# GORDON WOODROFFE & CO v. SHEIKH M. A. MAJID & CO

- **Citation:** [1966] Supp. 1 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1966-03-22
- **Case number:** Civil Appeal No. 164 of 1964
- **Bench:** K. SuBBA RAO, V. Ramaswami, J. M. Shelat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gordon-woodroffe-co-v-sheikh-m-a-majid-co-3841
- **Pages:** 14

## Headnote

Contract-Difference between sale and agency to se!!-Accaunt
stated, what is-When can be re-opened.
The respondent was a trader in hides and skins and the appellant
was an exporter. During the periad January to August 1949, there were
several contracts betweelli them. The contracts mentioned that the
appellant was buying the goods for resale in U.K. The price quoted
was C.I.F. less 2! %. The contracts also provided that time should be
the essence of the contract, that the sales tax was on respondent's account, that the respondent was answerable for weight as well as quality, that there should be a lien on the goods for moneys advanced
by the appellant, and that any djspute regarding quality should be
settled by arbitration according to the custom of the trade in the U .K.
The course of dealing between them showed that before the goods were
shipped they were subjected to a process of trimming and reassortment in the godowns of the appellant with a view to make them
conform to London standards, that the goods were marked with the
respondent's mark and that premiums were paid to the respondent
in case the goods supplied were of special quaLity. The respondent
filed a suit on the original side of the High Cou!'t praying that an
account should be taken of the dealings between himself and the
appellant on the ground that the appellant was his agent. The appellant's case was that there was an outright purchase of the respondent's goods and that the appellant was not an agent of the respondent. The trial Judge dismissed the suit. On appeal, the High Court
held that the appellant acted as a de! credere agent of the reSpOndent and directed the taking of accounts.
In appeal to this Court, it was contended by the appellant that:
(i) the terms of the contracts and the course' of dealing between the
parties showed that the appellant was not the agent of the respondent but was an outright purchaser of the goods. and (ii) that there
was a settled account between the parties which the respondent
could not reopen.
HELD: (i) The appellant was the purchaser of the respondent's
goods under the several contracts and not his agent for sale, and
therefore, the view taken by the High Court was not correct.
The essence of sale is the transfer of title to the goods for pi'ice
paid, or to be paid, whereas the essence of the agency to sell is the
delivery of the goods to a person who is to sell them, not as his own
property but as the property of the principal who continues to be the
owner of the goods, and the agent is liable to account for the proceeds.
On the terms of the contract and the course of dealing between the
parties, the contract was not one of agency for sale hut was an
agreement of sale. The appellant purchased the goods from the respondent 2i% less and sold them to the London purchasers at the
full p~ic~ so that the 2!% was its, margin of profit and not its agency
comm1SS10n. The fact that the goods were sent with the respondent'&
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[1966] SUPP. S,C,R.
mark, that the premium was paid outside the terms of the contract,
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that the appellant considered it fair and just to pay the whole of
the premium to the respondent or to share it with him, and that additional burden with respect to weight and quality was thrown on the
respondent, have no significance, in deciding the nature of the contract. The clause with regard to lien is consistent with the transaction being an outright sale, because the appellant was acting as
creditor of the respondmt and charged interest on advances only till
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the date of shipment of the goods when it became the purchaser of
the goods from the respondent. An agent can become a purchaser
when the agent pays the price to the principal on his own responsibility. The clause regarding arbitration in the U.K., though unusual, is
not also inconsistent with there being a sale of goods between the
parties in India. [3H-4B; 5G-H.]
(ii) The accounts were settled between the parties and the respondent coul

## Text

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GORDON WOODROFFE & CO.
v.
SHEIKH M. A. MAJID & CO.
March 22, 1966
[K. SuBBA RAO, V. RAMASWAMI AND J. M. SHELAT, JJ.J
Contract-Difference between sale and agency to se!!-Accaunt
stated, what is-When can be re-opened.
The respondent was a trader in hides and skins and the appellant
was an exporter. During the periad January to August 1949, there were
several contracts betweelli them. The contracts mentioned that the
appellant was buying the goods for resale in U.K. The price quoted
was C.I.F. less 2! %. The contracts also provided that time should be
the essence of the contract, that the sales tax was on respondent's account, that the respondent was answerable for weight as well as quality, that there should be a lien on the goods for moneys advanced
by the appellant, and that any djspute regarding quality should be
settled by arbitration according to the custom of the trade in the U .K.
