Salvesen & Company v Rederi Aktiebolaget Nordstjernan
| Jurisdiction | Scotland |
| Judgment Date | 10 November 1903 |
| Docket Number | No. 11. |
| Date | 10 November 1903 |
| Court | Court of Session |
Lord Pearson, Lord Moncreiff, Lord Justice-Clerk, Lord Young.
Agent and Principal—Misrepresentation by agent to principal that contract concluded—Shipbroker—Measure of Damages.—
Where a person by asserting the authority of a principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and the assertion turns out to be untrue, to the injury of the person to whom it was made, it must be taken that the agent undertook that it was true, and he is personally liable to the injured person for the damage that he has sustained by loss of bargain.
A shipbroker, negotiating for a charter-party between a shipowner and a coal-merchant, received an offer from the shipowner for a voyage charter at a specified rate per ton, loading to be completed 120 hours after arrival at the port of loading. The coal-merchant agreed to the rate of freight, but insisted that the loading clause should be—loading to be completed within 96 hours after berthing. Ultimately the shipbroker being willing to take the risk of the difference, wrote to each of the parties that the contract had been concluded on his own terms. The coal-merchant repudiated the contract on the ground that his offer was not a firm offer. In an action of damages by the shipowner against the shipbroker, held that the shipowner was entitled to rely on the shipbroker's representation that a contract had been completed, and was entitled to recover from the shipbroker, as damages, the difference between the profit which would have been made on the abortive contract and the best terms which could be obtained in the market when the misrepresentation was discovered.
Contract—Constitution—Charter-party.—
The contract of affreightment does not require the execution of a charter-party for its constitution.
In December 1899 Rederi Aktiebolaget Nordstjernan, a company carrying on business at Stockholm, Sweden, owners of the steamship
‘Oscar II.’ of Stockholm, raised an action against Chr. Salvesen & Company, shipbrokers, Leith, concluding for decree for £1400.
The circumstances out of which the action arose were thus set forth in the opinion of the Lord Ordinary:—‘The pursuers are a company carrying on business in Stockholm, and are owners of the steamship “Oscar II.” They sue the defenders, who are shipbrokers in Leith, for damages incurred through the defenders' “breach of duty and wrongous actings and representations” in the course of negotiating a charter for that vessel.
‘The leading facts on which the question of liability depends are to be found in a series of letters and telegrams beginning on Monday, 28th November, and ending on Monday, 5th December 1898. There are three parties to this correspondence—the owners, the shipbrokers, and Messrs David Ireland & Son, coal merchants and exporters in Dundee. The shipbrokers had applied to Messrs Ireland with a view to negotiating a charter for the carriage of 5000 tons of coal from an east coast port to Stockholm. It may be taken that the shipbrokers, although themselves in the export trade, acted as intermediaries without any intention of taking up the charter themselves; and also that they conducted the negotiations without disclosing to either principal who the other principal was. That they were in fact acting as agents for an undisclosed foreign principal was made clear to Messrs Ireland from the first in the defenders' letter of 29th November. Whether the shipowners knew or were bound to infer that the defenders were not to take up the charter themselves, but were communicating with a third party on this side, is not quite so clear. But in the view I take of the case it is not material.
