Case: Gordon Woodroffe &amp; Co Vs. Sheikh M. A. Majid &amp; Co

2. The respondent was a trader at Madras in hides and skins. The appellant was a firm, Gordan Woodroffe and Company (Madras), Limited, doing business among other things as exporters of hides and skins. For the period of 8 months commencing from January, 1949 there were as many as 101 contracts entered into between the appellant and the respondent. The case of the respondent was that he entered into an agreement with the appellant to act as agents for shipping the goods (hides and skins) to United Kingdom and for finding purchasers there. It is alleged that the appellant used to make payment to the respondent in respect of the goods sent to it for shipment in the nature of advances and he used to set off these advances when payment was made to the respondent after the goods were shipped. The respondent will hereinafter be referred to as the plaintiff and the appellant as the defendants. The plaintiff tentatively claimed a sum of Rs. 56,564/and odd as due to him as balance of the price of the goods and a further sum of Rs. 40,275/as representing the loss sustained by him by reason of the defendants conduct in not shipping his goods under the Sheik mark. The plaintiff accordingly prayed that an account should be taken of the dealings between the parties for the period in question. The defendants contested the suit on the ground that it was not an agent of the plaintiff but it purchased hides from the plaintiff for export and forin the United Kingdom. The case of the defendants was that there was an outright purchase of the goods from the plaintiff for the purpose ofin the United Kingdom. The defendants also contended that a sum of Rs. 4,351/and odd was due to it from the plaintiff and it prayed for a decree against the plaintiff for that amount by way of. The trial Judge held, by his judgment dated May 6, 1954 that the defendants were only purchasers of the goods from the respondent and the idea of agency was quite inconsistent with the nature of the transactions between the parties. The trial Judge came to the conclusion that the plaintiff was bound by the Statements of Account rendered by the defendants from time to time. After giving an opportunity to the parties to produce further evidence, the trial Judge held that since there was no fraud the accounts could not be reopened and the claim of the plaintiff with regard to Rs. 157/in respect of the marine insurance alone was sustainable. The trial Judge accordingly dismissed the suit and decreed them of the defendants after deducting the said sum of Rs.

Court's reasoning:
In the first place, it is important to notice that the contract in the opening portion specifically makes a mention of the fact that the defendants were buying the goods for resale, and in the paragraph containing the terms of the contract it is reiterated that the goods were intended for re-sale in the United Kingdom. On the face of it, therefore, the contract is clearly not one of agency for sale but it reads as an agreement of sale. If the defendants were intended to be constituted as the agents for sale the terms of the contract would have been entirely different. Another important feature in this case is that there is a definite price fixed in the contract for the plaintiffs goods. According to the plaintiff the rates fixed in the contract were the ones at which the goods were sold to London purchaser and not a different rate and the defendants were agents who were obtaining for him only the price at which the goods were sold at London. It is true that the defendants admit that before fixing the price as between themselves and the plaintiff they used to ascertain the London price by cable. It is also true that the plaintiff was debited in the Statement of account with the expenses of the cable. Even so, if the defendants were simply acting as agents for the sale there was no need at all to fix the price in the contract as between them and the plaintiff. It was contended for the plaintiff that according to the contracts the prices fixed are c. i. f. less 21/2 per cent and discount of 21/2 per cent was the commission for the defendants as agents. There is no use of the word commission in the contracts and we see no reason to hold that 21/2 per cent should be taken a commission and not as a margin of profit. The important point is that if the contract was one of agency there was no need to mention the price at all as between the plaintiff and the defendants. It may be that in most cases the prices which the defendants obtained from the London purchasers were the same as the prices stipulated in the contracts with the plaintiff but the fact remains that they obtained 21/2 per cent discount on the sale price, that is to Say, they purchased the goods from the plaintiff 21/2 per cent less and sold them to their London purchasers at the full price, so that 21/2 per cent was their margin of profit. It is possible that sometimes they sold the goods to the London purchasers at a higher price in which case they would be entitled to the difference in prices as a profit in addition to the 21/2 per cent which they got from the plaintiff6. In all there are 101 contract forms and in accordance with these contract forms statements of account were furnished by the defendants to the plaintiff. Exhibit P-1-A is the statement of account dated January 25, 1949 based upon the contract note Ex. P-1. It is true that the plaintiff did not sign any one of the contract forms, but all of them were received by the plaintiff without any objection. Statements of account were prepared in terms of these contracts and the plaintiff was receiving moneys from the defendants on the basis of these contracts and according to the price fixed therein. He did not, at any time, raise the slightest protest against the terms of the contract or against the price fixed therein. On the other hand, he received all the Contract forms and statements of account as well as the moneys sent to him by cheque. The plaintiff cannot, therefore, be heard to Say that he was not a consenting party to the Contracts7. There is also the circumstance that before the