Scottish Court of Session Decisions

This was an action by Peter Macbride, copper and tinplate worker and plumber, Glasgow, to recover from Messrs Hamilton, calenderers, the price of a set of steam drying cans and a steam engine

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which he contracted to set up on their premises within a certain time. The defenders did not dispute the amount, but pleaded that in consequence of the pursuer having failed to fulfil his contract within the time stipulated they had sustained loss to an amount greater than the contract price, against which they held that the amount of their loss must be set oft.

The Lord Ordinary ( Shand) pronounced the following interlocutor;—

“ Edinburgh, 6 th April 1875.—Having considered the cause, Repels the pursuer's third plea in law, and appoints the cause to be enrolled to fix the mode of trial: Reserves all questions of expenses, and allows the pursuer, if so advised, to reclaim against this interlocutor.

“ Note.—In October 1873 the pursuer undertook to make and fit up for the defenders, in their premises in Glasgow, a set of steam drying cans with framing, and a double cylinder diagonal steam engine.

In accepting the pursuer's offer to execute this work the defenders stipulated in writing that the work ‘shall be completed and ready for starting by the middle of January 1874, or earlier if possible.’ By letters, dated 13th and 15th November 1873, the parties agreed that an engine of larger dimensions should be substituted for that first contracted for, but no stipulation was made that farther time should be required or given for the execution of the work.

The pursuer, having completed the work, now sues for the contract price, which is admitted to have been £475. The defenders decline to pay the amount, on the ground that the pursuer failed to execute his contract within the time stipulated, and thereby occasioned them loss and damage to an amount exceeding the sum sued for.

The question between the parties which was discussed in the Procedure Roll is, whether the defenders' claim for loss thus sustained is maintainable as an answer to the pursuer's demand?

The pursuer maintains that he is entitled to have instant decree, and that the defenders must constitute their claim by a separate action of damages, and cannot maintain it to any extent as a defence to this action. I am of opinion that the defence may be maintained in this case without a counter action, and that consequently the pursuer is not entitled instantly to the decree which he asks.

The case is not one of mutual debts unconnected with each other, in which the defenders seek to set off a claim of compensation arising out of a totally different transaction from that which is the subject of the pursuer's claim. To that class of cases the statute of 1592 applies, but I think that statute has no application to a case like the present.

The dispute between the parties arises here in reference to their mutual obligations under the same contract; and (1) It seems to be only proper and just that if the pursuer has not fulfilled his contract in all its essentials, and that the defenders have not obtained the advantage for which they stipulated, they should not be bound to pay the pursuer the contract price, but should be entitled to resist payment to the effect of obtaining implement of the obligation in their favour, and if that cannot now be given on the terms arranged, then as a substitute the loss and damage they have sustained; and (2) It is desirable in such cases if possible to avoid the necessity for two actions between the parties where one will serve the purpose.

The case is distinguishable from the ordinary one of goods sold and delivered in respect the defenders had to give over their premises to the pursuer for the execution of his contract, and that the work to be executed and services to be performed were such as required a special contract, with sufficient time to enable the particular machinery to be prepared and afterwards fitted up. Time must, I think, be regarded as of the essence of the contract, because the defenders expressly stipulated in the contract that the work should be done by a day fixed. A certain indulgence or relaxation of the stipulation on this subject was apparently given by the defenders; but it appears from their statements, with reference to which no explanation has been given by the pursuer at the adjustment of the record, that the machinery was not fitted up until the 4th of August, notwithstanding repeated complaints and remonstrances regarding the delay, and an intimation that the defenders' business was in the meantime stopped or seriously interfered with, and that the pursuer would be held liable in the damages thus resulting. Copies of letters complaining of the delay, dated 14th April, 20th May, 5th and 15th June, and 7th and 11th July 1874, have been produced, confirming these statements. But in the meantime, and with reference to the present question, the statement itself is of importance as showing that the work was completed in the knowledge on the part of the pursuer that the defenders did not abandon the stipulation for the execution of the work within a certain time beyond any limited indulgence which their actings may be held to have sanctioned, and that although they permitted the work to go on, they did so under notice that a claim to be reimbursed the loss and damage which they were suffering from the nonimplement of the contract would be made.

The case is thus different from that in which goods are furnished or services performed after the stipulated time without notice that the party is held to have committed a breach of contract, and a claim intimated and reserved. In a case in which no such notice had been given, and no clam intimated, I should be disposed to hold that the defender was not entitled to resist instant decree by pleading a claim of damages in defence.

