Last Updated on
1. I have taken time to consider this case because it involves an inquiry into the legal position of indent merchants who import goods into India and, therefore, is of considerable importance to the mercantile community. In the course of my judgment I shall refer to the foreign seller (who may or may not be the manufacturer of the goods) as the supplier, the person who imports the goods as the merchant, and the person upon whose indent or order the goods are imported as the dealer. Now, the rights and obligations of the parties to an indent transaction depend upon the contract into which they have entered; but for many years past doubts have been felt as to whether the legal relationship of the merchant to the dealer under an indent is that of an agent or a principal. The uncertainty as to the legal position of indent traders has been created mainly, because persons engaged in the indent trade evince a strange disregard for the significance of the language that they use in framing their contracts. For instance, they appear to treat “limit and fixed price,” “client and customer,” commission and profit, “buy on my account,” and “sell to me,” as synonymous terms with a levity bewildering to anyone who attaches importance to the meaning of words. The traders, however, are not alone to blame for the looseness of the language in which they couch their agreements. The tenderness with which the Courts have been wont to treat commercial usages and phraseology to some extent may have conduced to the belief that it is prevalent among commercial men that, so long as the course of business is established and the usages of a trade are well understood, the rights and obligations of the persons who carry on the trade will be regulated by its established practice and usage, irrespective of the form of the contract into which they have entered. I am glad that the tide is now turning, and that the present tendency of the Courts is to hold the parties to a mercantile contract more strictly to the terms in which “they have purported to express the agreement that has been concluded between them.
2. Lord Birkenhead, L.C., observed in a recent case:
The learned Judge…has in effect declared that a custom may be given effect to in commercial matters which is entirely inconsistent with the plain words of an agreement into which commercial men, certainly acquainted with so well-known a custom, have nevertheless thought proper to enter. Much evidence would be necessary to convince me of the existence of such a custom, and, if it were forthcoming, I should nevertheless hold the custom to “be bad on grounds which seem to me to be both notorious and elementary. A ffretures Renis v. Leopold Walford  A.C. 801, see also Miller Gibb & Co. v. Smith and Tyrer  2 K.B. 141. Palgravie Brown & Son, Ltd. v. Owners of Sections “Turid”  1 A.C. 397.
3. No doubt, where the ambiguous terms or phrases are found in a mercantile contract evidence of usage is admissible to explain the meaning of the expressions in the particular trade or locality; and, where a contract is silent in respect of some incidental term or condition which, according to the course of business established in a particular trade it is customary to find included in such a contract, evidence of the custom is admissible to prove that such term or-condition formed part of the contract, unless the incorporation of the term or condition in the contract will have the effect “of introducing something repugnant to or inconsistent with the tenor of the written agreement” : per Lord Campbell, C.J. in Humfrey v. Dale  7 E. & B. 266. But where the parties to a contract have expressed the agreement at which they arrived in a written document the terms of which are capable of a reasonable interpretation according to the natural meaning of the words that are used, a trade usage which, if it regulated the rights and obligations of the parties, would alter fundamentally the nature and character of the contract as expressed in the written agreement, can neither determine nor affect the rights and obligations of the parties, engaged in the transaction and as it is inconsistent with the terms of the written agreement evidence of such a usage is inadmissible both under the provisions of the Indian Evidence Act and the principles of the Common Law. Willes J., thus enunciated the rule:
It is also an elementary proposition that a custom of trade may control the mode of performance of a contract, but cannot change its intrinsic character. It may regulate as extrinsic what is done in the market, where the contract does not provide otherwise. It cannot overrule what is agreed upon between the parties, whether intrinsic or extrinsic. The agent may perform the business ha is engaged for according to the usages of the market in matters of detail, although the principal be unaware of such a usage; because every authority to do a thing, not specifying the way, implies authority to do it in a reasonable way which the usual way prima facie is. But no usage unknown to the principal can justify a broker in converting himself into a principal seller. Mallet v. Robinson  5 C.P. 646.
4. I would add that in my opinion such a usage will not bind the principal or become admissible in evidence merely because the principal is aware of it. Indeed, the more fully the principal was aware of the usage the less likely is it that he would have contracted in terms inconsistent with the usage, unless he was minded to preclude the usage from regulating the rights of the parties to the contract. I am of opinion that the principal would not be bound by such a usage, whether he knew of it or not, unless it is provided or admitted that the principal consented to the agent performing the contract in the manner sanctioned by the usage.
