OGDENS, LIMITED v. NELSON. THE SAME v. TELFORD. Contract-For fixed Period of Time-Continuance of Circumstances necessary to Performance of Contract-Implied Condition. By a contract made between the plaintiffs, who were dealers in tobacco, and the defendant it was agreed that, in consideration of the defendant undertaking to become a customer of the plaintiffs and to purchase goods direct from them, and not to sign any agreement with any other firm in the tobacco trade which would prevent him from dealing with the plaintiffs, the plaintiffs would thenceforward for a period of four years distribute as an annual bonus among their customers, including the defendant, and in proportion to the purchases made by them respectively, a certain fixed annual sum, and also the expected profits on certain goods sold by the plaintiffs during that period. Before the four years had expired the plaintiffs sold their business to third persons. In an action for the price of goods sold to him the defendant counter-claimed against the plaintiffs for damages for breach of the contract : Held, that it was an implied term of the contract that the plaintiffs would continue to carry on business during the full period of four years, and that they would not during that period do any act disabling themselves from earning profits or preventing the defendant from being a customer of the plaintiffs, and that the defendant was entitled to damages. TRIAL before Lord Alverstone C.J. without a jury. The plaintiffs were wholesale tobacco dealers, and the defendant in each action was a retail tobacconist. The defendant in each action respectively entered into an agreement in writing dated March, 1902, whereby it was agreed between him and the plaintiffs that in consideration of the defendant agreeing to become a customer of the plaintiffs and to purchase goods direct from them, and not to sign any agreement with any other firm in the tobacco trade which would prevent him from dealing with the plaintiffs, the plaintiffs would for four years from April 2, 1902, distribute among such of their customers in the United Kingdom as purchased goods direct from them, in proportion to the purchases made by such customers from the plaintiffs, (1.) the entire net profits on the goods sold by the plaintiffs in the United Kingdom during 1903 June 11, 12, 22. 1903 OGDENS, LIMITED ข. NELSON. THE SAME V. TELFORD. such period of four years; and (2.) a bonus of 200,000l. in each of the said four years, the bonus to be distributed quarterly as from April 2, 1902, in four equal shares of 50,000l. each. The terms of the said agreement are fully set out in the judgment. In pursuance of the agreement the defendants. respectively became customers of the plaintiffs, and refrained from signing any agreement with any firm which would have prevented them from dealing with the plaintiffs. On September 27, 1902, the plaintiffs sold their business to a company called the Imperial Tobacco Company of Great Britain and Ireland. The actions were brought to recover from the defendant Telford the sum of 3091. 6s., and from the defendant Nelson the sum of 587. 18s. 2d., for goods sold to them respectively by the plaintiffs. The defendant in each case admitted the claim, but counter-claimed for damages for breach of the agreement of March, 1902. Bankes, K.C., Montague Lush, K.C., and J. R. Randolph, for the defendant. It was an implied term of the contract between the parties that the plaintiffs would continue to trade during the period of four years over which the contract was to extend, or at all events that they would not wilfully do any act which would put it out of their power to perform their contract, or would prevent the defendant from being a customer of the plaintiffs, and from thereby satisfying the condition upon which he would become entitled to a share of the promised bonus. That such a provision is by implication to be read into the contract is established by a series of authorities. In McIntyre v. Belcher (1) the plaintiffs sold to the defendant the goodwill of a surgeon's practice, the consideration being a promise on the part of the purchaser to pay to the plaintiffs one-fourth of the gross receipts of the practice during the next four years, if he should live so long. Before that time expired the defendant discontinued the practice. It was held that, as he had wilfully chosen to prevent himself from earning anything, he had committed a breach of the agreement. Willes J. compared the case to (1) (1863) 14 C. B. (N.S.) 654. that of a man granting all the apples growing on a tree and then cutting the tree down.. In Inchbald v. Western Neilgherry Coffee Co. (1) the plaintiff was employed by the defendants as a broker to dispose of the shares of the company upon the terms that he was to have a certain sum down, and a further sum when all the shares had been allotted. Before all the shares had been allotted the directors, thinking it better to do so, caused the company to be wound up. It was held that the plaintiff was entitled to damages. In Stirling v. Maitland (2) S., the agent of an insurance company, being indebted to the company, and being pressed for payment, it was arranged that the plaintiff should pay the money to the company and that the company should appoint him and S. as joint agents with the same rates of payment and remuneration as before. A deed was executed containing a covenant that in case the company should at any time thereafter displace S. from his appointment as agent, then they should forthwith repay to the plaintiff the money so paid by him. Subsequently the company transferred their business to another company. In an action to recover the amount