Morris v. Supplee

Opinion bt Mk. Chief Justice Mitchell, Appellants sold to plaintiffs cotton for future delivery at an agreed price the terms being specified in the contract as “ cash basis, note at 60 days from date of shipment of each 100 bales, interest added.” The first question is upon the meaning of these terms. Appellants offered to prove that they had a trade meaning and to show what that was. The evidence was rejected. In this there was error. The words used as they stand by themselves, may be understood to mean that the parties have provided for alternative methods of payment either of which will be accepted as equivalent to the otherj to wit: cash, or a note at sixty days with interest. But it is by no means beyond doubt whether such was the intended meaning. If it had been, the most natural and obvious expression would have been “ terms, cash or note,” etc. When the phrase “ cash basis ” was introduced it implied something which might be different from plain cash, and while the presumption is that what follows is intended to embody the alternative agreed upon, to wit: a note of the purchaser atsixty days with interest, yet the term “ cash basis ” is sufficiently ambiguous to be susceptible of another meaning and if it has acquired a general settled and commonly understood meaning with which the parties must be presumed to have used it, the defendant should have been permitted to show it. It is argued that even if such a customary trade meaning were proved it would be bad as contradicting the plain terms of the contract. But this view overlooks the fact that the terms are not plain in the sense that they are not susceptible, of more than one meaning, even though one meaning may be to some [258] extent at variance with the literal definitions of the words used. It is within the judicial knowledge of some members of the court, that in some branches of business in this state a cash sale means a sale to be paid for within thirty days, and that if a different contract is intended the custom is to use some additional word, such as “ cash on delivery ” (c. o. d.) “ spot cash,” etc., to indicate that delivery and payment are to be simultaneous. Yet it lias never been held that such a trade custom is bad as contradicting the expressed terms of the contract. The second question in the case relates to the measure of damages. The appellants accompanied their first shipment of cotton with a demand for payment in a manner which plaintiffs considered at variance with the contract, and such payment being refused appellants made no deliveries. After the contract time had expired the purchasers brought this suit for damages for the failure to deliver. It appeared at the trial that the plaintiffs had gone into the market from time to time during the running of the contract period, and bought cotton to take the place of that which the appellants had failed to deliver. The learned judge instructed the jury “ that the measure of damages was the difference between the contract price and the prices prevailing for cotton sold on the same terms in the nearest available market to the place of delivery, at the several dates when the cotton should have been delivered.” This under the circumstances was erroneous. There is no doubt that is the general rule, but it was inapplicable to the facts in this case. When a vendor refuses to deliver goods sold the buyer may wait until the contract time of delivery has passed and then go into the market and purchase, holding the seller liable for any loss. In such cases the measure o'f damages is the difference between the contract price and any greater market price that the buyer has been compelled to pay, or in other words the actual loss to the buyer from the breach. The reason for this is very plain. The buyer is entitled to have the goods at the stipulated time of delivery. He is not bound to supply himself from the market before the contract date, for it may be that the seller will deliver at the last moment. (We are not now considering the case where the buyer elects to treat a refusal to deliver as a breach and brings suit at once.) But when the agreed date has passed the buyer has become entitled to im [259] mediate delivery and may therefore supply himself from the market at the seller’s expense for his actual loss. This, in ordinary cases, is the difference between the contract price and the market price he is compelled to pay. But though the buyer is not bound to supply' himself before- the contract date of delivery, even on a rising market, yet he is at liberty to do .so, taking the risk that he may pay more than the price for which he may hold the vendor, at the contract date of delivery. And there might be cases, as e. g., where the want of material might compel the stopping'of a mill or factory, where the loss from a refusal to. deliver would be greater than the additional price paid, where he might hold the seller for a price even in excess of the market on the contract day. Such cases would be exceptional, the general rule being that if the buyer supplies himself before the contract date of delivery has arrived, he does so at his own risk that the market price at that date may be less than he has paid in the interim. The foundation of the rule is that he is entitled to compensation for his actual loss provided always that he keeps the loss as small as he reasonably can. In the present case it was shown in the cross-examination of one of the plaintiffs that after the failure to deliver the first shipment of cotton they had supplied themselves by purchases from other parties, but at wliat price did not appear. This is the exact point decided in Theiss v. 