Court held sale of four distinct machines was a divisible contract allowing recovery for delivered items only.

[*259] 1979 March

(PIKIS, P.D.C.)

IN THE DISTRICT COURT OF LARNACA

ΚΥΡΙΟ (I.T.H.) COMPANY,

Plaintiffs,

v.

Ioannis Kassapi and Another,

Defendants.

(Action No. 1138/77).

Contract - Construction - Extrinsic evidence - Revealing genesis and aim of transaction and its background - Admissibility - Sale of goods - To be delivered "the sooner" - Admission of evidence that vendors held out to purchasers that they would make almost immediate delivery.

Contract - Exemption clause - Limitations - Contract for sale of goods - Printed terms therein not negotiated by the parties - Whether binding.

Contract - Sale of goods - Time of delivery - Not of the essence of the contract - Reasonable notice served by purchasers making time of essence of contract - Vendors failing to deliver within time stated in the notice - Purchasers not bound by the contract.

Contract - Sale of goods - Part delivery – Divisible contract

- Vendors entitled to recover price of goods actually delivered.

A. Poetis, for the Plaintiffs.

P. Papageorghiou, for the Defendants.

JUDGMENT

The following judgment was delivered by:-

PIKIS. P.D.C.:- The plaintiffs, a firm [*260] of importers of industrial machinery, contracted to sell to the defendants, a merchant of Nicosia and his wife, four machines in

accordance with the terms of a written agreement executed on 19th July 1977. Reference was made at the trial to the background of the agreement and

assurances allegedly given by

the plaintiffs to the defendants as to their ability to make prompt or immediate delivery. This evidence was received notwithstanding the parol

evidence rule making inadmissible

the reception of extrinsic evidence as an aid for the construction of a document for it is now well settled that evidence revealing the genesis and

aim of the transaction and

generally the background to it is admissible for the limited purpose of enabling the Court to read the document in its proper perspective. (See Prenn

v. Simmonds (1971) 3 All E.R. 237; Moschi v. Lep Air Services Ltd. (1973) A.C. 331, 354; Reardon Smith Line Ltd. v. Ingrar Hanser – Tangen (1976)

1 W.L.R. 989, 995-997). The agreement provides for the sale of four different machines or industrial appliances for a total value of £3,420 to be

delivered the sooner. It is common ground that two of the four machines, those listed as items 3 and 4, were delivered on the day the agreement was signed.

The other two machines under items 1 and 2 were not delivered for some time and when plaintiffs expressed readiness to deliver

them at about the 20th August 1977 the defendants refused to accept delivery. Their claim is for the recovery of the value of the four

machines less £500 paid on

the day of execution of the agreement, their case being that the machines under items 1 and 2 remained valueless in their possession despite efforts made

to dispose of them in the market. [*261]

The defendants deny liability and maintain they were within their rights to refuse acceptance of the machines under item 1 and 2 when delivered and further contend they are not liable to pay the price for those machines that were delivered because of their faulty or incomplete state and the fact that this was an entire agreement necessitating complete performance on the part of the vendor before an obligation was cast on them to make payment under the agreement. They counterclaim for the recovery of the advance of £500 and damages for the delay to deliver as well as a declaration that the agreement was cancelled because of the breach of the plaintiffs. The first defendant testified that the servant of the plaintiffs who entered into the agreement on their behalf categorically stated to him before entering into this contract that all four machines would be delivered from existing stock and that those machines that were not delivered on the day of execution of the agreement would be delivered in two to three days, that is so long as it would take to make proper arrangements for their transportation from their Larnaca stores. He was reinforced in his belief that this would be the case by the contents of a written tender (exh.2) that had preceded the agreement particularly the statement made therein that delivery would be effected from existing stock as well as the fact that two of the four items of machinery were delivered on the day the agreement was signed. The employee and relation of the defendants, namely Miss Frosso Pandeli (d.W.2), present at the time of execution of the agreement, supports the evidence of her employer that the employee of the plaintiffs [*262] who negotiated the agreement on their behalf unequivocally represented that the remaining two items of machinery would he delivered in two to three days the latest.

