Scottish Court of Session Decisions

Upon 1st December 1887 Alexander Pillans, bolt, nut, and rivet manufacturer, Caledonian Works, Motherwell, entered into a verbal agreement with Messrs John Reid & Company, shipbuilders, Port-Glasgow, to supply them with iron rivets for their requirements during the year 1888 at so much per ton. Upon the same day the following letter was written by Reid & Company to Pillans, and subsequently acknowledged by him as correctly setting forth the agreement—“We have pleasure in confirming our verbal arrangement with you to-day, viz., that we have bought from you about 80 tons best iron ship rivets (all to be equal to Lloyds' requirements) required for our Nos. 8/D and 8/E at the rate of £5, 13s. 9d. per ton, and 1 6 up, usual extras; also that you supply us with our further requirements of iron rivets during the year 1888 at the rate of £5, 16s. per ton.”…

Between 9th August and 12th November 1888 Reid & Company ordered 426 tons 12 cwts. of rivets to be supplied under this contract. Of this amount Pillans supplied for the year 1888 320 tons, which he alleged were quite sufficient for Reid & Company's requirements during that year.

In the beginning of 1889 Pillans brought an action in the Sheriff Court at Glasgow against Reid & Company for £132, 15s. 10d., being the balance of his account due for rivets supplied under the contract. Reid & Company admitted that the sum sued for was due, but explained that the pursuer had failed to implement the contract, and in particular that he had only supplied a portion of their August-November order. The remainder, or 278 tons 14 cwts. 2 qrs. 3 lbs., they had to get from other manufacturers at a cost which, after deducting the contract price for the same amount, and the sums due to the pursuer, left them with a loss of £334, 8s. 5d. For this loss they brought a counter action in the same Sheriff Court against Pillans. The actions were conjoined.

In the leading action Reid & Company pleaded in defence—“(2) The defenders are entitled to set off against the sum sued for the loss and damage sustained by them through the pursuer's failure to implement his part of said contract, and the amount of the loss and damage being greater than the sum sued for, they are entitled to absolvitor.” And in the counter action Pillans pleaded in defence—“(3) The defender having supplied pursuers with rivets sufficient for their requirements for the year 1888 in terms of the contract, should be assoilzied with costs.”

After a proof the Sheriff-Substitute ( Lees) pronounced the following interlocutor:— “Finds that in December 1887 the pursuer entered into a contract with the defenders, under which he sold to them about 80 tons of iron rivets, and also undertook to supply them with their further requirements of iron rivets during the year 1888, of the qualities and at the prices specified in the letters passing between the parties on 1st and 5th December 1887: Finds that the defenders are resting-owing to the pursuer the sum of £132,15s. l0d. for rivets supplied under said contract: Finds that the defenders have failed to show that the pursuer is indebted to them in any sum through failure to supply their requirements of iron rivets during the year 1888: Therefore repels the claim made for the defenders in the counter action, and assoilzies the party Pillans from the conclusions thereof, and in the leading action decerns against the defenders in terms of the prayer of the petition, &c.

“ Note.—At the request of parties a proof was allowed them of their averments, but I entertain considerable doubt whether a court of law ought to look to evidence for the interpretation of the word ‘requirements’ occurring in the contract between the parties. It is not a technical trade term, and the fact that hardly any two witnesses of those examined assign the same meaning to the word makes it the more doubtful whether it is not more properly the function of the Court to consider the word.

The defenders take the word as equivalent to ‘orders,’ and they say that if they can show that they gave orders for the 278 tons in dispute, and that they had contracts in hand on which these rivets would be used they are entitled to decree. It is no doubt true that the word require’ is in

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many instances—in the common prayer-book for example—used as equivalent to order or command. But I am not sure that ‘requirement’ is synonymous with order or command. The defenders are the parties who framed the contract and used the word, and it is for them to show that it has the signification they put upon it. Now, the preponderance of the evidence is distinctly against them. Even their own witnesses seem as a rule not to take the view the defenders contend for. The word ‘requirement’ occurs, oddly enough, twice in the defenders' letter. They say the rivets are to be equal to Lloyds' requirements, and they are to be supplied to the extent of their requirements. Now, in both instances the word seems to have something of the nature of essentiality about it. Lloyds have fixed a certain standard, and the rivets must come up to it. The defenders have ships to build, and the rivets they require for these ships are their requirements in the meaning of the contract. In a somewhat similar case— The North British Oil and Candle Company v. Swann, 6 Macph. 835, it was held that where coal was to be supplied for what a company require, that meant require for the purposes of their business. And in a case closely analagous to the present one the late Lord Fraser, when Sheriff of Renfrewshire, held that the rivets required during the year were those that were to be used during that year— Simpson & Company v. Simons & Company, July 29, 1872.

The unfairness of the defenders' argument may be shown in this way—If they had a contract for a supply of rivets for a year, and in the latter half of the year the market price was above the contract price, then they say they could order all the rivets they were to use for the ships they had contracted to build; but if, on the contrary, the market price was tending below the contract price, then they were entitled to do with as few rivets as possible till the year had elapsed, and thereafter order rivets elsewhere at the lower price of the day. But if the defenders had this right surely it cannot in fairness be said that they required the rivets in the sense that it was needful for them to have them. In other words, their reading of the bargain would make requirement depend not on actual need, but on their volition. In fact, however, their own line of pleading is unavoidably against them, because what they did and contend they had a right to do was, to buy in against the pursuer to the extent that he had failed to fulfil their orders … I am quite prepared to believe that the defenders did reasonably require some rivets which the pursuer ought to have supplied under the contract, and if they had taken this line a court of law would not have lightly interfered with their opinion as to what they required and what they did not require. But then this is not the position the defenders have taken. Instead of seeking to show what rivets they bona fide required, and were therefore entitled to demand under the contract, they have devoted their whole attention to establishing the plea that they were entitled to demand from the pursuer all the rivets that they could use at any time on vessels they had contracted to build prior to 31st December 1888. On the success of this plea they have elected to peril their case, and as I think they have failed to establish this plea, the only result I can come to is to decide against them altogether, and I may add that if their plea were sound it might be carried further still, for if they were entitled to order from the pursuer all the rivets they chose with a view to subsequent use, there seems no sufficient reason why, as prudent shipbuilders, and keeping in view the state of the market, they should not have provided themselves with rivets at the pursuer's expense, not only for all the ships they had on hand, but those they might expect to get orders for whilst the price of rivets continued high. I therefore decide against the defenders.”

Reid & Company appealed to the Court of Session, and argued—They had never contended that Pillans was bound to supply all the rivets they chose to demand in 1888. The orders given, which he had failed to supply, were given fairly in accordance with their usual method of executing contracts, and were necessary for their requirements during 1888. To argue that they must have every rivet supplied under the contract in its place before the end of 1888 would be unreasonable. The number of rivets ordered might not have been used owing to unavoidable delays for which they were responsible. Whenever they got a contract to build a ship, they at once estimate the rivets they would require and give orders accordingly. The contract was not for rivets but for requirements of rivets. All rivets required for contracts entered into during 1888, or at least for such of these contracts as were begun to be executed before the end of that year, were part of their “requirements of iron rivets during the year 1888,” and as such fell to be supplied under the contract. The case, relied upon by the Sheriff-Substitute, of The North British Oil and Candle Company v. Swann, May 27, 1868, 6 Macph. 835, was really in their favour. It had only determined that “require” was not equivalent to “demand,” and that had here all along been admitted The rivets ordered were all required for their ships, and these ships had all been contracted for and actually begun (although this was not necessary) during 1888.

Counsel for the respondent (Pillans) were not called upon.

At advising—