5. This statement of the law may come as a surprise to business men; but if, as a result of this suit, persons engaged in the indent trade are induced so to alter the terms of their contracts that they are made to conform to the meaning that the parties intend to express, the time and labour that has been expended upon the trial will not have been wasted.
6. The plaintiffs in the suit are merchants, and they claim to recover damages from the defendant, who is a dealer, for failing to take delivery of goods sold to him by the plaintiffs; in the alternative, the plaintiffs, as agents, claim an idemnity from the defendant to their principal. The plaintiffs’ claim is baaed upon four contracts, the terms and conditions of which are set out in a common form of printed indent or order, each indent (Nos. 74, 75, 78 and 88) being completed by the dealer, who wrote below the printed matter the particular details of the order. A large number of indent forms in use among persons concerned in the indent trade at Calcutta were adduced in evidence, but they were substantially the same as the forms used for the purpose of the transactions in suit. Indent No. 74 was to the following effect:
Indent No. 74 Messrs. Holmes Wilson & Co. Ltd., 22ad October 1919.
I (we) the undersigned, request you to purchase yourselves of through your agent…on my (our) account and risk the whole or any part of the undermentioned goods on the term’s and condition stated below:
2. I (we) authorize you, your agents or whoever you or they may appoint, to draw on me (us) for invoice amount calculated on the terms of this indent, and I (we) agree with you, and as a separate agreement with your agents, to accept such draft or drafts on presentation and to pay the same at maturity. No interest to be allowed on part payment made against such draft or drafts.
3. Should I (we) fail to accept on presentation or to pay at maturity such bill or biils, I (we) hereby authorise you to dispose of the documents or goods either by private sale or public auction on my (our) account and risk without notice and I (we) hereby bind myself (ourselves) to make good any loss or deficiency that may arise from such sale together with all expenses and usual brokerage and interest, waiving all claim to any advantage thereon. I (we) agree to pay you a commission of 5 per cent. on proceeds of such goods resold together with 12 per sent, interest, on the draft amount from date of maturity till realization thereof.
4. Should I (we) fail to pay any D.A. draft on due date, you are hereby authorized to have all subsequent drafts “en route” or otherwise, altered to or drawn on D.P. terms, whether the relative indents hive been accepted on D-A terms or not, and I (we) agree to accept such and to retire same on or before the due date.
5. We agree to pay interest at 12 per cent, per annum on any draft or acceptance from date of maturity, which has become overdue, till date of payment. (The judgment then set out other provisions of the indent and proceeded.)
7. The first issue to be determined is whether upon a true construction of these contracts the plaintiffs agreed to purchase the goods in suit from the suppliers upon the terms and conditions of the indents as agents for and on account of the defendants, or whether under the terms of the contracts the plaintiffs were entitled as principals to purchase the goods, from the suppliers on any terms that they might arrange, and then to resell the goods to the defendant upon the terms and conditions of the indents. In other words, in effecting the contracts by which the defendant purchased the goods were the plaintiffs to be regarded vis-a-vis the defendant as agents or principals? Learned Counsel for the plaintiffs during the course of the trial was disposed to argue upon the authority of certain passages in the judgment of Blackburn, J., in Ireland v. Livingston  5 H.L. 395 that in respect of these sales the relationship of the plaintiffs to the defendant was that both of agent and principal, but, in my opinion, those passages do not support the proposition for which they were cited.
8. In Robinson v. Mollett  7 H.L. 802 Blackburn, J., in expressing an opinion contrary to that of Brett, J., and other learned Judges appeared to think that an agent might purchase goods for his principal without himself being the vendor or creating privity of contract between his principal and a third parson. But the view that found favour with Blackburn, J., as I understand Robinson v. Mollett  7 H.L. 802, was not accepted by the House of Lords, and I am clearly of opinion that under the contracts of sale by which the defendant purchased the goods in suit the plaintiffs inevitably must have been either principals or the agents of the defendant, and in the eye of the law cannot be regarded as filling at the same time both capacities. It may be that the agreement between the plaintiffs as merchants and the defendant as a dealer for whom they were acting at the outset was one of principal and agent, and that so long as the contract remained executory the relationship of principal and agent subsisted between them.