Mr. Kyriakos loannou, a partner in the plaintiff's firm, was unable to confirm or deny whether any representations were made regarding delivery of items 1 and 2 and put forward the terms of the agreement in support of his case refusing to be bound by anything other than its terms.

It is of the utmost important for the determination of the issues in dispute to decide what was the time stipulated for the delivery of the remaining two chattels. The agreement provided that delivery should be effected the sooner "to tahiteron". On a literary interpretation this should be construed as the sooner possible. What was possible depended on the background to the agreement and it is here of crucial significance to decide whether the employee of the plaintiffs did represent that delivery would be effected from existing stock signifying thereby readiness to make virtually immediate delivery. If so, it is in such context that the term "the sooner" should be interpreted. I accept the evidence of both defendant 1 and his employee on this point and find as a fact that a servant of the plaintiffs held out that his employers were in a position to make almost immediate delivery. Therefore the written stipulation in the agreement "the sooner" should be interpreted as soon as it was possible to make arrangements and transport the machines from Larnaca to Nicosia. In arriving at this decision I have not overlooked that at the bottom of [*263] exhibit 1 there is a printed term purporting to relieve the plaintiffs of liability for the non timely delivery of imported goods where such delay is attributable to causes beyond their control such as delay in the arrival of a ship, strike, war or other cognate causes. I was invited by the plaintiffs to excuse them of any delay for the delivery of the goods, if it took place, on account of delays in the arrival of the goods. This clause was inserted in the agreement without any negotiation between the parties on the subject and runs contrary to the express provisions of the agreement stipulating, in the light of the background to this agreement, that delivery would be effected as soon as it was possible to convey the machinery from their Larnaca stores to Nicosia. There is a growing tendency to play down and at times disregard printed terms inserted without any negotiation on the subject between the parties. (See A Schroeder Music Publishing Co. Ltd. v. Macaulay (1974) 3 All E.R. 616; L ‘Estrange v. F. Grancob Ltd. (1934) All E.R. Rep. 16; Gillespie Brothers and Co. Ltd. v. Roy Bowles Transport Ltd.

(1973) 1 All E.R. 193). This is a salutary approach as it upholds the principles of freedom of contract, principles constitutionally entrenched in the case of Cyprus. (See Article 26.1 of the Constitution). This approach is gaining ground and recently it was decided that an exception or limitation clause should not be given effect if it is either unreasonable per se or unreasonable as applied to the circumstances of a given case. (See Levison v. Patent Steam Carpet Cleaning (1977) 3 All E.R. 498, 503). [*264]

In the light of the foregoing I find that the plaintiffs, contrary to the terms of their agreement with the defendants, failed to deliver the machines listed as items 1 and 2 at the agreed time. Unless compliance with time provisions in an agreement is made of the essence of the agreement, failure to observe such stipulations does not entitle the aggrieved party to repudiate the contract. At common law no such relaxation was permissible but equity tempered the rigor of the common law rules and non compliance with time stipulations does not entitle the other party to repudiate the contract unless time is made of the essence either at the time of the formation of the contract

or subsequently by serving reasonable notice. (See Rightside Properties v. Gray (1974) 2 All E.R. 1169). The time factor as an element in the

performance of a contract was discussed at length by the Supreme Court in Nicos K. Shakolas v. Sofronios Michaelides and Another(1967) 1 C.L.R.,

p. 290. Nothing in the agreement of the parties made time of the essence and what remains to be resolved is whether reasonable notice had been served by the purchasers making time of the essence. Decision on the subject involves adjudication on conflicting evidence emanating from defendant 1 and Mr. Kyriakos loannou.

