James W. Colvile, J.
1. The Respondents (the Plaintiffs in the suit out of which this appeal has arisen) are merchants carrying on business at Winterthur, in Switzerland,
under the style of Volkart Brothers. Their house had subordinate branches or agencies in India for the purposes of their trade with that country. Of
these, the head or principal one was at Bombay, and under the management of a Mr. Knapp; the other was at Cochin, where the transactions in
question took place, and was managed, up to some time in February, 1874, by a Mr. Spitteler, and after that date by a Mr. Jung, who had
previously been his assistant.
2. The Appellants, the Defendants in the suit, are native merchants at Cochin, trading under the style of P. Marcar, the second Defendant being the
active partner of the firm.
3. The history of the transactions between the Plaintiffs, through their agents at Cochin, and the Defendants may be conveniently divided into three
periods, the first ending with the annual settlement of accounts up to the 30th of June, 1872; the second beginning from that time and ending with
the execution of the agreement L, on the 2nd of January, 1874; and the third, which comprehends the transactions under that agreement, ending
with the institution of the suit on the 10th of December, 1875.
4. The first is material only in so far as it shews what was the course of dealing between the parties whilst there was no substantial (if any) dispute
between them. Their transactions were of two kinds. The first and more important class consisted of purchases, chiefly of native-grown coffee, oil,
and pepper, made by the Defendants from the producers and delivered to the Plaintiffs agent at Cochin, for shipment to their firm in Europe. These
were almost invariably made upon contracts for future delivery at a stipulated price, of which the following, made on the 23rd of September, 1872,
may be taken as an example. The material parts of it are as follows:
Contract with P. Marcar, of Cochin, for 1000 cwts. Malabar native coffee, at Rs. 301/2 per cwt., delivery on or before the end of January 1875.-
I, the undersigned P. Marcar, of Cochin, agree and bind myself to deliver to Messrs. Volkart, of Cochin, on or before the end of January next, one
thousand cwts. Malabar native coffee,"" to be packed, garbled, and delivered as therein mentioned, ""at the price of thirty and a half rupees per cwt.
net.....On account of which agreement I have this day received from Volkart and Brothers the sum of Rs. 50, the balance to be paid as agreed. In
case of non-fulfilment of this agreement, I bind myself to pay to Messrs. Volkart Brothers, as penalty, Es.3 for each cwt. short delivered.
5. It is to be observed that the Rs. 50 mentioned in this form of contract was rather in the nature of earnest money to bind the contract than the
measure of the advance made to enable the Defendants to perform it. Such advances were almost invariably made, but they seem to have been
made on general account, the particular amount of advance attributable to each particular contract being, apparently, settled orally under the
provision expressed in the words ""to be paid as agreed,"" and deducted from the price when that was adjusted on the delivery of the produce. That
this was so appears by the receipts for advances, the adjustment of particular contracts, and the copies of"" purchase accounts"" set out in the
record.
6. The other class of transactions consisted of consiguments to Europe by the Defendants on their own account, made through the firm of Volkart
Brothers. There were thus cross accounts between the Plaintiffs and Defendants, viz., the purchase account and the consignment account, which
were kept separately under these titles, and besides these there appears to have been an ""interest account,"" the nature of which it is difficult
precisely to define, but which was certainly different from the ""interest account"" to be spoken of hereafter. These three accounts would naturally
result in a general account current between the two firms, which Mr. Jung swears was regularly kept. The date as on which these accounts were
balanced, and ought to have been settled, was the 30th of June in each year. But such settlement, at all events of the general account current, does
not appear to have been very regularly made, since the account K, which purports to shew the balance of the general account current on the 30th
of June, 1873, comprehends items which ought to have been included in the account for the preceding year, and was not finally adjusted until
March 1874. It may, however, be collected from the purchase account A, the consignment account B, and the interest account D, that the general
balance due from the Defendants to the Plaintiffs on the 30th of June, 1872, was about Rs. 168, 867. 8a. 10p.