goods were shipped to London they were subjected to a process of trimming and re-assortment in the godowns of the defendants with a view to make them conform to London standard and selection. In that process the defendants often called upon the plaintiff to-replace the pieces found defective. If the defendants were merely acting as agents the process of trimming and reassorting in the godowns to make the goods conform to London standards and specifications will be unnecessary, for in that case the defendants were merely bound to ship the goods as they were delivered to them. Another important feature of the transaction is that in several contracts time was fixed for delivery of the goods. In some cases like the contracts in forms like P-1 to P-3 the shipment has been effected before the contract forms were issued but there are some contracts which contained the stipulation that the bales were to be sent to the godowns of the defendants for shipment to be effected promptly which according to D. W. l, Ayyalu Chetti, meant two weeks. There were also some contracts like Ex. D-2 (a) which required the goods to be sent for shipment to be effected within one month, and some other contracts within two months. All the contracts provided that time should be the essence of the contract. If the defendants were acting only as agents for the sale there is no reason why there should be a stipulation in the contract as to the time fixed for the delivery and the stipulation that time should be the essence of the contract. There is also a further condition in the contracts that the sales tax was on sellers account, the seller being the plaintiff. This circumstance also indicates that the legal relationship between the parties was that of a seller and a purchaser and not of a principal and agentIt is true that the liability of the plaintiff is an additional burden thrown upon him under the terms of the contract but it is of no significance in considering the question as to whether there was transfer of title to the goods at the time of shipment from the plaintiff to the defendantsWe find from the several statements of account that reference is made to all such advances. These advances together with interest thereon are deducted from the sale-price payable to the plaintiff and for the balance alone cheques were sent to him. It appears that on a later date, i. e., in June 1949 the defendants took a regular hypothecation deed, Ex. P-19 from the plaintiff in respect of all the advances to be made by the defendants. But it should be noticed that in making such advances, the defendants were only acting as creditors of the plaintiff and were, therefore, entitled to charge interest on such advances till they actually purchased the goods from the plaintiff. After the purchase of the goods they did not charge any interest on the moneys paid by them. It appears from the statements of account that interest was charged on advances upto the date of shipment. In other words, the title in the goods passed to the defendants at the moment of shipment of the goods and the fact was that interest was charged on all advances only upto the date of shipment. The charge or lien on the goods, therefore, subsisted till the time of shipment i.e., till the title in the goods passed to the defendants under the contract of sale. We are, therefore, unable to agree with the Counsel for the plaintiff that the clause with regard to the lien is not consistent with the theory of the transactions being an outright sale. There was also a suggestion on behalf of the plaintiff that there cannot be a contract of sale subject to c. i. f. terms if there was an outright sale at Madras between the parties. We do not think there is any substance in this argument. The primary object of the contract was that there was a purchase by the defendants from the plaintiff of the goods for re-sale in the United Kingdom and in keeping with this object the buyer stipulated with the seller for delivery of the goods abroad and for that purpose, adopted a c. i. f. form of sale. It is also contended on behalf of the plaintiff that the term with regard to arbitration according to the custom obtaining in United Kingdom was not compatible with the theory of a sale between the parties. It is not possible to accept this argument as correct. It is open to the plaintiff to agree that even after the sale had taken place any dispute with regard to the quality of the goods and selection may be submitted to arbitration in United Kingdom. It is true that a clause of this description is unusual hut it is not inconsistent With the theory that there was a sale of goods between the parties at Madras. We have already observed that the contracts in this ease were not c.i.f. contracts but the price alone was fixed on a c. i. f. basis9. It is well established that even an agent can become a purchaser when an agent pays the price to the principal on his own responsibility. In ex parte, White. In re Nevill, 1871-6 Ch A 397, T. and Co. were in the habit of sending goods for sale to N., who was a partner in the firm of N. and Co., but received these goods on his private account. The course of dealing between T. and Co. and N, was that the goods were accompanied by a price list. N. sold the goods on what terms he pleased, and each month sent to T. and Co. an account of the goods he had sold, debiting himself with the prices named for them in the price list, and at the expiration of another month he paid the amount in cash without any regard to the prices at which he had sold the goods, or the length of credit he had given. On these facts it was held by the court of Appeal in chancery that though both the parties might look upon the business as an agency, N. did not, in fact, sell the goods as agent of T. and Co., but on his own account, upon the terms of his paying T. and Co. for them at a fixed rate, if he sold them, and the moneys he received for them were therefore his own moneys, which T. and Co. had no right to follow11. For the reason already given we are of the opinion that the defendants were purchasers of the plaintiffs goods under the several contracts and not his agents for