The defendant maintained that he kept pressing the plaintiffs to make delivery of the goods sold but the latter failed to live up to their promises, leading him to exasperation. He had, as he stated, urgent need of all the machines and appliances ordered. At about the 10th of August 1977, [*265] anxious as he was to secure delivery, he rang up Mr. Ioannou and told him that unless delivery was made by 15th August 1977 he was no longer interested to acquire the machines in question. His employee, the aforesaid Miss Pandeli, supports his contention that he rang up the plaintiffs repeatedly but there is a discrepancy between the testimony of the two as to the actual number of telephone calls made. Mr. Ioannou, while agreeing that defendant made inquiries over the phone about the date of delivery of the machines, denied that defendant notified him at any time that he would feel free to reject delivery of the machines unless delivered by a certain date.

Having examined the evidence I accept that defendant did serve notice on the plaintiffs that unless delivery was made by the 15th August 1977 he would no longer feel bound by his agreement with plaintiffs and the question arises whether the notice served was reasonable in the circumstances. It is a question of fact and degree to be resolved in the light of the totality of the facts of the case, particularly the time stipulations in the agreement itself and knowledge, if any, on the part of the vendor of the need that the purchaser had for the goods. It is manifest on a consideration of every aspect of the case that prompt delivery was within the contemplation of the parties and defendants did intimate to the plaintiffs through their servant of the urgent need they had of the machines. The five-day period was, in itself, a period longer than the period provided for in the agreement which meant in practice two to three days. My finding is that the notice served by defendants [*266] to the plaintiffs made the time factor of the essence and the failure of the plaintiffs to make delivery within such time exonerated the defendants of any further liability under this contract.

What remains to consider is whether this breach of the plaintiffs exonerated the defendants of any liability under the agreement or merely relieved them of liability in respect of the unperformed part of the contract. This in turn will depend whether the agreement of the parties constituted an entire or divisible contract. In the case of the first species of agreements performance of the sum total of the conditions of the agreement by the vendor is a condition precedent to liability on the part of the purchaser; whereas in the case of divisible contracts performance of a distinct part creates parallel obligations on the other party. (See Hoening v. Isaacs (1952) 2 All E.R. 176). Whether a contract belongs to the former or the latter category is a question of construction. There is a general presumption that lump sum contracts are entire contracts. However part performance of an entire contract may give rise to a claim on a quantum meruit basis if the recipient has accepted part performance. (The subject is discussed in Chitty On Contracts, 24th ed. paragraphs 1278-1286). I did not find it altogether easy to resolve whether the contract under consideration was an entire or a divisible one. Reference is made on the one hand to the sum total of the purchase price whereas on the other each chattel to be sold is distinctly listed and separately priced. This classification of the goods to be sold, coupled [*267] with the absence of any mechanical connection between the four machines sold leads me to the conclusion that this was a divisible contract entitling the vendors to recover the price of the goods actually delivered. Also I should put it on record that even if I had come to a different conclusion I would still hold the defendants liable to pay the price of the machines delivered, holding, as I do, that they accepted unequivocally delivery of the machines under items 3 and 4 Further, I reject the contention of the defendants that the chattels delivered were any other than those that plaintiffs contracted to sell. Nor is there any claim for breach of warranty in respect of any missing particles or parts.

In my judgment the plaintiffs are entitled to recover the balance of the purchase price in respect of items 3 and 4, that is £1,190, whereas their claim for the recovery of the price for the remaining chattels must be dismissed. Also I should put it on record that I found the evidence of Mr. Ioannou on alleged efforts to mitigate damage respecting items 1 and 2 wanting in persuation. Further, the counterclaim must be dismissed except a small part of it regarding the declaration sought. On the counterclaim there will be a declaration that defendants were exonerated from further liability under the contract after failure of the plaintiffs to deliver items 1 and 2 (exh.1) by 15th August 1977. [*268]

In the result, there will be judgment as above on the claim and a declaration as aforementioned on the counterclaim. Bearing in mind the outcome of the proceedings I order, in the exercise of my discretion, that defendants should pay 2/3rds of the costs of the plaintiffs on the claim whereas in respect of the counterclaim there shall be no order as to costs.

Judgment and order for costs as above.