7. The price of native coffee rose in the latter part of 1872 and 1873. On the 24th of January, 1873, Mr. Spitteler, who then managed the Cochin
agency, obtained from the Defendants security in the shape of the letter I, and the deposit of the title-deeds therein mentioned. The true
construction of this letter, which is one of the principal questions in the cause, will be afterwards considered. In February 1873, the price of coffee
having risen to Rs. 40 per cwt., it became manifest that the Defendants could not fulfil their contracts with Plaintiffs for deliveries in 1873 without
heavy loss. In these circumstances, Mr. Spitteler made to them further and extraordinary advances, amounting to Rs. 500,000 in the whole, by
payments which in the Defendants'' case, are stated to have been made on the 12th, 13th, and 19th of February, and the 8th of March, 1873. It
became a matter of controversy in this suit what were the object, nature, and effect of this transaction. The Defendants have set up that they
threatened to abandon their contracts on the terms of repaying the particular advances attributable to them, and of paying the stipulated penalty of
Rs. 3 per cwt; that they were persuaded by Mr. Spitteler to forego this intention, and to accept the advances, on the understanding that the money
was to be employed in buying coffee at the market price on account of Volkart Brothers, on whom the losses incurred in this operation were to
fall. Mr. Spitteler, on the ether hand, has deposed that, when the advances were made, the coffee deliverable on the contracts for 1873 had been
all, or nearly all, actually or constructively delivered (an assertion hardly borne out by the terms of the contracts or other evidence in the cause),
and that the advances were made in order to enable the Defendants to pay for the coffee, and thus to obtain the command of the market for the
following season.
8. The best evidence of what was understood by the parties to be the nature of the transaction between them is that afforded by their written
statements made at the time. These have been admitted, without objection, on the record. Mr. Spitteler, advising his principals in Europe of these
advances, when they amounted to only Rs. 300,000, wrote, on the 19th of February, 1873, as follows:
Coffee. On the coast Rs. 40 to Rs. 401/2 are readily paid, but most of the dealers find it already now impossible to get produce, and it is already
pretty distinctly and openly said that E. Bawdry & Co. have received notice from their contractor, Baboo, according to which a great part of their
contracts will remain unfulfilled. The reason we can explain easily. Marear has not only 5000 cwts. over his contracts already had delivered to him,
but his friend Ramon has still about 20,000 cwts. in his possession, which are in the first place reserved to Marcar. As he actually requires money
for these payments, we have agreed with him that he should not sell for one month, without our sanction, either to natives or exporters, but should
keep in his possession the whole quantity for the chance of orders. There against we advanced him three lacs, and he has to make good to us all
interest, back commissions, &c., in case we should not find any employment for the remaining coffee, otherwise we shall bear these charges
ourselves, but shall pay Marear a corresponding lower rate than market rate. Through this arrangement we have enabled Marear partly to recoup
himself for the sustained loss, whereas we, on the other side, reserve ourselves a good chance to do some further considerable business this
season. We have no doubt, under the exceptional circumstances, you will approve of our having done so, especially as we hold in our possession
security for the greater part of the amount.
9. In the letter of the 19th of July, 1873, which the second Defendant wrote to Mr. Solomon Volkart in the course of the subsequent negotiations,
he says,
Last year I entered into several coffee contracts for coffee delivery, amounting to 40,000 cwts., at different rates, averaging Rs. 31. 14a. 9p. per
cwt. f. o. b., and have suffered considerable loss in them. I little expected that the price of coffee would have risen so high in a few days, and that,
too, at a figure which no merchants experienced at any time. My friends, as usual with them, held a large portion of coffee. I was, however, unable
to arrange a fixed price, owing to their exorbitant demands, and, although aware of the failures of the Brazil and Java crop, I little anticipated that
price would grow beyond 30 to 31, being the highest limit native coffee was ever raised to; and I forbode the certainty of a recession. With these
impressions, I entered into the contracts with your firm. The first few parcels which arrived in the market were met with ready buyers at Rs.301/2
per cwt., for ungarbled, besides a payment of Rs.3 per cwt. for expenses of conveyance, there being a marked increase of price daily, particulars
of which were duly communicated to your Mr. Spitteler. I saw the necessity of paying for the coffee at market price to my parties in order to fulfil
my contracts with you, as well as securing the remaining coffee in their hands, who would otherwise have resorted to others, thus entailing on me
serious difficulties to bring them round again for future operations, with the view of covering the loss which threatened me on all sides. With these
circumstances, I was compelled to receive the advances from Mr. Spitteler, who foresaw that if I were to pay penalty for short delivery, as
stipulated in the agreement, there would have appeared to my favour Rs. 400,000, as compared with market price, against Rs. 121,000, being
penalty at Rs.3 per cwt., with certain and sure loss to the firm. I, however, considered my credit in your office, the position you hold in the
commercial circles, and the difficulties in which you would have been involved, and taking courage in the confidence you repose in me, did all that I
possibly could towards the fulfilment of my agreement, trusting entirely, as I now do firmly trust, that, with a little assistance and time from you, I
should be able to make up the loss.
