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Pacific Coast by rail to New York, then by steamer to London or Liverpool, at 21 shillings per case, and on the same day cabled to New York that Hooper & Co. wanted 28,000 cases; that on the following day, the 1st of September, the witness received in London a cable from the plaintiffs confirming the sale of 28,000 cases, and on the same day confirmed the sale to Hooper & Co.; that the witness then entered into a written contract with Hooper & Co. on behalf of the plaintiffs, by which the plaintiffs sold to Hooper & Co. 28,000 cases of salmon at 21 shillings per case.
On a former appeal in this case (99 App. Div. 622, 90 N. Y. Supp. 998), we held that upon this evidence there was a cause of action in favor of the plaintiffs. The court submitted the question to the jury, who resolved the questions of fact in favor of the plaintiffs. The only question that remains is whether error was committed in rulings upon the trial that requires a reversal of the judgment. We have examined the rulings, upon testimony to which the defendant has called out attention, and are satisfied that no error was committed which would justify a reversal of the judgment. There was admitted in evidence a letter from one Hawley to the plaintiffs. Hawley seems to have been an agent of the railroad company with whom the plaintiffs had had negotiations as to rates for the shipment of this salmon from San Francisco to New York. While it is quite probable that this let. ter was incompetent, it merely related to the negotiations with the plaintiff in relation to rates, and had no possible relation to the only question in controversy in the action, and was of no possible advantage to the plaintiffs and no possible injury to the defendant. Upon the plaintiffs' testimony there can be no question but that Stubbs had authority to make this contract, and, the jury having resolved that question in favor of the plaintiffs, the fact that the contract was binding on the defendant is established. The remaining question, which is the serious question in the case, relates to the measure of damages.
The complaint alleges that, at the time of the said sale and contract to deliver, the defendants, its officers and agents, knew that the plaintiffs already had an order or orders for said salmon at an advanced price, and that they were purchasing the said salmon, and the same was sold and agreed to be delivered to them for the express purpose of enabling the plaintiffs to accept said order or orders and resell the said salmon at such advanced price, pending its delivery by the defendant to them, knowing that said salmon was to be delivered by the plaintiffs on such resale, when the same should be delivered to the plaintiffs under their said contract with the defendant; that the defendant, its officers and agents, also knew, as the fact was, that the said defendant controlled all salmon of the brands hereinbefore referred to, and so sold and agreed to be delivered by the defendant to the plaintiffs as aforesaid, and that the plaintiffs could not procure it elsewhere than from the defendant, and that, in case of its failure or refusal to deliver said salmon to the plaintiffs as it agreed to do, the plaintiffs would be unable to deliver said salmon under their resale thereof, and also that the plaintiffs would then lose the profits that
was not controverted, that the Alaska Packers' Association, for whom the defendant was acting, was the exclusive manufacturer of these brands, and that the same could not be procured except from the said association. And it also appears that it was the association, which was the manufacturer and sole producer of these brands of salmon sold by the defendant, who had refused to allow its agent, the defendant, to carry out the contract, and it was in consequence of the refusal of the association to allow the defendant to carry out the contract that the defendant refused on its part to carry out its contract. We have a case, therefore, in which the sole producers of the article sold had refused to deliver the merchandise sold by the defendant to the plaintiffs, and it is also established that it was impossible to purchase the salmon in the market except from the association or the defendant, and it therefore had no market price at which it could be purchased. The Alaska Association, it would appear, had two agents through whom it sold its merchandise. The agent for the United States was the defendant, and the agent for Great Britain was Balfour, Guthrie & Co. At the time of the breach of the contract it was apparent that the plaintiffs had been notified that Balfour, Guthrie & Co. was the agent of the Alaska Association for the sale of its salmon in Great Britain, and the defendant insists that it was the duty of the plaintiffs to endeavor to purchase from Balfour, Guthrie & Co. the salmon to deliver which it had contracted, and that the measure of damages was the difference between the price that Balfour, Guthrie & Co. would sell the salmon for delivery in Great Britain and the price at which the defendant had agreed to sell the salmon to the plaintiffs. But both Balfour, Guthrie & Co. and the defendant were simply the agents of the Alaska Association. Neither could sell these brands of salmon except as the association's agent, and to those to whom the association desired to sell. The association had absolutely refused to carry out this contract with the plaintiffs, and had refused to allow its agent, the defendant, to deliver the salmon under the contract that the defendant had made. The plaintiff had been notified by the defendant that the Alaska Association had already oversold its output for that year, and where a principal has absolutely refused to fulfill a contract made by its agent, although in the