Contract, Performance and breach, Rescission. Sale. Evidence, Competency. Damages, In contract.
Where there are two independent contracts between the same persons for the furnishing of certain goods of the same kind and quality at different times, the fact that the seller has committed a breach of the first contract by furnishing goods inferior to those required by the contract and by failing upon demand to furnish goods of the kind and quality required, does not justify the buyer in assuming that the seller also will break his second contract for a further supply of like goods, and, although the buyer may be reasonably apprehensive of a like breach of the second contract, he has no right to rescind or repudiate the second contract before it has been broken by the seller.
In an action for an alleged breach of a contract to furnish a certain commodity at an agreed price, upon the question whether the contract sued upon had been rescinded, evidence of the acts and declarations of the parties and of circumstances which might have furnished a motive for their conduct is competent, and, if it appears that there had been an advance in the price of the commodity or that it could not be obtained easily in the market, this may tend to show that it was not for the interest of the seller to insist upon performance, so that his silence, after a proposal of a rescission of the contract had been made to him by the buyer, until the time for performance had elapsed may justify a finding that he acquiesced in the proposal and that the contract was cancelled by mutual consent.
In an action for a breach of a contract to ship certain coal to the plaintiff in barges sent by the plaintiff to receive it, in delivering coal of a kind and quality inferior to that called for by the contract, and for a later breach in failing to deliver coal of the required kind and quality, if it appears that the defendant, when he shipped the part of the coal which was shipped to the plaintiff, knew that it was not the kind of coal which the plaintiff had purchased and had insisted on having and also knew that until the arrival of the coal the plaintiff would be ignorant of the substitution, and if it also appears that the defendant fully understood that the port of shipment was merely a place for transportation to other markets, and that upon the receipt of the coal at its port of destination it was to be resold by the plaintiff, and if it is shown that by a usage of the trade known to the parties the buyer does not inspect the coal when shipped in his vessels but is expected to rely upon the seller's promise to deliver coal of the quality called for by the contract, it would be unfair to limit the plaintiff's damages to the difference between the contract price and the market price at the port of shipment, and the measure of damages must include not only the difference in price in the market at the plaintiff's place of business to which the coal was shipped and to be shipped, but also the expenses and the necessary disbursements incurred by the plaintiff by reason of the defendant's breach of contract.
BRALEY, J.
The only evidence introduced at the trial was the auditor's report, and, his findings of fact evidently having been affirmed by the judge who tried the case without a jury, the questions raised by the exceptions rest upon the refusals to rule, and the rulings, as to the effect of the evidence. Beers v. Wardwell, 198 Mass. 236. During the period covered by the transactions the plaintiff corporation was engaged as a jobber in selling coal at wholesale, with its principal office in Boston. If occasional sales were made elsewhere, the bulk of its trade was supplying customers within the territory of which that city, as described in the report, is the usual commercial centre of distribution. After verbal negotiations, it entered into two contracts in writing with the defendant Wittenberg, who resided and did business in another State, for the delivery of ten thousand tons of "steam coal" under each contract. The coal was to be delivered at Newport News, Virginia, by the railroad as directed by the seller, free on board vessels sent by the buyer, by whom the expenses of transportation were to be paid. By the first contract an option as to the kinds of coal was given, and, although the second contract omits this clause, the auditor reports, that the plaintiff contracted only for "New River coal," which the defendant engaged to furnish.
In the performance of the first contract, the defendant concedes that the shipments were not of the kind selected, but the cargoes were composed of a mixture of New River coal and Kanawha coal, in which the latter largely predominated. Upon the arrival of the first cargo, a part was discharged before the plaintiff ascertained its inferior quality. Interviews followed between the parties, but no adjustment of their differences was reached, and, the defendant's agent having stated that the remaining cargoes in transit were similar, the plaintiff notified the defendant that it would not accept them. Because of the failure to comply with the terms of the first contract, the corporation recalled the vessel it had sent for the small balance remaining of the first purchase and for the coal to be shipped under the second contract, and alleged as a defense in the action against it by Wittenberg for damages for the refusal to perform, that this contract had been cancelled.
The contracts, as the judge ruled, no doubt were distinct and not dependent. Turner v. Rogers, 121 Mass. 12. If the first had been broken by the seller, it did not follow he would commit a breach of the second contract, although a refusal to perform would have justified an immediate rescission by the plaintiff. Daniels v. Newton, 114 Mass. 530, 533. Menage v. Rosenthal, 187 Mass. 470. But, while the defendant's conduct tended strongly to weaken confidence in his intention to keep a similar agreement in the future, the plaintiff's anticipation of non-performance, however reasonable under the circumstances, would not have been a justification for its rescinding or repudiating the second contract. Porter v. American Legion of Honor, 183 Mass. 326.