9. Moreover, if an agent employed to effect a purchase on behalf of his principal from a third person upon certain terms either sells his own goods to his principal or as agent buys from a third person upon other terms, the principal thereby is not bound, and in either event is at liberty to repudiate the act of his agent in effecting the contract. But if the agent sells his own goods, and the principal assents to the mode in which the agent has carried out his mandate, in my opinion, after the purchase has been effected the relationship of the parties quoad the contract of sale ceases to be that of principal and agent, and ripens into that of vendor and purchaser; though it may be necessary to refer to some other agreement, for instance, the agreement of agency, in order to ascertain the terms and conditions of the contract of sale. If the law were to be otherwise the result would be that in so far as the agent was acting as a vendor he would be under no obligation to account to the other party to the contract in respect of any profit that he might have made through buying or selling the goods in question to that other party. On the other hand, in so far as he was acting as the agent of a principal, he would be liable to account to his principal in respect of any profit in excess of the agreed commission payable by his principal (if any) that ha might have made out of the transaction. In my opinion, where goods are purchased through A by B, A inevitably must either have sold, the goods to B on his own account as a principal, or as agent for B, have created privity of contract between B and a third person : Feise v. Wray  3 East. 93, Ireland v. Livingston  5 H.L. 395, Robinson v. Mollett  7 H.L. 802, Cassaboglou v. Gibb  11 Q.B.D. 797, Ex-parte Miles 15 Q.B.D. 39, Blackburn, on Sale, 3rd Ed. 52,
10. I proceed, therefore, to consider the question whether under the terms of the contracts in suit the plaintiffs were bound to purchase the goods from a third person as agents for the defendant, or whether they ware entitled to sail their own goods to the defendant upon the terms and conditions contained in the indent. I am clearly of opinion that under the four indents in suit the relationship of principal and agent was created between the defendant and the plaintiff, and unless the defendant assented to soma other mode of performance, that it was the duty of the plaintiffs under the indents to create privity of contract between the defendant and the foreign supplier for the purchase of the goods upon the terms and conditions of the indents. Under these indents the order given to the merchants by the dealer is “to purchase yourself or through your agents on my account and risk.” Both in common parlance, and as interpreted by Courts of law, these words denote an agreement for agency, and are wholly inconsistent with the notion that the person to whom they are addressed is thereby invited or entitled to sell his own goods to the person who has given him an order in this form. It is unnecessary to elaborate this matter; for, as Willes, J., pointed out in Mollett v. Robinson  5 C.P. 646:
Here the authority of the brokers was to buy as brokers for their principal, not to sell to him. If the sale had bean consummated in the course insisted upon by the brokers, the principal would have obtained goods and paid for them that is, would have bought them. Of whom? Of his own brokers, and no one else. That ought not to be, without the knowledge and consent of the principal. It is an axiom of the law of principal and agent that a broker employed to sell cannot himself become the buyer, nor can a broker employed to buy become himself the seller, without distinct notice to the principal, so that the latter may object if he think proper, A different rule would give the broker an interest against his duty, be pass off a bad bargain or inferior goods.
11. Learned counsel for the plaintiffs further strenuously urged that because the goods were to be bought by the dealer at a stated price C.I.F., and no commission was payable by the dealer, the contract was one of sale, and could not be one of agency. I am unable to appreciate the force of that contention. There is no magic in the term C.I.F., the meaning of which is free from ambiguity and well understood, and merely indicates compendiously the sum that the dealer will have to pay for the actual cost of the goods, insurance, and freight. And a contract of sale C.I.F., in which no provision is made for paying commission is equivalent to a contract of sale C.I.F.C., C.I.F., and C.I.F.C., indicating that the dealer is willing to pay the’ sum stated but no more for the actual cost, insurance, freight, and commission, whether payable to the merchant or by the merchant in order to obtain the goods. It was further contended that the conditions of sale set out in the indents were inapplicable to a contract of agency. Construed as a whole, however, the teams and conditions of the indents do not appear to be incompatible with agency. Indeed, some of the clauses of the indent (for instance, Clause 3) would be superfluous and unnecessary if the contract was one of sale between principals. Again, it is common ground that it is customary in the indent trade to use the printed form of indent in suit in transactions in which the parties intend that the merchant shall act as the agent of the dealer, and whether the goods are to be purchased F.C.B. or C.I.F. : see Clause IS. Further, the printed form of invoice used by the plaintiffs in these and similar contracts in which it is stated that the goods are “consigned unto order for account and risk of” the defendant also tends to show that the. printed form of indent is applicable to a transaction in which the merchant is the agent of the dealer. Learned counsel for the defendant relied upon certain admissions by Mr. Holmes in a written statement in answer to a claim by the defendant in another suit, No. 1835 of 1923, relating to other indents.