The course of dealing between them showed that before the goods were
shipped they were subjected to a process of trimming and reassortment in the godowns of the appellant with a view to make them
conform to London standards, that the goods were marked with the
respondent's mark and that premiums were paid to the respondent
in case the goods supplied were of special quaLity. The respondent
filed a suit on the original side of the High Cou!'t praying that an
account should be taken of the dealings between himself and the
appellant on the ground that the appellant was his agent. The appellant's case was that there was an outright purchase of the respondent's goods and that the appellant was not an agent of the respondent. The trial Judge dismissed the suit. On appeal, the High Court
held that the appellant acted as a de! credere agent of the reSpOndent and directed the taking of accounts.
In appeal to this Court, it was contended by the appellant that:
(i) the terms of the contracts and the course' of dealing between the
parties showed that the appellant was not the agent of the respondent but was an outright purchaser of the goods. and (ii) that there
was a settled account between the parties which the respondent
could not reopen.
HELD: (i) The appellant was the purchaser of the respondent's
goods under the several contracts and not his agent for sale, and
therefore, the view taken by the High Court was not correct.
The essence of sale is the transfer of title to the goods for pi'ice
paid, or to be paid, whereas the essence of the agency to sell is the
delivery of the goods to a person who is to sell them, not as his own
property but as the property of the principal who continues to be the
owner of the goods, and the agent is liable to account for the proceeds.
On the terms of the contract and the course of dealing between the
parties, the contract was not one of agency for sale hut was an
agreement of sale. The appellant purchased the goods from the respondent 2i% less and sold them to the London purchasers at the
full p~ic~ so that the 2!% was its, margin of profit and not its agency
comm1SS10n. The fact that the goods were sent with the respondent'&
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[1966] SUPP. S,C,R.
mark, that the premium was paid outside the terms of the contract,
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that the appellant considered it fair and just to pay the whole of
the premium to the respondent or to share it with him, and that additional burden with respect to weight and quality was thrown on the
respondent, have no significance, in deciding the nature of the contract. The clause with regard to lien is consistent with the transaction being an outright sale, because the appellant was acting as
creditor of the respondmt and charged interest on advances only till
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the date of shipment of the goods when it became the purchaser of
the goods from the respondent. An agent can become a purchaser
when the agent pays the price to the principal on his own responsibility. The clause regarding arbitration in the U.K., though unusual, is
not also inconsistent with there being a sale of goods between the
parties in India. [3H-4B; 5G-H.]
(ii) The accounts were settled between the parties and the respondent could not be allowed to r>eopen the settled account as there
was no proof of fraud, mistake or any other sufficient ground.
Accounts are "settled or started" if they are submitted and accepted as correct by the other side to whom they have been rendered.
For almost every shipment the appellant prepared a full and detailed statement of account and sent it to the respondent. The account
contained items both of credit and debit and the figures on both
sides were adjusted between the parties and a balance struck and
the respondent accepted their accuracy and never raised any objection_ to them. [llH; 14 E-F].
Bishnu Chand v. Girdhari La!, (1934) L. R. 61 LA. 273 and Laycock v. Pickles, 4 B and S 497, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 164 of
1964.
Appeal from the judgment and decree dated December 15,
1959 of the Madras High Court in 0.S. Appeal No. 22 of 1955.
P. Ram Reddy and A. V. Velayudhan Nair, for the appellant.
K. R. Chaudhuri, and K. Rajendra Choudhury, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought against the judgment
of the High Court of Madras dated December 15, 1959 in O.S.
Appeal No. 22 of 1955.
The respondent was a trader at Madras in hides and skins.
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J:he appellant was a firm, Gordon Woodroffe and Company
(Madras), Limited, doing business among other things as exporters
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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
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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
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WOODROFF>O & co. ''· MAJID & co. (Rarn<tswami, J.)
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 "Shaik 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 for resale in the United
Kingdom.
The case of the defendants was that there was an outright purchase of the goods from the plaintiff for the purpose of
resale in the United Kingdom.