10. It is unnecessary to quote more of this letter. Its whole tone is that of a debtor admitting his liability for the advances in question, but pleading
with his creditor for indulgence in consideration of the circumstances in which, and the motives for which, that liability was incurred. The account
which it gives of the substance of the transactions is not inconsistent with that of Mr. Spitteler, though differing from it in some details, and
particularly in the suggestion that, but for the consideration due to the Plaintiffs, and for the prospect of future business, the Defendants might have
escaped from their contracts of 1872-73 with less loss, by paying the stipulated penalty of Rs.3 per cwt. Looking to that letter and to the other
evidence in the cause, their Lordships have no difficulty in coming to the conclusion that not only was the sum of five lacs so advanced to the
Defendants as much a debt due from them to the Plaintiffs as any of the ordinary advances made on the purchase account (a fact found by both the
Indian Courts, and now hardly disputed), but that the Defendants fully recognised and admitted that liability in 1873. The first suggestion of their
contention to the contrary would seem to have been made in their letter of the 26th of November, 1875, when the differences between them and
the Plaintiffs, which resulted in the institution of this suit, were at their height.
11. The Plaintiffs, on being advised of these exceptional advances by Mr. Spitteler''s letter of the 19th of February, 1873, lost no time in
telegraphing their surprise and dissatisfaction, and seem to have contemplated immediate proceedings for the recovery of the amount from the
Defendants. Thereupon ensued a long correspondence, and a negotiation, of which it is sufficient to state that it extended over many months, that it
was conducted in India, on, the part of the Plaintiffs, not only by Mr. Spitteler, bat by Mr. Kapp, the manager of the Bombay agency, and Mr.
Sigg, a partner in the European house, who was sent out for that purpose, and that it ended in the execution of the agreement L, on the 2nd of
January, 1874. In the course of this negotiation, and on the 25th of October, 1873, the Defendant gave to the Plaintiffs the further security
contained in the letter J and the schedule thereto, and various arrangements, of which it is unnecessary to say more at present, were proposed and
rejected. Of the final arrangement, embodied in the document L (the construction of which will have to be hereafter more particularly considered),
it is now only necessary to state that it proceeded on this basis. The balance due to the Plaintiffs by the Defendants was stated to have been, as on
the 1st of July, 1873, Rs. 678,012. 10a. 1p., but was afterwards found to have been only Rs. 613,007. 6a. 5p., as shewn by the account K. Of
this balance, Rs. 300,000 were to be carried to what was styled ""the block account,"" and the remainder to what was styled ""the interest account,
by which was meant an account bearing interest. ""The block account"" was to carry no interest, and was to be liquidated by returns only on future
contracts for produce, such returns to be calculated according to a stipulated scale. This arrangement was to be partly retrospective, in that a sum
of Rs. 53,056. 13a. was to be carried to the credit of the ""block account"" as for returns on transactions between the 1st of July, 1873, and the 1st
of January, 1874, and various sums, amounting to Rs. 145,357, were to be credited to the Defendants on the ""interest account,"" as due to them in
respect of transactions during the same period. And, lastly, the agreement contained an express stipulation that the balance of interest to accrue
due on ""the interest account,"" which was to carry interest on both sides of the account, should be paid in cash on the 30th of June in each year.
