale commission and 1 per cent. re sale brokerage.

(5) Messrs. Hayley & Kenny are not responsible for late or nonshipment of goods in consequence of war, accidents, or loss during sea and/or land transport, ice blockades, quarantines, strikes, bankruptcy, fire at manufacturer's works, breakdown of machinery, or other causes of force majeure,



Hayley &
Kenny v.

I/we agree that we will not make any claim for late shipment if same be only two weeks after the specified time. The date of the bill of lading will be accepted by me/us as conclusive DE SAMPAYO evidence of the date of shipment without further proof being required. If goods were ready for shipment within contract time, and were shut out or have to wait for the steamer, such goods to be shipped by the first available steamer, and I/we agree to accept them without making a claim. Should the goods be shipped before the time stipulated, I/we agree to pay for them as arranged above, but with an allowance for interest at the rate of 6 per cent. per annum for the time shipped too early.

(6) The weight of the goods as specified in the shipper's invoice shall be accepted by me/us as the correct weight thereof, and the goods shall be paid for on that basis, any loss in weight being borne by me/us.

(7) Messrs. Hayley & Kenny or their agents are to effect marine insurance F. P. A. on the said goods with some good Insurance Co., the solvency of which they shall, however, not be deemed to guarantee for the full invoice value of the said goods (unless otherwise agreed in writing), otherwise all goods shall be at my/our sole risk from the time when same shall be put on board ship at the port from which shipment is first made, and Messrs. Hayley & Kenny shall be in no way responsible therefor.

(8) All complaints regarding the goods to be made in writing within seven days from arrival of the goods.

(9) Each shipment and/or separate item under this order to be
separate contract.

(10) Messrs. Hayley & Kenny are not responsible for any errors
caused by mutilated or incorrectly interpreted telegrams.
(11) Disputes of whatever nature arising out of this contract to be
referred to the arbitration of two gentlemen from the list of
surveyors and arbitrators nominated by the Ceylon Chamber
of Commerce, one to be chosen by each party, whose decision
I/we agree to accept as binding and final, but should the two
arbitrators be unable to agree, they shall refer the case to an
umpire, whose decision shall be final and binding upon both
parties. If by mutual agreement only one arbitrator is chosen,
his decision shall be final and binding upon both parties.
In case I/we fail to nominate an arbitrator within three days from
the time, I/we have been requested by Messrs. Hayley & Kenny
in writing to do so, Messrs. Hayley & Kenny are at liberty
to nominate an arbitrator for me/us, and I/we agree to accept
his decision on my/our behalf.

Arbitrator's fees are to be borne by the party against whom the
decision is given.

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The acceptance of this order shall be made known to me/us by
Messrs. Hayley & Kenny within
days from the
date hereof, failing which, this order shall be deemed cancelled.
Notice of acceptance shall be taken as sufficient if sent by post
to my/our place of business.


Messrs. Hayley & Kenny shall be entitled to receive from me/us
a commission of
per cent. on the full invoice
amount, whilst their European or other representatives have
to find their remuneration on the selling prices of the goods.




Hayley &
Kenny v.

We hereby bind ourselves jointly and severally to perform the several conditions and covenants hereinbefore contained. Anything written in the vernacular, except a plain signature, shall be null and void.

I/we undertake to give Messrs. Hayley & Kenny full instructions as to get-up, stamping, marking, packing, &c., of the goods. immediately after acceptance of the order, but should I/we fail to do so, Messrs. Hayley & Kenny are at liberty to use their own discretion in these matters.



12 Twelve and a half tons galvanized plain sheets, sizes as below at seventy-three pounds four shillings.

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Terms: Payment in cash before delivery, or at seller's option by approved pro-notes at 90 days' sight at ruling rate of bank interest.


Mark: H&K



Accepted 20/4/20. Per pro HAYLEY & KENNY, (Sgd.)

The plaintiffs allege that the goods arrived at Colombo on or about October 13, 1920, and were duly tendered to the defendant, and that the defendant in breach of his contract failed to take delivery of and pay for the same, and they claim Rs. 7,332 57 being the difference between the contract price and the amount realized when they were sold by auction at the defendant's risk, together with a certain sum as interest. The defendant pleaded, inter alia, that the plaintiffs could not and did not tender an effective policy of insurance covering the galvanized sheets ordered by him, and he was, therefore, not bound to accept the goods. The District Judge upheld this ground of defence, and dismissed the action with costs, and the plaintiffs have appealed.