The defendants also contended
that a sum of Rs. 4,35 I /- and odd was due to it from the .Plaintiff
and it prayed for a decree against the plaintiff for that amount by
way of counter-claim. The trial Judge held, by his judgment dated
May 6, 1954 that the defendants were only purchasers of the goods
from the plaintiff 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 that counter-claim of the defendants after deducting
the said sum of Rs. 157 /-. The plaintiff preferred an appeal to the
High Court of Madras under the Letters Patent. By its judgment
dated December 15, 1959 the High Court reversed the decision
of the trial Judge and held that the defendants acted as del credere
agents of the plaintiff for effecting the sale of the plaintiff's goods
in the United Kingdom. On this basis the High Court decreed the
plaintiff's suit and directed the taking of accounts, as prayed for,
from the defendants, though in respect of some of the items the
claim of the plaintiff was negatived.
The High Court also held
that the plaintiff was liable to pay to the defendants the amount
claimed by them by way of counter-claim.
The first question presented for determination in this case is
whether the defendants were acting as del credere agents of the
plaintiff or whether the defendants were outright purchasers of the
goods supplied to them by the plaintiff. In tbe approach to this
question it is necessary to notice the distinction between a contract
of sale and a contract of agency. The essence of sale is the transfer of the title to the goods for price paid or to be paid. The
transferee in such case becomes liable to the transferor of the goods
SUPRgMJ<: COUHT REPORTS
[1966] SUPP. s.c.R.
as a debtor for the price to be paid and not as agent for the proceeds of the sale.
On the other hand, the essence of agency to
sell is the delivery of the goods to a person who is to sell them, not
as his own property but as the property of the principal who contimoes to be the owner of the goods and who is therefore liable to
account for the proceeds.
The true legal relationship between
the parties in the present case has, therefore, to be inferred froqi
the nature of the contract, its terms and conditions and the nature
of respective obligations undertaken by the parties.
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It is necessary, at this stage, to set out briefly the course of the
dealings between the parties which has been summarised by the
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High Court as follows :
"The plaintiff used to purchase tanned hides of all
sorts in Periamet (Madras), and in his godown assort them
according to quality, pack them into bales and mark them
with his mark, viz., Shaik or S. M. A. Mark. Then the
bales would be delivered into the defendants' godown
where the bales would be opened and re-assorted so as to
conform to London specification and standard. In the
process of putting the goods into that shape, there used
to be necessity for the defendants to cut and trim the
pieces and sometimes call on the plaintiff for replacement
of the pieces which fell below the standard. Thereafter,
the defendants used to re-pack them into bales each
weighing 600 pounds and then ship the goods themselves
as shippers and obtain the necessary shipping documents
on the basis of c.i.f. contracts. The goods would be
shipped to the defendants' London Office where they were
sold to London purchasers. All the expenses incurred in
connection with the goods prior to shipment, such as carriage, trimming and assortment in the defendants' godown
were all to be borne by the plaintiffs. So also expense in
connection with the shipment, such as freight, insurance,
short weight, etc., were all to be borne by the plaintiff.
After the goods were shipped and as soon as the shipping
documents were got ready, the price of the goods was calculated at the price fixed in the contract notes and after
deducting the expenses
and the advances with interest
thereon, the balance, if any, was paid to the plaintiff
either by cheque or by credit being given in his accounts.
For every shipment a contract note was being sent by the
defendants to the plaintiff. So also, a statement of account
with a covering letter as well as a cheque for the balance
found due to the plaintiff were being sent to the plaintiff
from time to time. In all, there were 101 contract forms
and several statements of accounts sent to the plaintiff
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WOODROFFE & co. v. MA.TID & 00. (Ra.maswam.i,
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in respect of the shippers. To none of those contracts or
statements of account did the plaintiff raise any objection
at any time."
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The question whether the defendants took delivery of the
plaintiff's goods as agents for sale or whether they puchased the
goods outright must largely depend upon the terms of the contract
of which a sample is Ex. P-1.
All the 101 contracts were prepared
in the same printed form.
Exhibit P-1 is the contract dated January 21, 1949. It is in the form of a letter sent by the defendants
to the plaintiff. It opens with the sentence "We confirm buying
from you for resale the following subject to U .K. Import Licence".