An executory bilateral contract, however, may be rescinded or cancelled by mutual consent of the parties. They may discharge it in part by a new agreement modifying its terms, or agree to abrogate it so that both will be discharged from performance. The original consideration supports the modification, while the agreement of each to annul is a sufficient consideration for an abandonment. Earnshaw v. Whittemore, 194 Mass. 187, 191, and cases cited. Cutter v. Cochrane, 116 Mass. 408, 410. But where, as in the present case, the parties are not in accord as to what was done, the question whether they have reached such an understanding is one of fact. Johnson v. Reed, 9 Mass. 78, 84. Cutter v. Cochrane, 116 Mass. 408, 410. Hobbs v. Columbia Falls Brick Co. 157 Mass. 109. In proof of consent to rescission, it is competent to show acts, declarations and motives of the parties. If it appears that there has been an advance in price, or that the commodity cannot be obtained easily in the market, these facts may furnish evidence that it was not for the interest of the seller to insist upon performance. Smith v. Glover, 50 Minn. 58. Chouteau v. Jupiter Iron Works, 94 Mo. 388. The auditor, who saw the witnesses and heard the evidence, reports that although Wittenberg neither expressly assented nor dissented, he did not protest at the time, but remained silent until the period of performance had elapsed. In the meantime, the market price had advanced beyond the contract price, and New River coal had become scarce, or could not be obtained. In view of his attitude and these conditions, the auditor finds that the seller acquiesced, and that the second contract was cancelled by mutual consent. The judge, having been warranted in finding accordingly, rightly refused to give the plaintiff Wittenberg's thirty-first and thirty-second requests, and, having found for the defendant, the fourth and fifth requests became immaterial.
The remaining exceptions relate wholly to the measure of damages recoverable in the actions for failure to perform the first contract. The ordinary rule, which often has been stated, is that where the seller fails to deliver, the buyer can recover for breach of the promise the difference between the contract price and the market value at the place of delivery of the goods, wares or merchandise at the time the contract is broken. In mercantile transactions this difference generally will measure the actual loss sustained. But as damages are assessed as compensation, the amount awarded should be such as the parties at the time of the making of the contract are supposed to have contemplated naturally would follow from the probable consequences of a breach. Merrimack Manuf. Co. v. Quintard, 107 Mass. 127. Abbott v. Hapgood, 150 Mass. 248. Edgar v. Joseph Breck Sons Corp. 172 Mass. 581. Speirs v. Union Drop Forge Co. 180 Mass. 87. Weston v. Boston Maine Railroad, 190 Mass. 298. Leavitt v. Fiberloid Co. 196 Mass. 440, 445, 446. Boyden v. Hill, 198 Mass. 477. C.W. Hunt Co. v. Boston Elevated Railway, 199 Mass. 220. And this may be proved by parol evidence, even if the contract is in writing. Globe Refining Co. v. Landa Cotton Oil Co. 190 U.S. 540, 544. A recurrence to the evidence makes it plain that the port of shipment was designated only as a place for transportation to such other markets as the buyer might direct, and the defendant fully understood that upon receipt at the port of destination the coal was to be resold by the plaintiff. By a general usage of the trade, which the auditor reports was known to the parties and which consequently was incorporated in the contract, the buyer does not inspect the coal when shipped, but is expected to rely upon the seller's promise to deliver coal of the quality called for by the contract. A.J. Tower Co. v. Southern Pacific Co. 184 Mass. 472, 475; S.C. 195 Mass. 157. While it might rely on the presumption that the defendant would not violate his agreement, the plaintiff was not bound upon the arrival of the cargoes to accept the coal if it was not the kind purchased, and it is immaterial whether title passed when it was put on board the vessels. If it did pass, as the defendant assumes, the sale nevertheless was on an implied warranty that the coal should be of the quality ordered. Alden v. Hart, 161 Mass. 576. Fullam v. Wright Colton Wire Cloth Co. 196 Mass. 474. See Kemensky v. Chapin, 193 Mass. 500, 506; Farrell v. Manhattan Market Co. 198 Mass. 271; West End Manuf. Co. v. P.R. Warren Co. 198 Mass. 320. It is abundantly shown that the defendant, not only knew that the coal he directed the railroad to deliver was not the kind purchased and which under the option the plaintiff insisted upon having, notwithstanding his representations that Kanawha coal was equally serviceable, but also knew that until the arrival of the coal the plaintiff would be ignorant of the deception. The market value, at the time the coal arrived and was ready for sale in the ordinary course of its trade, is what it would have been worth to the plaintiff. To limit the plaintiff's recovery to the difference between the purchase price and the market price at the port of shipment, would enable the defendant to escape without making full compensation for the losses directly attributable to his violation of the agreement. The measure of damages assessed by the judge, therefore, was rightly held to include, not only the difference in price in the market at the plaintiff's place of business, but also the expenses and other necessary disbursements incurred in transportation, as stated and allowed by the auditor in his schedule of items. Cutting v. Grand Trunk Railway, 13 Allen, 381, 384, 385. Johnston v. Faxon, 172 Mass. 466. Leavitt v. Fiberloid Co. 196 Mass. 440. C.W. Hunt Co. v. Boston Elevated Railway, 199 Mass. 220. Maryland Ice Co. v. Arctic Ice Machine Manuf. Co. 79 Md. 103, 107. O'Connor v. Forster, 10 Watts, 418. Western Union Telegraph Co. v. Hall, 124 U.S. 444. Howard v. Stillwell Bierce Manuf. Co. 139 U.S. 199, 206.
We find no error of law at the trial, and the exceptions must be overruled.
So ordered.