12. I do not think it necessary to refer to the pleadings in that suit, both because the facts in that suit, may well be different from those in the present suit, and may have to be investigated hereafter, and also because it may be urged with plausibility that in that suit the present defendant framed his claim upon the footing that the plaintiffs had contracted to sail the goods to him otherwise than as agents. But in the course of certain arbitration proceedings, in respect of the contracts in suit it is clear that the plaintiffs insisted that under the contracts their position was that of agents and not of principals. It is, of course, to be remembered that during the arbitration proceedings and thereafter, the plaintiffs have been acting under legal advice, and in accordance with the opinion as to their legal position which commended itself to their legal advisers; but the fact remains that until the present suit was launched the plaintiffs adopted the view that under the indents the relationship of principal and agent was created between the defendant and themselves. In my opinion, it is idle to contend that under the terms of the contracts in suit the plaintiffs did not become the agents of the defendant to purchase goods from the suppliers for and on account of the defendant upon the terms and conditions of the indent. It is conceded by the plaintiffs, if they were under an obligation in the circumstances obtaining in this case as agents for the defendant, to effect contracts between the defendant and the suppliers for the purchase of the goods in suit upon the terms and conditions of the indents, that they have not performed their part of the contracts, and that the claim in the suit for damages or for an indemnity must fail.
13. Learned Counsel for the defendant further contended that in these transactions the plaintiffs throughout were acting as agents for the defendant, and that privity of contract was established between the suppliers and the defendant. But I refrain from discussing the interesting question of law that was mooted at the trial as to whether, if the plaintiffs purchased the goods from the suppliers as agents for the defendant without disclosing the name of their principal, privity of contract thereby was created b3tween the defendant and the United States Steel Products Co. of America who supplied the goods; because upon the oral and documentary evidence that has been adduced I am satisfied : (1) that the plaintiffs did not purchase the goods in suit from the United States Steel Products Co., as the agents of the defendant but as principals on their own account, and, therefore, that privity of contract was not created between the United States Products Co. and the defendant under the contracts whereby the plaintiffs purchased the goods from the suppliers; (2) that the terms of the contracts of sale between the United States Steel Products Co. and the plaintiffs differed in material respects from the terms and conditions of the indents, and that the plaintiffs were not authorized under the indents to enter into any such contracts as agents for the defendant.
14. The course taken by the plaintiffs on receipt of the defendant’s indents was to communicate with the Calcutta office of the United States Steel Products Co. and endeavour to arrange with them for the goods to be sold to the plaintiffs at a price lower than that set out in the defendant’s indents. The plaintiffs in order to carry out indents Nos. 74 and 75, bought from the United States Steel Products Co. C.I.F. Calcutta 48 tons of 3/16″ mild steel plates at 97.60 per ton and 52 tons of 1/4″ mild steel plates at 92 per ton to fulfil indent No. 78 the plaintiffs bought from the United States Products Co. C.I.F. Calcutta 48 tons of 1/4″ mild steel plates at 94 per ton and 52 tons of 3/16″ mild steel plates at 99.60 per ton, and against indent No. 88, 103 tons of steel joists at 90 par ton. These goods were all bought subject inter alia to the suppliers’ printed conditions of sale which were different from the terms and conditions of the defendant’s indents and were less favourable to the purchaser. After the suppliers had agreed to sell the goods to the plaintiffs the plaintiffs sent the placement reports to the defendants. I find that the contracts under which the plaintiffs bought from the United States Steel Products Co. were concluded between the suppliers and the plaintiffs as principals, and that the suppliers gave credit solely to the plaintiffs, and regarded the plaintiffs alone as the purchasers of the goods.