Then follows a description of the goods giving the number of
bales, the average weight and range, the assortment and the price
per lb. in pennies. The price quoted is said to be c.i.f. less 2! per
cent. The goods were already shipped by the s.s. 'City of
Florence'.
The seller is said to be liable to pay brokerage at the
rate of one pie per lb. Then follow the terms of the contract
which are to the following effect:
"Landed weight to be accepted, payment on presentation of documents in order. It is understood that the
above goods are for re-sale in United Kingdom. You are
responsible irrespective of any inspection by us in Madras
for selection and quality of the goods at destination
where inspection and acceptance thereof will be made by
our agents or the ultimate buyers. In the event of any
dispute or claim in respect of goods covered by this contract, failing amicable settlement with buyers, such claim
is to be submitted to arb'tration according to lhe custom
of the trade in the United Kingdom and the result of such
settlement or arbitration is binding on you. We have a
charge or lien on all goods covered by this contract for
all moneys advanced by us including expenses incurred
and interest thereon. Insurance through Gordon Woodroffe Company, Madras, Limited. Time is an essence of
the contract."
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 resale 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 plaintiff's goods.
According to the plaintiff the rates fixed in
the contract were the ones at which the goods were sold to London
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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 2! per cent and discount of 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
2! per cent should be taken as 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 2! per cent discount on the sale price, that is to say, they purchased the goods
from the plaintiff 2! per cent less and sold them to their London
purchasers at the full price, so that 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
2! per cent which they got from the plaintiff.
In all there are IOI contract forms and in accordance with
these contract forms statements of account were furnished by the
defendants to the plaintiff. Exhibit P-lA is the statement of account dated January 25, 1949 based upon the contract note Ex.
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P-1. It is true that the plaintiff did not sign any one of the contract
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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
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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 contracts.
There is also the circumstance that before the goods were
shipped to London they were subjected to a process of trimming
and reassortment in the godowns of the defendants with a view to
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make them conform to London standard and selection.
In that
process the defendants often called upon the plaintiff to replace the
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WOODROFFE & co. v. MAJID & co. (Ramaswami, J.)
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pieces found defective. If the defendants were merely acting as
a aents the process of trimming and reasserting in the god owns to
~ake 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. I, 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 selier's 'accdunt, the seller being
the plaintiff. This circumstance also indicates that the legal relationship between the parties was that of a seller and a purchase!
and not of a principal and agent.
On behalf of the plaintiff it was argued that according to the
contract the goods were to be marked with the plaintiff's mark. It
is true that in some of the defendants' letters such as Ex. P-10 it
was mentioned that the bales were sent with the plaintiff's mark
in some shipments but this circumstance has not significance. It
only means that the buyer resold the goods to the London purchaser with the mark of the plaintiff. It was also contended on
behalf of the plaintiff that "premium" was paiil to the plaintiff in
case the goods supplied were of special quality. It is in evidencnhat
the "premium" was extra price obtained in London if the Boa~d of
Control was satisfied about the special quality .of the goods (vid~
D-10). It was pointed out that if the defendants were purchasers the
premium should go to them but in some cases the premium was paid
to the plaintiff. Exhibits P-7, P-10 and P-18 show that for some shipments the premium was paid to the plaintiff. The expl:ai1ation of
D.W. I, Ayyalu Chetti is that in some cases the premium was paid
to the plaintiff ex gratia. lf in London the quality of tl)C goods
was found particularly good the premium was obtained from
the London purchaser, that is to
s~.y. the premium was obtained
not as in terms of the contract "but as a special payment if the
goods happened to be of good quality: · It is a "payment therefore,
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(!966) 8Ul'P. 8.C,R.
made outside the terms of the contract and there is nothing significant if the defendants considered it fair and just to pay the whole
of the premium to the plaintiff or to share it with him in some
cases. It was also contended by the plaintiff that according to
the terms of the contract the landed weight was to be accepted and
the plaintiff was to be respo!lliible for the selection and quality of
gcxxjs at the destination where inspection would be made by the
defendants' agents or the ultimate London buyers. In some statements of account sent by the defendants the plaintiff has been
debited various amounts for shortage in weight at London. The
plaintiff was also informed about the claims made by the London
purchasers on the ground of low standard and selection, that is to
say, the plaintiff was made answerable for weight as well as quality.