12. The subsequent transactions between the European and the native firms all proceeded on the basis of the arrangement embodied in L, It is
unnecessary to examine these in detail. It is sufficient to state that during this last period of the dealings between the Plaintiffs and Defendants their
relations seem to have been somewhat strained, but did not become actually hostile before the month of August, 1875. On the 10th of that month
the Cochin agency wrote a letter to the Defendants, enclosing an account headed ""interest account,"" and demanding payment of a sum of Rs.
35,119. 14a. 9p., as presently payable under the terms of letter L, for interest due on ""the interest account"" up to the 30th of June, 1875, and for
short proceeds. The Defendants paid on account Rs. 10,000 in September, and the further sum of Rs. 583. 3a. on the 3rd of November, the latter
sum being all which, on their mode of stating the account, they admitted to be their due. Their letter remitting this last sum, and the account
enclosed in it, arc in the record. On the 10th of November, 1875, the Plaintiffs, after giving credit for these sums, and for another small payment of
Rs. 146. 3a. 10p., and admitting some errors in their previous account, reduced the balance, of which they again demanded present payment, to
Rs. 15,768. 3a. 7p.
13. On the same day they wrote another letter to the Defendants, apparently in answer to some offer of produce, in which they said:
We beg to say that, as already verbally told your Mr. Marcar, we cannot entertain the idea of entering into fresh engagements with you, until such
time as the balance of interest and short proceeds has been settled satisfactorily, and in accordance with the agreement of 2nd January, 1874. We
hereby request you peremptorily to hand over such amount, viz., Rs. 16,014. 6a. 7p., with the interest due up to date to bearer.
14. The difference between this sum and that demanded in the letter of the same date is the sum of Rs. 146. 3a., of which the letter admits the
receipt by a cheque.
15. The sum to which the amount in dispute was thus reduced was made up of the sum of Rs. 12,789. 1a. 11p., which, being the difference
between interest at 6 per cent, and interest at 9 per cent. upon the balance of ""the interest account,"" the Defendants claimed to be allowed under
the provisions of L; and of that of Rs. 2979. 1a. 8p., as to which, though they admitted it to be due for short proceeds, they insisted that it was not
then payable, but ought to be carried to their debit in ""the interest account."" Further correspondence, of a more or less angry character, passed
between the parties, till on the 8th of December, 1875, the Plaintiffs wrote to the Defendants as follows:
In reply to your letter of the 7th instant, we beg to state that you are well aware that we consider that you have entirely broken your engagements
with us for the liquidation of your block account, both in regard to the offers you have made and in carrying out your contracts, and also in regard
to the returns, the benefit of which you ought to have given us. In reference to the interest account, you have refused to pay us the interest due us
on the 30th of June last, and you have entirely neglected to make any attempt to pay us the large balance due us on this account. Under these
circumstances, we are compelled to put the case into Court, and any further discussions will be useless. We must, therefore, decline to take notice,
at present, of the tissue of erroneous statements you have put forward in your last letters.
16. In reply to this, the second Defendant wrote on the same day a letter of remonstrance, denying the imputed breaches of Plaintiffs'' agreement,
expressing his willingness to go on under it, shewing that the dispute as to the interest might be settled ""by means otherwise than legal,"" and
concluding as follows:
Under these circumstances, take notice that I hold you responsible to me for all damages arising from your withdrawal from a contract which up to
yesterday I shewed a ready disposition to carry out myself; that from this date I repudiate your further right to fall back upon that agreement; and
that I shall bring such action against you for the recovery of compensation for loss sustained by your breach of contract as I may be advised to
take.
17. The plaint was filed on the 10th of December, 1875. It sought to recover the sum of Rs. 180,897. 5a. 2p., the admitted balance on the block
account without interest; and the sum of Rs. 224,882. 8a. 1p., as the balance due on the interest account, with interest on such balance ""from the
7th of December, 1875."" The balance thus claimed on ""the interest account"" included the Rs. 15,768.3a. 7p., of which immediate payment had
been demanded in November. The plaint also prayed for a declaration that the instruments of mortgage I and J created and were mortgages of the
interest of the Defendants in the properties mentioned in the schedule, and that, if necessary, an account might be taken of what was due by the
Defendants to the Plaintiffs on the said mortgages.