15. Under the contracts the goods were shipped by the suppliers, and the bills-of-lading were made out to the orders of the shippers, and were endorsed “notify Holmes Wilson Calcutta.” The invoices for the goods were sent to the plaintiffs, and drafts were drawn by the suppliers upon the plaintiffs who met them upon the arrival of the goods in Calcutta. The plaintiffs did not communicate to the defendant the terms upon which the goods had been purchased from the suppliers, and they sent their own invoices to the defendant in which the goods were charged at the indent prices. Nevertheless learned counsel for the defendant contended that the effect of the evidence was that the plaintiffs in purchasing the goods from the United Steel Products Co. must be held to have acted as the agents of the defendant. In this connexion the defendant placed much reliance upon the terms of the plaintiffs’ invoices and the placement reports. The invoices, however, were on a printed form which was used indifferently for all indent business, and whether the plaintiffs were acting as agents or as principals. I do not think in the circumstances that much importance should be attached to the printed form of invoice that was used : see per Blackburn, J., in Armstrong v. Strokes  7 Q.B. 598.
16. As regards the placement reports learned Counsel for the defendant urged that if the plaintiffs had purchased the goods from the United States Steel Products Co. as principals it was unnecessary that any reference should have been made in the placement reports to the acceptance of the orders by the Works. I am not prepared to accept that contention, for it appears to me that it was natural and reasonable that the plaintiffs should have informed the defendant that the United States Steel Products Co. from whom the defendant desired that the goods should be obtained had agreed to supply the goods. In respect of the placement report for indent No. 78, in which it is stated “Works have accepted 1/4″ plates at 100, 3/16.” plates at 106 per ton C.I.F.”, it is enough that I accept Mr. Holmes’ explanation that these were the terms upon which the plaintiffs were prepared to supply the goods to the defendant, and that in due course the plaintiffs charged the defendant for the goods at the prices set out in this placement report. I do not think that it is either necessary or desirable that I should burden my judgment by discussing further in detail the evidence upon this matter. It is enough that I should hold that the effect of the transactions in fact and in law was that the plaintiffs purchased the goods in suit from the suppliers upon their own account as principals and resold them to the defendant.
17. The plaintiffs sought to justify their action upon three grounds : (1) that upon a true construction of the indents they became principals and not agents vis-avis the defendant; (2) that according to the established usage of the indent trade in Calcutta, known to the defendant, a merchant who under an indent agrees to purchase goods from abroad for and on account of a dealer “C.I.F. no commission” is entitled to purchase the goods from the supplier as a principal on any terms that he may arrange, and to resell the goods to the dealer upon the terms of the indent, the difference between the price at which the merchant buys from the supplier and the price at which he sells to the dealer being his remuneration for obtaining the goods for the dealer; (3) that; the defendant well understood and assented to the mode in which the plaintiffs proposed to execute the indents, and cannot now be heard to deny that the plaintiffs had the authority of the defendant for the mode in which they carried out his mandate.
18. As regards the first ground of justification for the reasons that I have stated I am of opinion that under the terms of the indents the plaintiffs were bound to purchase the goods from the suppliers as agents for the defendant and not as principals. In connexion with the second ground many authorities were cited by the parties, but I am relieved from discussing these decisions in detail because admittedly the two cases upon which the plaintiffs mainly relied were Mollett v. Robinson  5 C.P. 646 and Paul Beier v. Chotalal  30 Bom. 1. In my opinion, even if the usage pleaded wera to be proved the effect of the incorporation of such usage into the written agreement that had been concluded between the plaintiffs and the defendant would be to “change its intrinsic character.” Evidence of the usage, therefore, is inadmissible for the purpose of varying the terms of the written agreement; and it is equally inadmissible whether the defendant was aware of it or was ignorant of its existence. Why should it be presumed, merely because the patties were aware of a trade usage, that they intended that; their rights and obligations should be controlled by the usage, when they had concluded a contract the terms of which are fundamentally inconsistent with the usage that it is sought to incorporate in the contract. Commonsense and, in my opinion, the Common Law alike are opposed to any such presumption. Lord Halsbury, L.C., in May and Hart v. Angeli  14 L.T.R. 551, observed:
I have no doubt, and I do not think it is susceptible of doubt, that when there is only the relation of broker and customer the broker cannot satisfy the terms of his employment by selling his own goods to the customer who is employing him as broker; and apart from the special circumstances of the case Robinson v. Mollett  7 H.L. 802 establishes no more. The special circumstances of that case had relation, so far as the contention in it was concerned, to the peculiarities of a particular business, and which was supposed to take the case out of the ordinary rule. But no one doubted, as I think no one can doubt, the ordinary rule to be what I have stated.