agent's name, a purchaser who has suffered from a breach of a contract is certainly under no obligation to apply again to the manufacturer of the merchandise to know upon what terms he can buy merchandise which the manufacturer has already refused to sell him or allow to be delivered to him under a contract made with the manufacturer's agent. There was no reason to suppose that Balfour, Guthrie & Co. would entertain a proposition from the plaintiffs for the purchase of this salmon which it had contracted to sell in Great Britain, when Balfour, Guthrie & Company's principal had refused to allow a contract made with the plaintiffs for the purchase of the salmon to be carried out. We have thus a valid contract made by the defendant to sell merchandise to the plaintiffs; a refusal by the defendant to complete its contract, based upon a refusal of the defendant's principal to deliver the merchandise sold; and the fact that there is no market at which the merchandise sold
can be purchased, either at the place of delivery or, so far as appears, anywhere else. And the question is then presented as to the measure of damages. We have evidence that prior to and at the time the contract was made the vendor was distinctly informed that the salmon was bought for resale in Great Britain; that negotiations were pending for the sale of the salmon there, which would be confirmed immediately upon the execution of the contract by the defendant; and the fact that within two days after the contract was signed the negotiations were terminated by a resale of the merchandise purchased from the defendant, and immediate notification of that fact given to the defendant, without the slightest objection on its part to the disposition that was to be made of the article sold.
The foundation upon which rules in relation to the measure of damages in actions for a breach of contract are based is that of indemnity to the injured party. As was said in Hadley v. Baxendale, 9 Exch. 355, a case which has been often cited and followed almost without criticism in this country:
"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.”
Or, as was said by Chief Justice Church in Booth v. Spuyten Duyvil Rolling Mill Company, 60 N. Y. 487:
“The damages for which a party may recover for a breach of a contract are such as ordinarily and naturally flow from the nonperformance. They must be proximate and certain, or capable of certain ascertainment, and not remote, speculative, or contingent. It is presumed that the parties contemplate the usual and natural consequences of a breach when the contract is made; and if the contract is made with reference to special circumstances, fixing or affecting the amount of damages, such special circumstances are re garded within the contemplation of the parties, and damages may be assessed accordingly."
Bearing this in mind as the foundation upon which the rules in regard to the measure of damages have been established, it seems to me that the solution of the question in this case is without difficulty. Generally, in relation to the breach of a contract for the sale of merchandise, full indemnity is given when the articles sold can be purchased in the market, and thus have a market value, by awarding to the injured party the difference between the contract price and the market price. If a vendee can go into the market and purchase the article which his vendor has contracted to deliver, there is at once presented a method of accurately fixing the damage which has been caused by a breach of contract by the vendor. The vendee has but to
have applied the merchandise contracted for, and the vendor is liable for the difference between what it has cost him to make such purchase and the contract price. And, as this will furnish a complete indemnity, it has been established as a definite rule for the measure of damages in consequence of the breach of an executory contract for the sale of personal property. But where there is no market on which the merchandise can be purchased, and the vendee, having relied upon his contract to purchase, is without power to acquire the property which the vendor has agreed to sell, but has refused to deliver pursuant to the contract, it is quite clear that this rule is not applicable, and still, because it is not, it cannot be said that a vendee, no matter what damage he may sustain, is without redress. Yet if he is confined to the difference between the market value and the contract price, and there is no market value, the result would be that the law would award no compensation for the breach of contract. But the law provides a method of indemnification to a party injured by the failure of another to perform a contract, although the ordinary rules are not applicable. Thus, in Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205, 4 N. E. 264, 54 Am. Rep. 676, the Court of Appeals said:
"One who violates his contract with another is liable for all the direct and proximate damages which result from the violation.
They may be so uncertain, contingent, and imaginary as to be incapable of adequate proof, and then they cannot be recovered because they cannot be proved. But when it is certain that damages have been caused by a breach of contract, and the only uncertainty is as to their amount, there can rarely be good reason for refusing, on account of such uncertainty, any damages whatever for the breach. A person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain. It is not true that loss of profits cannot be allowed as damages for a breach of contract. Losses sustained and gains prevented are proper elements of damage. Most contracts are entered into with the view to future profits, and such profits are in the contemplation of the parties, and, so far as they can be properly proved, they may form the measure of damage."