18. The issues finally settled in the suit were:
(1.) Whether the mortgage instruments of the 21st and 25th of October, 1873, I and J, are valid and subsisting mortgages for the balances that
may be found due by Defendants to the Plaintiffs, or for any part thereof.
(2.) Whether, on the 30th of June, 1873, there was a balance of Rs. 613,097. 6a. 5p., due by Defendants to Plaintiffs.
(3.) Whether the Defendants have committed any breach of the agreement of the 2nd of January, 1874, and if not, whether the Plaintiffs are
entitled to sue for the balances due on the block account and the interest account.
(4.) Whether Plaintiffs are entitled to bring their suit before submitting to arbitration the dispute as to Rs. 12,789. 1a. 11p. on account of interest.
(5.) A similar issue as to the before mentioned sum of Rs. 2979 1a. 8p., the remainder of the sum claimed by the Plaintiffs as a cash payment
payable as on the 30th of June, 1875.
19. The District Judge, Mr. Wigram, in a very careful and able judgment, disposed of these issues as follows:
Upon the 1st, he found that, on the true construction of instruments of mortgage I and J, they and the deeds deposited with them constituted a
security for the general balance due from the Defendants to the Plaintiffs.
Upon the 2nd, he found that that balance was, on the 30th of June, 1873, the sum of Rs. 613,007. 6a. 5p.
Upon the 3rd, he found that the agreement of the 2nd of January (L) was, upon the true construction of it, revocable at will by the Plaintiff''s, but
that, if it were not so revocable, they had failed to prove any breach of it on the part of the Defendants which justified the rescission of it.
As to the 4th and 5th issues, he found that the Plaintiffs were not entitled to sue for the disputed amount of interest until that dispute had been
settled by arbitration ; but that there was no such objection to the claim for the Rs. 2979. 1a. 8p., the amount, and the Defendants'' liability for it, in
some way or another, not being in dispute.
20. The result of his judgment was that the Plaintiffs were entitled to a decree for Rs. 392,990 12a. 10p., and to a declaration that, if that amount
was not paid within three months, the Plaintiffs were entitled to sell the right, title, and interest of the Defendants in the properties mortgaged to
them under the Exhibits I and J, and a decree was made accordingly on the 16th of July, 1877.
21. From this there was an appeal, and, so far as it related to the 4th issue, a cross appeal, to the High Court, which dismissed both appeals, and
confirmed the decree of the Lower Court in its integrity. The judgment of the High Court appears, from the somewhat scanty note of it, to have
proceeded, so far as it related to the 3rd issue, upon the supposed proof of actual breaches of the agreement L on the part of the Defendant, and
not upon the revocability of that agreement at the will of the Plaintiffs.
22. In dealing with this appeal their Lordships are relieved from any further consideration of the 2nd and the 4th issues. What has been already said
sufficiently indicates their entire concurrence in the finding of the two Indian Courts upon the former. And there is now no cross appeal against the
finding in favour of the Defendants upon the latter.
23. The questions, therefore, for determination are reduced to the following:
1st. Whether the finding upon the first issue is correct; a question which depends upon the construction to be put on the document I, since that
governs also the effect of J.
2nd. Whether the Plaintiffs were entitled to rescind wholly or in part the agreement embodied in document L, without proof of an actual breach of
it by the Defendants sufficient to justify such rescission; and
3rd. If they were not so entitled, whether there is sufficient proof of any such breach.
4th. Whether there is error in the decree, in so far as it declares the Plaintiffs at liberty to sell the mortgaged premises, if the Defendants should not
pay the amount decreed within three months.