‘Stated generally, the course of the correspondence was this: On 28th November the owners telegraphed to the shipbrokers that the ship would be ready about 8th December for a coal charter from the east coast of England to Sweden, subject to quick loading and discharging, the freight to be 8s. a ton. The shipbrokers at once wired this on to Messrs Ireland, asking them to state their quickest time for loading and discharging. Their first reply had reference to Burnt-island, but as the ship was too large for that port, Methil was fixed as the port of loading. For Methil their reply was, freight to be 7s. 6d. a ton; 120 hours allowed for loading; and the discharge at Stockholm to be at the rate of 600 tons per day, on the understanding that they would not be responsible beyond 500 tons. To this the shipbrokers, after communicating with the owners, replied on 1st December insisting on an 8s. freight, and on a discharge of 600 tons per day without qualification, and asking Messrs Ireland to offer accordingly. They refused to do so, and adhered to their position as to the freight and discharge clause, but altered the loading time to “96 berthed”—that is, undertaking to complete the loading in 96 hours after the ship was berthed. The shipbrokers wired out to the owners, who gave way as to the freight, but not as to the discharge clause. But they did not wire out the alteration in the loading hours from 120 to “96 berthed.” On the contrary, in their telegram to the owners they inserted “144 loading no turn,” which meant 144 hours after arrival—whether in the roads or in dock does not matter in this case, so long as it excluded the idea of so many hours “after berthing.” Irelands' proposal gave no warrant for this, and, indeed, was directly to the contrary; and still less were Irelands' views met by the counter proposal in the owners' reply telegram of 1st December, namely, that the loading time should be “96 running hours no turn,” which meant, and was interpreted by Irelands to mean, 96 hours after arrival. For this and other reasons they on 2d December declined the ship on the conditions offered by the shipbrokers.
‘The brokers thereupon made a fresh start, and wired asking the owners, whose conditions had proved “unworkable,’ to agree to the brokers' conditions. The owners replied that they understood the conditions to be exactly the same except the loading time, as to which they were willing to go the length of 120 hours from arrival. This being submitted by the shipbrokers to Irelands, the latter replied substituting “96 berthed” for “120 arrival.” Once more the ship-brokers on 5th December try Irelands with the two proposals already rejected, namely (1) 120 hours for loading after arrival; and (2) discharge at the rate of 600 tons per day. Once more the shippers reply (1) that they decline the ship if the loading hours are to count from arrival; and (2) that they will not agree to discharge 600 tons per day, except under the qualification that they are not to be responsible for demurrage over 500 tons. The brokers at once communicate with the owners, passing over the first point in absolute silence, and wiring—“‘Oscar’ fixed discharging 600 inserted charter but not responsible demurrage over 500 instant confirmation better impossible.” The owners, reading this, as they were clearly entitled to do, as meaning that the ship was fixed subject to their at once agreeing to the stipulation as to discharge, telegraphed promptly that they agreed to it; and so (as they thought) closed the bargain. The brokers, having received this the same evening, wired to the merchants that their terms were accepted as arranged, and that they would post a charter in the morning for signature. To make it quite clear, they wrote the merchants at the same time what terms were “arranged;” and these include “96 hours loading after berthed.” In short, the defenders, knowing that the contracting parties were hopelessly at variance on this point, represented to each party respectively that the contract was concluded on his own terms.
‘Mr T. E. Salvesen, partner of the defenders' firm, gives the only possible explanation. “By this time,” he says, “we had made up our mind that unless we came to the rescue there was no possibility of a contract being concluded at all, as Ireland insisted upon loading time after berthing, and the owners insisted upon loading time after arrival. On 5th December we made up our mind that we would run the risk of the difference between the owners' and the charterers' terms. At that time that was a very customary thing; it was constantly done by any brokers who did any business. Naturally we would not take that risk unless we thought the risk was almost nil. … We were very anxious that this charter-party should be concluded so that we might earn our brokerage, after having had a great deal of trouble and expense in telegraphing; and this was the only way in which we thought it could be done.” When it is said that the risk of the difference was extremely small, it must be borne in mind that in the contracting parties' view it was so material that neither would give way upon it.
‘The sequel was, that upon the shipbrokers wiring to the merchants that their offer was accepted on the terms as arranged, which they did on the evening of 5th December, the merchants replied the same evening that only one hour previously they had had a wire from their consignees at Stockholm cancelling the 5000 ton ship as they had arranged otherwise; and they added,—“The owners have spoiled this business by hanging off so long.” On the following day, 6th December, they explain further,—“The owners have delayed so long that we found it impossible in the face of the scarcity of waggons to secure enough cargo to load her.”
‘The ship was at this time discharging a cargo at Rotterdam and would not (it appears) have been ready in ordinary course to load at Methil on the 8th December 1898; but it is not, in my opinion, proved that she could not have made such despatch as to fulfil the stipulation that she was to be ready to load “about 8th December.” As Messrs Ireland adhered to their refusal to load it was needless to order...
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