And this is the principle that has been adopted in England in a great variety of cases which are brought together in the English note to the case of Hadley v. Baxendale, supra, in 6 English Ruling Cases, 617 (France v. Gaudet, L. R. 6 Q. B. 199), which, though an action for conversion, would apply in an action for a breach of a contract. There the plaintiff purchased champagne lying at the defendant's wharf at 14 shillings per dozen, and sold it to a ship's captain about to sail for 24 shillings. The defendant refused to deliver the wine, and the plaintiff was unable to fulfill his contract; champagne of a similar quality not being procurable in the market. It was held that the plaintiff was entitled as damages to the price at which he sold the champagne. And in Elbinger Actien-Gesellschaft, etc., v. Armstrong, L. R. 9 Q. B. 473, the same principle was applied. See, also, Hind v. Liddell, L. R. 10 Q. B. 265; Grabert-Borgnis v. Nugent, 15 Q. B. D. 85; and Hammond v. Bussey, 20 Q. B. D. 79. These cases have been cited with approval in this state, and the same principle has been applied. In Messmore v. N. Y. Shot & Lead Co., 40 N. Y. 422, the defendant sold the plaintiff 100,000 Minie bullets at 7 cents per pound. The plaintiff was under a contract with the state ,
of Ohio to furnish that quantity at the price of 734 cents per pound, and he told the agent of the defendant at the time he gave the order of this arrangement with the state of Ohio. The jury allowed the plaintiff as damages the difference between the price that the plaintiff was to sell to the state of Ohio and the contract price, and that judgment was sustained. Judge Mason, in delivering the opinion of the court, stating this rule, said:
"This rule is based upon reason and good sense, and is in strict accordance with the plainest principles of justice. It affirms nothing more than that, where a party sustains a loss by reason of a breach of a contract, he shall, so far as money can do it, be placed in the same situation with respect to damages as if the contract had been performed.”
In Booth v. Spuyten Duyvil Rolling Mill Co., supra, this same principle was applied, and the difference between the price that the plaintiff had contracted to sell the articles purchased from the defendant and the contract price was allowed as the proper measure of damages. Judge Church there said:
“But if the contract is made to enable the plaintiff to perform a subcontract, the terms of which the defendant knows, he may be held liable for the difference between the subcontract price and the principal contract price, and this is upon the ground that the parties have impliedly fixed the measure of damages themselves, or, rather, made the contract upon the basis of a fixed rule by which they may be assessed."
It was insisted, however, in that case, that, as the price which the purchaser from the plaintiff was to pay the plaintiff was not communicated to the defendant, it could not be said that he made the contract with reference to such price; but it was held that that made no difference, Chief Judge Church saying:
"I have examined all the authorities referred to, and I do not find any which countenances such a position, and there is no reason for exempting a vendor from all damages in such a case. It is not because the vendee has not suffered loss, as he has lost the profits of his subcontract; it is not because such profits are uncertain, as they are fixed and definite, and capable of being ascertained with certainty; it is not because the parties did not contract with reference to the subcontract, when it appears that the contract was made for the purpose of enabling the vendee to perform it. If the article is one which has a market price, although the subcontract is contemplated, there is some reason for only imputing to the vendor the contemplation of a subcontract at that price, and that he should not be held for extravagant or exceptional damages provided for in the subcontract. But the mere circumstance that the vendor does not know the precise price specified in the contract will not exonerate him entirely.
It is only requisite that the parties should have such a knowledge of special circumstances, affecting the question of damages, as that it may be fairly inferred that they contemplated a particular rule or standard for estimating them, and entered into the contract upon that basis."
Many other cases might be cited, and I am not familiar with a single case that has questioned this principle. But it is said here that, because no subcontract had been actually made at the time the contract with the defendant was executed, therefore the rule does not apply. But I can see no reason for such a distinction, and certainly none is suggested in any of the cases which I have been able to find. The defendant was told that plaintiffs were negotiating the sale of this salmon in England, and that they would confirm the sale as soon as