24. The contention of the Defendants is that the construction of I is to be governed by the first paragraph in it, which, speaking in the name of the
second Defendant, says,
As I have been and am now accustomed to contract with you for the supply of country produce and other merchandise, and in the course of these
transactions there is frequently a considerable amount of money outstanding to my debit in the way of advances, &c., made upon the contracts,
and you very naturally would like some security, I agree to the following propositions, &c.,
25. They insist that this statement, being in the nature of a recital, limits the security to advances made upon contracts for future deliveries of
produce, and consequently must exclude from it the advances, to the amount of five lacs, which constitute so large a portion of the balance found
due to the Plaintiffs, particularly if Spitteler''s statement, to the effect that when those advances were made all, or almost all, of the Defendants''
contracts with the Plaintiffs up to that time had been fulfilled, is to be taken to be correct.
26. The construction of an ambiguous stipulation in a deed may undoubtedly be governed or qualified by a recital; but on the other hand, if the
intention of the parties is clearly to be collected from the operative part of the instrument, that intention is not to be defeated or controlled because
it may go beyond what is expressed in the recital.
27. The distinction is recognised and the authorities on this subject collected in the case of Walsh v. Trevanion 15 Q. B. (N.S.) 750.
28. What, then, is the effect of the operative part of this instrument. It says,
You shall hold them (the deeds) as a lien for the current outstandings due at any time from me to you upon our contracts, and you shall have power
over the property as a pukha mortgagee would have, only you must agree not to sell any of it until you have given me full twelve months notice
from the time we shall come to a settlement of accounts to pay up, or from the time demand shall have been made by you of the amount claimed
by you but if I fail, then you may sell, at my expense, for the best I price you can get, any of the properties successively, till you have i satisfied my
account current, out of the proceeds, giving me a strict account of what you sell. ""And the next paragraph contains the following sentence:"" And
upon my payment of all balances due, you will at once return to me all the documents now deposited with you, and cancel this letter
29. The conclusion which their Lordships draw from the above passages taken together, and examined by the light which the proved relations of
the parties at the time throw upon them, is, that the security was intended to cover the general balance that might become due from the Defendants
to the Plaintiffs upon all the accounts between them. The words ""upon our contracts,"" which the Defendants insist can only be taken to mean the
particular contracts for the delivery of produce referred to in the paragraph in the nature of a recital, do not appear to their Lordships to be
necessarily repugnant to this construction. Such contracts may hare been chiefly in the minds of the parties, but the words themselves are wide
enough to embrace all their transactions. And what follows strongly favours the wider construction. There is to be no sale until twelve months after
one of two events, viz., a settlement of accounts or a demand. The first case implies a settlement of accounts in order to ascertain the amount due.
How could that be ascertained unless all the different accounts were brought into a general account current, and a balance struck thereon ? Let it
be supposed that ""the purchase account,"" taken alone shewed a large balance due for advances. It can hardly have been the intention of the parties
that the property should be sold to pay that balance; if, on the other hand, a balance was due from the Plaintiffs to the Defendants on ""the
consignment account"" and this explains the following sentence, ""if I fail, then you may sell, &c, until you have satisfied my account current."" The
account current"" would include both accounts. And this intention is made still more clear by the subsequent stipulation that the event on which the
deeds shall be returned and the latter cancelled is the payment of all balances due. Again, let it be assumed that there was no account open
between the parties except ""the purchase account."" The advances were entered generally to the debit of the Defendants in this account, as on the
dates on which they were made, in round sums. Neither this, nor any other account that has been produced allowed what particular advance was
made on each particular contract. The live lacs were entered in this account in the same manner as the sums previously advanced. It can hardly
have been intended that if it should prove necessary to realize the securities, the account so kept was to be analysed and recast in order to
ascertain which of the sums so debited were secured, and which were due upon open account.
30. The learned Counsel for the Defendants have relied upon their refusal to execute S. S. S., one of the abortive proposals made in the course of
the negotiations for a settlement between February, 1873 and January, 1874. Whatever may have been the motive of the refusal (and this has not
been very satisfactorily proved), parol evidence of what took place a considerable time after the execution of I can hardly affect the construction of
that document. If it could have any such effect, the evidence of what took place during the long negotiation which ended in the execution of L
would, taken as a whole, rather lead their Lordships to the conclusion that both parties were negotiating under the belief and upon the assumption
that the whole debt then due was covered by the mortgage securities.