19. It may be, of course that the defendant assented to the plaintiffs performing the contracts of agency in the manner sanctioned by the usage, but no case has been cited to me, except possibly Paul Beier v. Chotalal  30 Bom. 1, in which an usage such as the one pleaded in this case has been held to be binding upon a party to a contract the nature of which differs fundamentally from that of the usage, merely because the party was aware of the usage at the dime when he entered into the contract. If such a case wa3 brought to my notice I should refuse to follow it unless it was an authority binding upon me; for I hold that the admissibility of such an usage cannot be squared either with the Common Law principle expressum facit cessare taciturn, or with the provisions of the Indian Evidence Act.
20. In Mollett v. Bobinson  5 C.P. 646, the party whom it was sought to bind by the usage was not aware of its existence, and the decision in that case is not an authority for the proposition that the party would have been bound by the usage then under consideration if he had been aware of it. The true view, in my opinion, is that expressed by Willes, J., in Mollett v. Robinson  5 C.P. 646, that an agent who has agreed to purchase goods on behalf of his principal would not be entitled to sell his own goods to his principal “without the knowledge and consent of the principal.” Lord Lyndhurst stated the rule in the same way:
Where an agent employed to sell becomes himself the purchaser, he must show that this was with the knowledge and consent of his employer Charter v. Trevelyan  11 C. & F. 714.
21. I must now endeavour to ascertain and explain what really was decided in Paul Beier v. Chotalal  3 Bom. 1. The printed form of the indent in that case commenced with the words
We/I hereby request and authorize you to order, us and, if possible, buy and send us/me the under mentioned goods on our/my account and risk and we/I bind ourselves/myself to pay for the same at the prices and conditions specified below.
and then additional printed terms and conditions are set out. After the printed matter there was added in writing inter alia:
12 cases each containing 16 pieces of 25/30 yds at 1s. 9d. per yard nett free godown including duty; 60 days 6 per cent, interest after due date.
22. The question that arose in that case was whether the merchants were bound to account to the dealer for the difference between the price paid to the supplier and price mentioned in the indent. As I apprehend the judgment of Jenkins, Order J., the Court was of opinion that under the terms of the indent the contract between the merchants and the dealer was one of sale and not of agency. If that were so cadit quaestio, and the correctness of the decision cannot be questioned. But Jenkins, C.J., in the course of his judgment, observed:
In the view, however, that I take of the case it is not necessary nor is it desirable that we should decide whether on the acceptance of the indent the relations of the parties became crystallized into those of vendors and purchasers pure and simple; for, apart from that, I hold that on the terms of the indent viewed in the light of the custom of trade in Bombay the plaintiffs are under no obligation to account.
23. The learned Judge thus described the custom of trade then under consideration.
Taking the whole of the evidence into consideration the conclusion to which I come is that, according to the custom of trade in Bombay, when a merchant’ requests or authorizes a firm to order and to buy and send goods to him from Europe at a fixed price nett free godown including duty, or free Bombay Harbour and no rate of remuneration is specifically mentioned, the firm is not bound to account for the price at which the goods were sold to the firm by the manufacturer.
24. The reason why Jenkins C.J. refrained from determining whether under the indent, the relationship of the marchant to the dealer was that of an agent or a principal appears to be that in the opinion of the learned Chief Justice, provided the custom was established, it was a matter of indifference whether the merchants were principals or agents vis-a-vis the dealer. But in considering the rights and obligations of the parties was it permissible to treat the relationship between them created under the indent as an irrelevant matter that could be ignored? Jenkins, C.J. accepted the view, as I read the judgment, “that direct relations were not established between the indentor and the maker”; that the supliers sold the goods to the merchants as principals and that under the indent the merchants did not become the agents of the dealer. His Lordship observed:
There is no express term that accounts shall be rendered; it can only be claimed that the obligation exists by implying, or importing into the contract an incident of the relations between a principal and his agent. Moreover the-argument assumes that contract between the parties was that of agency.