It 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 collsidering the question as to whether there was transfer of title to the goods at the time of sh'pment from the plaintiff
to the defendants. On behalf of the pla'.ntiff reference was also
made to the fact that the contracts provided for a lien on all the
goods covered by the contracts for all moneys advanced by the
defendants, including expensei incurred and interest thereon. It
is the admitted position that for purchasing skins and hides, the
plaintiff was taking large sums of money as advances from the defendants. We 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,
ent!tled 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 con1istcnt with the theory of the transactions being an outright sale.
There was also a suggestion on behalf of the plaint•ff 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
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WOOD)WFFE & co. v. MAJID & co. (Ramaswami, J.)
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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 resale 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 the United Kingdom. It is true that a clause of this description is
unusual but 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 case were not c.i.f. contracts but
the price alone was fixed on a c.i.f. basis.
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 Nevil,(') T & Co. were
in the habit of sending goods for sale to N who was a partner in
the firm of N & Co., but received these goods on his private account. The course of dealing between T & 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 & 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 &
Co., but on his own account, upon the terms of his paying T & 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 & Co., had
no right to follow.
A similiar principle has been expressed in W. T. Lamb and
Sons v. Goring Brick Company, Ltd.(') In that case, certain
manufacturers of bricks and other building materials, by an
agreement in writing, appointed a firm of builders' merchants as
"sole selling agents of all bricks and other materials manufactured
at their works". The agreement was expressed to be for three
years and afterwards continuous subject to twelve months' notice
by either party. While the agreement was in force the manufacturers informed the merchants that they intended in the future to
sell their goods themselves without the intervention of any agent,
(I) (1871) 6 Ch. 397
LIS5S0!-3(a)
(2) [!932] I K.B. 710.
10
BUPRU!B OOUIIT RBPORTS
[1966) SUPP. S.C,R.
and thereafter they effected sales to customers directly.
An action was then brought by the merchants for breach of the agreement. It was held by the Court of Appeal that the effect of the
agreement was to confer on the plaintiffs the sole right of selling
the goods manufactured by the defendants at their works, so that
neither the defendants themselves
nor any agent appointed by
them, other than the plaintiffs, should have the right of selling
such goods. It was also held that the agreement was one of vendor
and purchaser and not one of principal and agent. Though the
term 'agent' was used in the agreement. the Court of Appeal considered that the substance of the transaction was that the manufac-
'turers sold their bricks to the so-called agent who in turn sold
them on their own responsibility to customers. The price charged by the manufacturers to the sole selling agents was the ruling
market price and the sole selling agents were allowed a deduction
of 10 per cent by way of commission on that price. The manufacturers had no concern at what rate the sole selling agents sold
the goods to customers. It was clear from these facts that the
sale by the selling agents to customers was a transaction in which
the manufacturers were not interested and there was no privily
of contract between the manufacturers and the ultimate purchasers. Reference may be made, in this connection to the following passage from Blackwood Wright, 'Principal and Agent', Second
&In. page 5:
"In commercial matters, where the real relationship
is that of vendor and purchaser, persons are sometimes
called agents when. as a matter of fact, their relations
are not those of principal and agent at all, but those of
vendor and purchaser. If the person called an 'agent' is
entitled to alter the goods, manipulate them, to sell them
at any price that he thinks fit after they have been so
manipulated, and is still only liable to pay for them at
a price fixed beforehand, without any reference to the
price at which he sold them. it is impossible to say that
the produce of the goods so sold was the money of the
consignors, or that the relation of principal and agent
exists-Ex parte White, In re Nevill (1871), 6 Ch. 397A purchaser has not to account to his vendor; his only
duty is to pay him; and all the other rights and duties
which exist between principal and agent do not exist
between vendor and purchaser-Ex parte Bright, In re
Smith (1879), 10 Ch. Div. 566; Ex parte White. In re
Nevill-0871) 6 Ch. 397-."
For the reasons already given we are of the opinion that the
defendants were purchasers of the plaintiff's goods under the
;\C'Veral 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 overruled.
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WOODROFFE & co. v. MAJID & co. (Rarnaswarrvi, J.)
11
We pass on to consider the second question involved in this
case, viz., whether there was a settled account between the parties
and whether it is open to the plaintiff to reopen it.