advanced by the plaintiff, it was held that there was an implied covenant by the company that they would not voluntarily do anything by which it would be impossible for them to keep S. in their employ, and that they were consequently liable. In Telegraph Despatch and Intelligence Co. v. McLean (3) the defendant sold to the plaintiffs a news agency business, part of the price being payable by instalments contingent on the profits of the business. It was held by the Court of Appeal that, as the purchase-money was to be ascertained by reference to the profits, there was an implied covenant by the plaintiffs that the business should be carried on. In Rhodes v. Forwood (4) it was agreed between Rhodes, a colliery owner, and Forwood, a broker, that in consideration of the services and payments to be mutually rendered for seven years, or as long as Forwood should continue to carry on business at Liverpool, Forwood should be the sole agent at Liverpool for the sale of Rhodes' (1) (1864) 17 C. B. (N.S.) 733. (2) (1864) 5 B. & S. 840. (3) (1873) L. R. 8 Ch. 658. 1903 OGDENS, LIMITED v. NELSON. THE SAME V. TELFORD. 1903 OGDENS, LIMITED v. NELSON. THE SAME v. TELFORD. coals. There were stipulations in the agreement that Rhodes should have the entire control over the prices for which and the credits at which the coals were to be sold, and that if Forwood could not sell a certain amount per year, or if Rhodes could not supply a certain amount per year, either party might on notice put an end to the agreement. At the end of four years Rhodes sold his colliery. In an action by Forwood for damages for breach of the agreement it was held that the action was not maintainable. But that decision proceeded upon the ground that the nature of the stipulations excluded the implication of any agreement to find work for Forwood during the seven years. The agreement was only to employ him in the sale of such coals as Rhodes sent to Liverpool. In Turner v. Goldsmith (1) the defendant, a shirt manufacturer, agreed to employ the plaintiff for a term of five years as a traveller, to be remunerated by commission on goods sold. After two years the defendant's manufactory was burnt down, and he did not resume business or further employ the plaintiff. It was held that the plaintiff was entitled to substantial damages for breach of the contract. Lindley L.J. distinguished Rhodes v. Forwood (2) from the case before him on the ground that in the latter there was an express contract to employ the plaintiff which was wanting in the former. In Hamlyn v. Wood (3), where the defendants, a firm of brewers, contracted with the plaintiffs to sell to them for a period of ten years all the grains made by the defendants at certain rates, and after five years the defendants sold their business and in consequence ceased to supply grains to the plaintiffs, the Court of Appeal held that a term could not be implied in the contract to the effect that the defendants would not by any voluntary act of their own prevent themselves from continuing the sale of grains to the plaintiffs for the period mentioned. There the Court treated the question of whether such an implication ought to be made as depending on the facts of each particular case. In Brace v. Calder (4) a firm consisting of four partners agreed to employ the plaintiff as manager of a branch of their business for a term of two (1) [1891] 1 Q. B. 544. (3) [1891] 2 Q. B. 488. years at a fixed salary, but before the expiration of the two years two of the partners retired from the business, the two surviving partners being willing to retain the plaintiff in their employment. It was held that as a contract to serve four employers was a wholly different thing from a contract to serve two, the dissolution of partnership amounted to a wrongful dismissal of the plaintiff. Rigby L.J. said that the only principle to be derived from the authorities was that "the contract is to be construed according to its express terms, and that no term is to be implied which is not rendered reasonably necessary to carry out the plain intention of the parties," and in accordance with that principle he thought it impossible to imply a term that in the event of the retirement of any of the employers the defendants' contract might be transferred to the new partnership. The only other case besides the two abovementioned cases of Rhodes v. Forwood (1) and Hamlyn v. Wood (2) which is in the plaintiffs' favour is Northey v. Trevillion (3), where, the defendant having appointed the plaintiff as his sole agent to buy goods for him on commission for a period of ten years, Phillimore J. refused to imply a term in the contract that the defendant would continue to carry on business for ten years so as to supply the plaintiff with orders. He drew a distinction between the case of a mere contract of agency, where the agent is in an independent position and is remunerated by commission on such work as he chooses to do, and one in which the employee is in a position of service or subordination, and in which if he is paid by commission the commission is in the nature of salary. Apart from those three cases, the authorities cited establish that where the contracting party does an act which puts it out of his power to perform his part of the contract he has committed a breach of the contract. Asquith, K.C., Duke, K.C., and F. E. Smith, for the plaintiffs. There is in the contract between Ogdens and the defendants no express agreement that Ogdens will continue to carry on their business, and there is no ground for inserting into it (1) 1 App. Cas. 256. (2) [1891] 2 Q. B. 488. (3) (1902) 7 Com. Cas. 201. 1903 OGDENS, LIMITED V. NELSON. THE SAME v. TELFORD. |