sale and the view taken by the High Court on this aspect of the case is not correct and must be overruled13. It is admitted in this case that for almost every shipment the defendants prepared a statement of account and sent it to the plaintiff giving full particulars of the amount due to him together with the deduction and showing the net balance payable to him and enclosing a cheque for such balance or giving a credit for the sum in the accounts. Copies of such accounts are Exs. P-1A, P-2A and P-3A corresponding to the contracts Exs. P-1, P-2 and P-3. Copies of other accounts have been filed by the defendants in the Court and marked Exhibit D-18 series. The plaintiff in his evidence did not deny the receipt of these accounts. On the contrary, he admitted in cross-examination that for every shipment he was getting accounts and cheques for the balance due. It is an admitted fact that to these statements of account no objection was raised by the plaintiff at any time. Nor a single document has been produced on his side to show that he ever wrote to the defendants raising an objection to the statements of account. Not only the plaintiff failed to raise objection to the several statements of account but at one stage sent a memorandum to the defendant accepting the accuracy racy of the accounts. On June 20, 1949, the defendants wrote a letter, Ex. P-16, to the plaintiff stating that there was a balance of Rs. 1,26,379-7-2 payable by him, and that against the balance they were holding certain goods belonging to the plaintiff and asking him to confirm the statements. On June 22, 1949 the defendants again wrote a letter-Ex. D-5, enclosing a statement of account Ex. P-17 showing the said balance of Rs. 1,26,379-7-2 and asking the plaintiff for confirmation. On receipt of this statement the plaintiff signed the memorandum, Ex. D-4 on June 22, 1949 and sent it to the defendants confirming the correctness of the balance as due by him and also confirming the stock of his goods remaining with the defendants. The Plaintiff conceded in his evidence having signed Ex. D-4 after the receipt of the statement of account, Exhibit P-17. The plaintiff explained that he did not look into the correctness of the figures but believed Ex. P-17 to be correct as it was sent by an English firm. The plaintiff also said that he was told by the defendants broker that if he did not sign it, it would be harmful to him. The trial Judge refused to accept the explanation of the plaintiff and held that the plaintiff had accepted all statements of account as correct and, therefore, it must be held in law that the accounts were settled and the plaintiff could be allowed to reopen it only by proof of fraud or mistake or any other sufficient equitable ground17. In the present case, the correctness of the statements of account furnished by the defendants has been challenged by the plaintiff under 13 heads. In view of our finding that the transactions between the parties were not on the basis of an agency but on the basis of an outright sale the accounts cannot be reopened under any of these heads of challenge. The trial Court has already gone into the evidence and has reached the finding that there was no fraud, mistake or any other sufficient equitable ground for reopening the finality of the accounts. As regards one item, viz., rebate in marine insurance, the trial Court has ordered that the plaintiff should be given credit for a small sum of Rs. 157 though there was no evidence of fraud on the part of the defendants. The trial Court has rejected the claim of the plaintiff for reopening the accounts on any other ground and in view of our finding that the legal relationship between the parties was not one of agency, we see no reason for interfering with the decision of the trial Court on this aspect of the case also14. The legal position is that the accounts are settled or stated if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of accounts need not be in writing, nor is it necessary that before the accounts are settled, they should be gone into by the parties and scrutinised and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of partiesIn this connection it is necessary to state that the expression account stated has more than one meaning. It sometimes means a claim to payment made by one party and admitted by the other to be correct. An account stated in this sense is no more than an admission of a debt out of Court; while it is no doubt cogent evidence against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any other admission, be shown to have been made in error. Where the transaction is of this character, it makes no difference whether the account is said to be stated or to be stated and agreed; thed agreement is without consideration and amounts to no more than an admission. There is, however, a second kind of account stated where the account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance struck. This is called by Mr. Justice Blackburn, ink v. Pickles, (1863) 4 B and S497, a real account stated, and he describes it as follows :There is a real account stated, galled in old law an insimul computassent, that is to say, when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side. It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed to be due. It is not necessary, in order to make out a real account stated, that the debts should be debts in praesenti, or that they should be legal debts. I think equitable claims might be brought into account, and I am not certain that a moral obligation is not sufficient. It is to be taken as if the sums had been really paid down on each side; and the balance its recoverable as if money had been really taken in satisfaction; subject to this, that where some of the items are such that, if they had been actually paid, the party paying them would have been able to recover them back as on a failure of consideration, the account stated would he invalidated.In the present case, the settled account between the parties falls within the second kind of account stated and it is to an account of this description that the equitable doctrine of settled account has to be considered.