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 Ex. P-lA,
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 Ex. D-18 series. The plaintiff in bis
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 defendants
accepting the accuracy 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. 1,26,37917 /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. 1,26,37917 /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, Ex. 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 acc.ount 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 ground.
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The legal position is that the accounts are settled or state<l
if they are submitted and accepted as correct by the other side to
whom the accounts have been
rendered. Such a statemP.nt of
12
SUPREllB OOURT RBPORTS
[1966] SUPP. s.o.R.
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 parties.
As observed in Daniell's Chancery Practice,
eighth edition, Vol. I, p. 419:
"The mere delivery of an account will not constitute
a stated account without some evidence of acquiescence
which may afford sufficient legal presumption of a settlement."
There is also the following passage in Bullen and Lcake's PreceA
•
dents of Pleadings, ninth editioo, p. 584:
C
"It is not enough for the accounting party merely
to deliver his account; there must be some evidence that
the other party has accepted it as correct. But such
acceptance need not be express; contemporaneous or
subsequent conduct may amount to a sufficient acquiescence."
Again, in Willis v. Jernegan(') the Lord Chancellor was dealing
with the two objections raised by the plaintiff's counsel to the
defendant's plea of a stated
account. It was observed by the
Lord Chancellor that there was no absolute necessity that the
account should be signed by the parties who had mutual dealings
to make it a stated account, for even where there were transactions, suppose, between a merchant in England and a merchant
beyond sea, and an account was transmitted to England from the
person who was abroad, it was not the signing which would make
it a stated account, but the person to whom it was sent, keeping
it by him any length of time, without making any objection which
should bind him and prevent his entering into an open account
afterwards. In another case, Tickcl '" Short, (') the Lord Chancellor expressed the opinion that it is the rule of the Court that
where a merchant kept an account current by him for about two
years without objection, the Court will consider that the accounts
are stated or settled. The same principle has been expressed by
the Bombay High Court in Seth Manek/a/ Mansukhbhai v.
Jwaladutt Rameshwar Pillani(') in which it was pointed out that it
was sufficient if the accounts were accepted and such acceptance
might be inferred by conduct of parties.
The contention on behalf of the defendants is that there has
been a "stated" or "settled" account in this case and in the absence of fraud, mistake or any other sufficient equitable ground
it is not liable to be reopened at the instance of the plaintiff. In
this connection it is necessary to state that the expression "account
Cl) (17•1) 2 A\k. 251.
(~) (1750-.11) ! v ... (Sen.) 239.
(I) I.L.R. [1947] Born. 378.
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WOODROFFE & co. v. MAJID & co. (Ramaswami, J.)
lS
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, whi!e it is no doubt cogent evidence against the admitting party, and throws upon him the burden
of prov mg that the debt 1s 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"; the so-called
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, in
Laycock v. Pickles(') a "real account stated," and he describes it
as follows:
"There is a real account stated, called 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 is 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 considera·
ti on, the account stated would be 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.
This statement of the law has been affirmed by Lord Wright
in delivering the opinion of the Judicial Committee in Bishnu
Chan v. Birdhari Lal(') as the follows:
"Indeed, the essence of an account stated is not the
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character of the items on one side or the other, but the
(1) 4 B. and S., 497.
(2) A.I.II. 1984 P.O. 147.
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SCl'REUE COURT RF.PORTH
[1966) Sl'PI'. 8.~.R.
fact that there arc cross items of account and that the
parties mutually agree the several accounts of each, and
by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to
agree that the balance only is payable. Such a transaction
is in truth bilateral and creates a new debt and a new
cause of action. There are mutual promises, the one
side agreeing to accept the amount of the balance of the
debt as true (because there must in such cases be, at least
in the end, a creditor to whom the balance is duel and
to pay it, the other side agreeing the entire debt as at a
certain figure and then agreeing that it has been discharged to snch and such an extent, so that there will be
complete satisfaction on payment of the agreed balance.
Hence, there is mutual consideration to support the pro·
mises on either side and to constitute the new cause of
action. The account statdd is accordingly binding, save
that it may be re-opened on any ground for instance,
fraud or mistake which would justify setting aside any
other agreement."
In the present case, the correctness of the statements of
account furnished by the. defendants has been challenged by the
plaintiff under 13 heads.