The present case, as presented, is one in which the defenders deny that the pursuer has duly implemented his contract, although it is admitted that if he had done so the sum for which he sues would be the correct amount payable. In one sense the stipulated price or condition is the counterpart of the material supplied and services performed; but the defenders agreed to give the price only for the work done by a certain day, and as time enters essentially into the contract the defence is that the pursuer failed to perform his part, and so is not entitled to decree for the full amount, but only for any sum due after deduction of the amount of the defender's loss, which in this particular case is stated to have been greater even than the amount sued for. In this view it is denied on the facts, as appearing from the record, that the pursuer's claim is liquidated. The amount payable is, no doubt, fixed by the contract, if it be assumed the pursuer's contract was implemented, but this the defenders dispute. The pursuer maintains that having allowed him to perform the work the

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contract must be taken to have been executed, and the amount due is therefore liquid, and now prestable; but I think this argument is unsound, for the pursuer was substantially in possession of the defenders' premises, and I do not think the defenders were bound at the last moment, and it may be after part of the work had been done, to turn him out, and to enter into a new contract with another person, with all the consequent loss, unless they were prepared to allow the pursuer to go on, on the footing of holding the contract as duly executed. Indeed it is not maintained that the defenders have no claim of damage, but only that their claim cannot be pleaded in defence to this action.

If the contract had contained a stipulation for a reasonable sum per day by way of pactional penalty, in the event of delay on the pursuer's part in executing the work, it appears to me the case would have been directly within that of Johnstone v. Robertson, March 1, 1861, 23 D. 646. In that case it is no doubt true the circumstance that the rate of compensation for delay had been settled was mentioned by several of the Judges as entering into their judgments, but it appears to me that the rule should be the same whether the parties have or have not fixed the rate of compensation. A claim is not liquidated until the period of time to which the claim of loss applies has been ascertained, and the defence does not therefore admit of instant verification, even where a rate of pactional penalty has been fixed, any more than the present.

I think the sound general rule, which may be the subject of exceptions arising from special circumstances, or the special terms of a particular contract, is that in cases of mutual contract a party in defence is entitled to plead and maintain claims in reduction or extinction of a sum due under his obligation where such claims arise from the failure of the pursuer to fulfil his part of the contract. Claims thus arising were sustained in defence in the cases of Taylor v. Forbes, 2d December 1830, 9 S. 113; Stewart v. Campbell, 12th November 1834, 13 S. 7, and in the case of Johnston already mentioned, while in the case of the Scottish North-Eastern Railway Company v. Napier, 10th March 1859, 21 D. 705, the Lord President illustrates what appears to me to be the general rule by reference to the case of master and servant, where he expresses the view that a claim for wages may be met by a claim for loss caused by misconduct in the service,—a view acted on in ordinary practice in the Sheriff-courts, where such cases are generally sued.

In the case of an action for freight, resisted on the ground that the goods carried have been damaged, it is not, I think, so clear in principle as in the present case that the claim may properly be maintained in defence, because the damage is not necessarily the result of carelessness on the part of the carrier, but may arise from inherent defect, or the perils of the sea, and a tedious inquiry with doubtful results may be necessary. In the case of landlord and tenant it has been frequently held that a claim of rent cannot be well met in defence by claims of damage, but I think the explanation is to be found in the fact that the two obligations are not contemporaneous. Where they are so, or where it is plain that the landlord has failed to perform an essential condition of the contract, I am of opinion that a defence may be pleaded in the action at his instance for payment of rent. Thus, if a landlord sued for a year's rent, and the defence were stated that access to the premises could not be and was not obtained until four months after the term of entry, it appears to me the defence claiming a deduction would be properly taken up in the action at his instance. The same principle, I think, applies to the present case.

The pursuer, in argument, maintained that, in a case of goods sold and delivered, a defence of loss on account of non-performance of the contract by delivery of the goods within the time stipulated would not be competent, and that this case was in no different position.

For the reason already stated, I think this case materially differs from that now supposed, but I am not prepared to hold that even in such a case the counter claim could not be competently sustained in the action on the contract. If, after a buyer of goods has suffered damage from the seller's delay to supply them within the stipulated time, and has intimated his claim for the loss sustained, and that he is about to buy in goods against the contract in the open market, the other party should still offer to supply the goods, the buyer would, I think, be right in taking them in place of buying from others, and if he did so under reservation, of his claim for loss caused by the seller's delay I should hold that in that case, as in the present, in an action on the contract for the price he would be entitled to set up his counter claim for loss caused by the failure of the seller to fulfil the contract in one of its essential particulars.

I have thought it right to state fully the ground of my judgment in this case, because it raises a point of general importance, and I am not aware of any previous case which has occurred for decision in which the question has arisen so purely as here.”

The pursuer reclaimed, and pleaded—“(1.) The pursuer, having performed the work stipulated, is entitled to payment of the contract price. (2.) The defenders being indebted to the pursuer in the sum sued for, the pursuer is entitled to decree as libelled. (3.) The defenders are not entitled to set off their alleged illiquid claim of damages against the pursuer's claim for work done and machinery supplied.”

The defenders pleaded—“The pursuer not having duly executed his contract, and the defenders having in consequence sustained loss and damage to an amount in excess of the sum sued for, the defenders are entitled to absolvitor.”

At advising—