It is admitted that no policy of insurance was tendered to the defendant, and that the insurance which the plaintiffs effected covered not alone the goods in question, but also other goods

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ordered by others on separate indents. The law is clear that in the case of c.i.f. contracts a policy of insurance must be delivered by the vendor together with the ordinary shipping documents. Mambre Saccharine Co., Ltd., v. Corn Products Co., Ltd.,1 and Wilson Holgate & Co. v. Belgian Grain & Produce Company.2 The first of these cases shows that the purchaser is entitled to have delivered to him a policy of insurance which covers only the goods mentioned in the bills of lading and invoices. But it is contended on behalf of the plaintiffs that the indent constituted a contract of agency, and not a contract of purchase and sale, and that the defendant could not refuse to accept the goods, but would have only a claim for damages if the plaintiffs had violated any part of their duty, and the judgment of Lord Blackburn in the leading case of Ireland v. Livingstone 3 is cited in this connection. The indent in this case no doubt is in form a contract of agency, but it is noticeable that the order is to supply the goods at a settled price, which is to cover cost, insurance and freight, and commission. Thus, if the plaintiffs were able to procure the goods at a less price, they would be under no obligation to reduce their claim, nor, if they had to pay a larger price, would they be able to claim anything more than the price agreed upon. The gain or loss, as the case may be, would be the plaintiffs' own, and this is inconsistent with the essence of a contract of agency, as explained in Ireland v. Livingstone (supra). In this, as in that case, there is no relation between the defendant and the consignor in England, who was wholly unknown to the defendant, and unless the plaintiffs were considered the vendors to the defendant, there would be no one from whom the title to the goods could pass to the defendant. I think that the plaintiffs, to all intents and purposes, are in the position of vendors to the defendant, and are bound to observe the obligations of a contract on c.i.f. terms. Even if the contract were really one of agency, there is, I think, no difficulty in attaching to the plaintiffs the same obligations. Any controversy on this head, however, is concluded by the position which the plaintiffs themselves took up in bringing the action, for their plaint stated that by the indent in question “the plaintiffs sold and the defendant bought 12 tons of galvanized plain sheets at £73. 4s. per ton c.i.f. and c." I think that in accordance with the ordinary incidents of a c.i.f. contract, they were bound to effect a separate insurance over the goods ordered by the defendant, and tender to him the policy of insurance before they sought to enforce the contract against him.

The plaintiffs, however, pressed two points which they contended relieved them from that obligation. They sought to establish a custom among merchants in Colombo, according to which the merchant who executes an indent may effect one policy of insurance over the goods of several parties and likewise retain the policy and 1 (1919) 1 K. B. 198. 2 (1920) 2 K. B. 1. 341 L. J. Q. B. 205.



Hayley &

Kenny v.




Hayley &
Kenny v.

recover on it in case of necessity on behalf of the indentors and not
deliver it unless asked for. The evidence on this point is, I think,
insufficient to establish a definite invariable custom, even if a local
custom can override the general rule of mercantile law. The
witnesses called were Mr. C. G. Simpson, an assistant in the plaintiff's
firm, and Mr. K. G. Carolis Silva, a clerk employed by the plaintiffs,
and Messrs. Joliffe, Cunningham, and Thalmand, members or
assistants of three other firms. Mr. Simpson says: "The policy
was in London. We had a certificate of insurance. It is kept
with us in case of a claim on the part of defendant. We would
have a claim on the insurance company
It has never
been the practice to give the actual policy to the indentor," and in
another passage he says: "He (the defendant) never at any time
asked for the policy of insurance." Mr. Carolis Silva says: "The
policy of insurance or certificate of insurance is usually held in the
office till it is called for by the buyer. If the goods are damaged,
and the buyer wants to make a claim, he asks for the insurance
policy. If not, he does not ask for it. We have not had claims.
Unless asked for we do not tender the policy of insurance." The
defendant's counsel objected to any question regarding any custom.
The District Judge overruled the objection, and the witness was
asked: "As far as you know, is it the custom to surrender the
certificate or policy unless they are asked for ?" His answer was
"No." Mr. Joliffe says: "We have never handed the policy of
insurance to the buyer. We have never been asked for it

As far as my knowledge is concerned, I should say that it is not the
custom for firms and importers to hand over the insurance policy
to the indentor." Mr. Cunningham says: "The insurance policy
very seldom asked for, and we never tender it unless asked for.
We very seldom get the actual policy. Our agents in England
have a floating insurance, against which they issue a certificate
. If the indentor of goods insured with a floating
policy asks for the policy, we present him with the certificate."
Mr. Thalmand, who is an assistant of Messrs. Volkart Bros., says:
"I am well acquainted with the method of their import business
We never give him (the indentor) the insurance policy
The indentor has not the right to ask for the policy,
but the giving of the certificate would be sufficient compliance with
the request." The last witness called for the plaintiffs is Mr. C. E.
Ekanayake, who is a clerk of Messrs. Darley, Butler & Co. He
says: "Sometimes we get the actual policies of insurance, sometimes
I do not remember a case in which I gave
a policy or certificate of insurance. In that case, if he asked for
the insurance policy, I would give him the certificate."

It seems to me that these witnesses practically speak of the practice of their respective firms, and not of a general local custom. and there does not appear to be any uniformity in the practice.

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