25. Under these circumstances I should have thought that it was of vital importance to determine the relationship o$ the parties under the written contract into which they had entered. If the Court had come to the conclusion that under the terms of the indent the merchants had agreed to buy the goods from, the suppliers as agents for the dealers and on his account and risk, the usage upon which the merchants relied in that case, (based as it necessarily must have been upon the supposition that the merchants were entitled to make a profit-by buying from the suppliers at a lower rate than that fixed by the indent, and then delivering the goods at the indent, price to the dealer), was inconsistent with the contract of agency. If it had come to that conclusion, in my opinion, the Court ought to have held that evidence of the custom was inadmissible, both because it sanctioned a situation in which the agents’ interest conflicted with their duty and also because if incorporated in the contract the usage would change the intrinsic character of the written contract that had been concluded between the merchants and the dealer. Notwithstanding the great respect that I entertain for the opinion of Sir Lawrence Jenkins I confess that in my judgment, the case of Paul Beier v. Chotalal  30 Bom. 1, far from dissolving the doubts as to their legal position that have been perplexing indent traders tended to foster an erroneous belief that the rights and obligations of persons concerned in the indent trade are to be determined by the usage and course of business established in that trade, and that where the terms of the indent conflict with the usage of the trade the contract is to be deemed subordinate to the usage and protanto its terms are to be disregarded.
26. It is clear from the evidence that this fallacious view of their legal position permeated the minds of Mr. Holmes and the other merchants who were called as witnesses to prove the alleged custom in the present case, and that it determines the course that they follow in transacting business. These witnesses did no pretend that any usage exists in the indent trade that an agent employed to buy on his principal’s account is entitled to buy goods on his own account and then to resell them to his principal. The position that they took up, as I understand their evidence, was that the course of business in the indent trade was established and well understood by all persons concerned in the trade, and that the rights and obligations of persons who imported goods from abroad upon indents were determined by the course of business and the usages of the trade; and in so far as the terms for an indent were inconsistent with the rights and obligations created or sanctioned by the items of the trade the usage was to prevail and the terms of the indent were to be treated as of no account.
27. Now, from the evidence adduced in this case I find the course of business that I am about to describe well established in the indent trade in Calcutta. When goods are ordered from abroad by a dealer under an indent at a price and rate of commission therein stated it is the duty of the merchant as agent for the dealer to buy the goods from the supplier upon the terms and conditions of the indent at the lowest price obtainable not exceeding the price set out in the indent. The dealer receives the supplier’s invoice and the supplier draws upon the dealer for the price of the goods. In such a transaction the merchant acts throughout as the agent of the dealer, and is entitled to commission from the dealer at the indent rate. Owing to the unwillingness of foreign suppliers, however, to enter into direct relations for the supply of goods with bazar dealers this course of business, in which the merchant acts merely as a middleman in the transaction usually, is not resorted to and one or other of the following alternative methods of supply is followed. The merchant agrees as agent for the dealer to buy the goods from the supplier on the indent terms F.O.B. or C.I.F., the price being stated in the indent, but no commission being payable by the dealer. In that case, according to the usage of the trade, the parties are understood to agree that the merchant shall be entitled to obtain remuneration by making an arrangement with the foreign supplier for the payment to the merchant of a return commission; but the amount of this return commission does not con-corn the dealer, the rate of the commission being fixed by agreement between the merchant and the supplier, and being paid by means of credit slips either at the time when the goods are supplied, or at a periodical adjustment of accounts, as may be arranged. Under the alternative method of supply in which no commission is payable by the dealer the dealer orders the goods to be imported by the merchant at a fixed price C.I.F. or F.O.B., and according to the usage of the trade the parties are understood to agree that the merchant may buy the goods on his own account from the foreign supplier without disclosing the dealer’s name or acting as his agent, and then resell them at the indent price to the dealer upon the terms of the indent. Under this method the merchant obtains his remuneration by retaining the difference between the price at which he buys from the supplier and the indent price o£ the goods.
28. It appears from the evidence that under indents where no commission is payable by the dealer it is the customary course of business that one or other of these two methods of supply should be adopted, and Mr. Holmes stated that about 50 per cent., of such indents are carried out by the one method, and 50 per cent., by the other. The defendant stated that he was fully aware of the usage by which a merchant obtains his remuneration by way of return commission, but that he never had heard of a usage by which the merchant obtained his remuneration by what I may call the difference in price method. Bearing in mind what I have already stated with respect to the indifference with which indent traders regard the wording of their contracts, it is not a matter of surprise that the customary form o£ indent commencing with the words:
We/I, the undersigned request you to purchase yourself or through your agents on my/our account and risk
are used by indent traders whichever method of supply they may employ, and whether according to the course of business the merchant is acting as a principal or as the agent of a dealer. (His Lordship then dealt with the evidence and proceeded). In my opinion, the usage proved in this case that where goods are ordered by a dealer at a fixed price “C.I.F., commission nil” the merchant is entitled to make and retain a profit by buying from the supplier at one price and selling to the dealer at the indent price is fundamentally inconsistent with the terms of the contract into which the plaintiffs and the defendant have entered, and is inadmissible in evidence, whether the defendant was aware of it or not.