'Weiss, 166 Pa. 9, where it having appeared that plaintiff had supplied himself with the goods, the defendant proposed to inquire at what cost, and the judge on objection excluded the evidence and charged that the measure of damages was the difference between the contract and the market price. It was held that this was error, and the true measure applicable to the circumstances was the difference between the contract price and the actual price at which the plaintiff obtained the goods to supply the default. Quoting from Arnold v. Blabon, 147 Pa. 372, where the court had held that if the plaintiff therein had lessened his damages by buying the goods (cork) at less than the contract price, he could only recover the lesser sum, Green, J., delivering the opinion of this court, said: “ The ruling was manifestly correct, because while it is true that the ordinary rule of damages in such cases would have entitled the [260] defendant to recover the entire difference between the market value of the cork and the contract price, yet as the proof was that he had supplied himself with cork at a less cost than the market price, he could recover only for his actual loss. This is in accord with all the authorities above cited and is perfectly sound law — the rule of actual compensation for the loss of the goods to be delivered requires that the actual loss only should be allowed to be recovered.” The same rule was again applied in Pittsburg Sheet Mfg. Co. v. West Penn. Sheet Steel Co., 201 Pa. 150, where it was said by our Brother Fell : “ The object of the law is to compensate the party injured. He is entitled to this and nothing more, and in all cases compensation must be limited to the loss actually sustained. If the buyer purchases goods in place of those contracted for at less than the market value, and thus reduces the loss, he can only recover the actual loss.” The only difference between Theiss v. Weiss, and the present case is that there the court excluded the evidence while here the defendant was allowed to ask the question, but the plaintiff refused or evaded a direct answer. The judge thereupon assumed it as incumbent on defendants to show the quantity purchased by plaintiffs, and the time and price, and defendants having given no evidence on these points he treated the case as within the general rule and charged accordingly. This was error. The burden of proof was on the plaintiffs. They were entitled to compensation for their actual loss but nothing more. When it appeared in their own testimony that they had bought cotton to replace that which defendants had failed to deliver, it became part of their case to show that they had bought at a loss, and what that loss was. They could no longer rely on the market price at the last contract date of delivery as the measure of damages, for it had appeared that they had supplied themselves previous to such date. They could not charge the defendants with a higher price than that of the market on the contract date, but if they had bought for less, then their loss was less, and they were bound to show how much. The whole evidence on this point moreover was within their own knowledge and control exclusively. For all that appears in the case the plaintiffs may have bought at less than the contract price, and the defend [261] ants’ breach of the agreement may have thus resulted in a profit to plaintiffs. The burden was on them to negative this inference before they could be entitled to more than nominal damages: Lentz v. Choteau, 42 Pa. 435. Appellants argue that the contract was divisible, having “ First, a provision to deliver at 8]- cents per pound, cash basis, and second, an agreement to extend a credit of 90 days upon payment of six per cent interest; the contract to deliver and the contract to extend the credit being separate elements, and in nowise dependent upon each other. When, therefore, the defendants tendered the cotton at the contract price for cash, the agreement to make delivery was fulfilled. The only breach was the refusal to grant the credit, which was equivalent to a refusal to loan the money at the legal rate of interest. As the plaintiffs had contracted to pay this interest, the breach was technical, and the damages were nominal. “ The theory upon which this is founded is, that the plaintiffs could have gone elsewhere, and by the payment of six per cent interest have secured the money, and paid the purchase price in cash. This was in accord with their legal obligation to reduce the damages as much as possible.” This argument, however, rests upon an unwarrantable splitting of the contract which was single. Plaintiffs were entitled to a delivery of the cotton on the specified terms. A refusal to deliver except on different terms imposing an additional burden on the buyer was equivalent to an absolute refusal. The subject of the contract was the cotton, the terms were merely an incident, important certainly but still an incident. The buyer might have been able to' borrow the money and pay cash or he might not. He was under no obligation to try, but could stand on his contract, the substance of which was that the seller would deliver him the cotton on the day specified. When the seller failed to do so, the buyer by the well settled rule had the right • to supply himself and look to the seller to compensate his loss. Judgment reversed and venire de novo awarded.