31. Upon the whole, therefore, their Lordships have come to the conclusion that the Judge''s finding on the first issue before him was correct, and
that the whole of the before-mentioned sum of Rs. 61.3,007. 0a. 5p. was, and that the balance of it now recoverable is, secured by the mortgage
securities in question.
32. Their Lordships have now to determine the more difficult question of the construction and effect of the document L.
33. The contention on the part of the Plaintiffs is that it was revocable at their will, as found by the District Judge. The contention of the Defendants
is that, unless rescinded by mutual agreement, or upon a breach of its stipulations by one party justifying its rescission by the other, it was to subsist
in full force until the liquidation under it of both the ""block"" and the ""interest"" account, or, at all events, of the block account; and further that, if in
the events that have happened, the Plaintiffs are entitled to sue for and recover the balance due on ""the interest account,"" they cannot sue for or
recover the balance due on ""the block account,"" as to which they have agreed that it was to be liquidated by ""returns only.
34. The circumstances under which the agreement was entered into have already been partially stated. That they afford no ground for the
suggestion that the settlement in question proceeded upon the compromise of a doubtful claim, or of a disputed debt, is a conclusion in which their
Lordships have already intimated their concurrence. On the other hand, it is clear that, although the arrangement was on the face of it in ease and
for the benefit of the Defendants, the Plaintiffs found, or thought they found, their own advantage in it. Had they shewn no forbearance, had they
driven the Defendants to extremity, they would probably have lost great part of the large sum then due to them, and they would certainly have; lost
the advantage which they expected to reap from the employment of the Defendants, who were supposed to have acquired the command of the
market, in their future operations in native produce. The agreement actually made is extremely loose. It fixes no time for its duration, or for the
liquidation of the debt. It was, no doubt, purposely left vague upon this point; since one of the grounds on which the second Defendant says he
objected to execute S. S. S. was that it bound him to pay a certain amount by a fixed time.
35. The only specified date from which any inference as to the intended duration of the arrangement can be drawn is the 30th of June, 1875. From
that it may fairly be inferred that the parties contemplated dealing on the footing of the agreement up to that time at least. But all beyond that time is
left indefinite.
36. The Defendants, however, contend that it follows, by necessary implication from the terms of the document, that the parties bound and
intended to bind themselves to carry on their dealings upon the footing of it until the whole debt, or, at all events, that portion of it which was
carried to the block account, was liquidated in the manner thereby provided. The passages on which they mainly rely are,
1st. The statement that ""the following conditions have been agreed upon by both parties for the repayment by P. Marcar of the money due to
Volkart Brothers.
2nd. The provision as to the rebate of interest, which contains these words,- ""The same reduction of interest to be made subsequently until the
entire settlement of this account should P. Marcar continue to afford the same satisfaction.
3rd. The provision that ""the block account shall be liquidated by returns only on all contracts,"" &c.
37. Their Lordships are clearly of opinion that the extreme contention of the Defendants that the whole debt was to be repaid under the agreement,
which was, therefore, to subsist until that liquidation had taken place, cannot be maintained. The ""interest account"" stands upon a different footing
from the ""block account."" It was to remain as a debt carrying interest, and that interest was to be paid annually, but no precise stipulation as to the
mode of liquidating the principal is to be found in the agreement, unless it is to be inferred from the 5th paragraph that, for the future as for the past,
sums of money to become due to P. Marcar for cash, goods, consignments, &c., were to be carried to their credit. There was, however, no
provision for the continuance of the consignment business, which would presumably be the principal source of such credits. Hence, even if the
agreement was intended to subsist, and did in fact subsist, until the block account had been liquidated by the returns, there might have remained at
that time a balance due on the interest account which the Plaintiffs would have been entitled to sue for and recover.
38. And it further appears to their Lordships that, as regards the balance due on the ""interest account,"" the utmost that can be implied from the
agreement against the Plaintiffs is a covenant not to sue for it until after the 30th of June, 1875.
39. The question, then, under consideration is reduced to the ""block account,"" and the effect of the words ""shall be liquidated by returns only,"" &c.