29. The question that remains to be determined is in connexion with the third ground upon which the plaintiffs sought to justify the mode in which they performed the indents. It is one of fact, namely, whether the defendant consented to the plaintiffs performing the contracts in suit in the manner sanctioned by the said usage; for I hold that the plaintiffs in executing the indents in suit have followed the well-established course of business in the indent trade in Calcutta. (His Lordship after examining the evidence proceeded.) I am of course, aware of the cases that lay down that where it is alleged that the principal has consented to an agent selling to him his own goods in fufilment of a contract under which the agent has agreed to purchase goods on behalf of the principal, the consent of the principal must clearly be proved. But, to my mind, the evidence in this ease leads irresistibly to the conclusion – and I – find without doubt or hesitation – that the defendant consented to the plaintiffs executing the indents by the difference in price method and must be taken to have authorized the acts of the plaintiffs in carrying out the indents by purchasing the goods from the supplier and reselling them to the defendant. I find that the goods required to fulfil each of the indents in suit arrived in Calcutta, and I find also that the goods were shipped in due time, and that the plaintiffs at all material time were ready and willing to deliver the goods to the defendant as agreed between them. The plaintiffs, however, after accepting and paying for a portion of the goods delivered under Indent No. 75 have refused to accept or pay for the balance of the goods. In my opinion, the defence to the plaintiffs’ claim upon which the defendant relied at the trial was ingenious, but not genuine. I believe that the defendant refused to take delivery of the balance of the goods that he had ordered not because he did not approve of the manner in which the plaintiffs had executed the indents but because the rate of exchange had gone against him, and if he had taken delivery of the goods at the indent price the transaction would have resulted in a heavy loss.
30. At the end of 1919 the rate of exchange with the United States stood at Rs. 240 to a $100.00; at the end of 1920 it had risen to Rs. 400 to a $100.00; and in July 1920 the rate was Rs. 445 to a. $100.00. In these adverse circumstances the defendant endeavoured to obtain the cancellation of the indents and Mr. Holmes was approached by the defendant for the purpose of effecting the cancellation of the indents or the resale in the United States of the goods that the defendant had ordered.
31. The plaintiffs appear to have made strenuous efforts to minimize, even if they could not obviate, the loss that the defendant must suffer if he was forced to take delivery; but at the same time by their letters of the 1st and 4th November 1920, the plaintiffs made it clear to the defendant that they would only consent to cancel the indents if the suppliers were willing to forgo their rights under the contracts that they had made with the plaintiffs. When the suppliers remained obdurate, and insisted upon the transactions being completed, the defendant, as appears from his letter of the 9th February 1921, decided to refuse to take further delivery upon the ground of late shipment; and in the arbitration proceedings that followed pleaded inter alia late shipment as a defence to the plaintiffs’ claim. The arbitration, however, wa3 abortive; and at the hearing of the suit the defendant abandoned the plea of late shipment, which obviously would have militated against the defence upon which he was advised to rely at the trial, namely, that the plaintiffs were his agents in the transaction, and had committed various breaches of duty as agents, and in particular had made secret profits out of the indent transactions. An examination of the plaintiffs’ books, however, supported Mr. Holmes’ assurance that the plaintiffs had received no remuneration from the suppliers by way of return commission or otherwise, and that the only profit that they could make out of the transaction would Be the difference between the indent price and the price at which they purchased the goods from the suppliers. As I have found that the defendant consented to the plaintiffs executing the indents by the difference in price method, in my opinion, there is no defence to the plaintiffs’ claim.
32. The plaintiffs are entitled to recover the damages that they have suffered by reason of the failure of the defendant to accept delivery and pay for the balance of the good3 ordered under the indents, and upon that basis a decree will be passed in favour of the plaintiffs.