Now, even as to this account, the provisions are extremely loose, and such as could not be duly worked unless the contracting parties continued to
act with the highest good faith, and on a perfect understanding with each other. Nevertheless, they seem advisedly to have abstained from making
express provisions either for the continuance or for the due working of the agreement, each trusting to the honour, and, probably, still more to the
self-interest of the other. Such an agreement is conceivable if it was intended to endure so long only as both parties desired it to continue. But, for
the effectual working of an irrevocable agreement for the liquidation of the block account in a particular way, it would be necessary to imply
covenants and obligations for which the parties have failed, apparently from the difficulty of agreeing upon them, to make express provision. For
example, no express provision is made as to the extent of the business to be done; the rates at which one party is to offer, and the other to accept,
produce; the result upon the letter of the agreement being that, if either were disposed to act unreasonably, he would have the means of postponing
the liquidation of the account indefinitely. And if the parties have thus abstained from inserting express provisions for the fair and reasonable
working of their supposed agreement, can the Court, which is called upon to enforce it, supply them. Their Lordships are of opinion that it cannot
do so. Among the reasons stated by Lord Denman, C.J., in delivering the judgment of the Court in Aspdin v. Austin 5 Q. 13. (N.S.) 671, 684 are
the following, which appear to be particularly applicable to this case; he says:
Where parties have entered into written engagements with expressed stipulations, it is manifestly not desirable to extend them by any implications;
the presumption is that, having expressed some, they have expressed all conditions by which they intend to be bound under that instrument. It is
possible that each party to the present instrument may have contracted on the supposition that the business would in fact be carried on, and the
service in fact continued during the three years, and yet neither party might have been willing to bind themselves to that effect, and it is one thing for
the Court to effectuate the intention of the parties to the extent to which they may have, even imperfectly, expressed themselves, and another to
add to the instrument all such covenants as, upon a full consideration, the Court may deem fitting for completing the intentions of the parties, but
which they, purposely or unintentionally, have omitted. The former is but the application of a rule of construction to that which is written; the latter
adds to the obligations by which the parties have bound themselves, and is, of course, quite unauthorized, as well as liable to great practical
injustice in the application.
40. These considerations have led their Lordships to the conclusion that the stipulations, even as to the block account, were binding only during the
continuance of the arrangement for the conduct of future business, and that on the true construction of the agreement, either party had power, at
least after the 30th of June, 1875, to determine it, should it be found, as undoubtedly it was found, to be working unsatisfactorily. They had in this
respect the same right as parties under a contract for a partnership at will. Indeed, though they were not strictly partners, their contract was like
one between persons engaged in successive joint adventures, the Defendants supplying the produce at a profit to the Plaintiffs, who realized a
further profit on its export to Europe, and the former undertaking further that a portion of their profits should be applied in liquidation of their
liability on former transactions. Their Lordships conceive that on this construction full effect can be given to all the express stipulations contained in
L, and, further, that in the events which have happened the Plaintiffs have not lost their right to sue for and recover the balance due to them either
on ""the block"" or on ""the interest account."" In truth, had they broken any covenant, express or implied, the remedy of the Defendants would seem
to have been an action for unliquidated damages, the measure of which would not necessarily be the balance due on the block account.
41. Their Lordships'' construction of L renders it unnecessary to consider whether, assuming the agreement to be irrevocable, the Plaintiffs have
established a breach of it on the part of the Defendants which would justify the rescission of it, a question which, regard being had to the conduct
of the parties with respect to the alleged breaches, might not be free from difficulty. Upon the last point their Lordships find that there is no error in
that part of the decree which empowers the Plaintiffs to realize their securities in case the Defendants should fail to pay the sum due within three
months from the date of the decree. They are of opinion that a sufficient demand, within the meaning of the letter I, was made immediately before
the institution of the suit, and was be understood by the Defendants to have been made. Such seems to be the result of the letters of the 8th of
December, 1875. The allowance of three months for the payment of the sum decreed to be due to the Plaintiffs on the mortgage securities was
therefore in ease of the Defendants. Their Lordships will humbly advise her Majesty to affirm the decree under appeal, and to dismiss this appeal
with costs.