Morris v. Baron & Co.

Morris v. Baron & Co.

[1918] AC 1

(Section 62, discharge by agreement, substitution of new agreement, novation)

FACTS:

Morris entered into written contract (A) with Baron to supply him with certain no. of pieces of cloth: dispute arose between the parties as Morris demanded payment of supplied pieces of cloth while Baron claimed damages for breach of contract out of delay in supplying rest of the pieces. Parties thereafter, by parol, made an arrangement (B) by which they both decided to withdraw legal proceedings, and Morris agreed to give 30 pounds as damages to Baron for not supplying in time. Further, three months were given to Baron to pay Morris due amount, and also an option to demand delivery of the remaining goods, if he pleases. The suit was filed by Morris when Baron consistently refused to pay the due amount while insisting on the delivery of the remaining goods.

ISSUES:

1) Whether parties rescinded contract A and substituted wholly new contract B for it?

2) Whether Baron can claim damages for non-supplying of remaining goods by Morris?

HELD:

1) As put forth by Lord Dunedin– whether there has been rescission or mere variation of terms must depend upon the intention of the parties and the nature of the new contract itself: In case of variation/alteration, there is no such executory clause in second contract as would enable parties to sue upon it alone if the first contract did not exist; while in case of novation /substitution, parties could sue on the second contract alone and the first contract is extinguished either by express words or because second dealing with the same subject matter or having the same legal effect as the first but in a materially different way.

In present case, both the parties mutually intended and agreed not merely to vary the original contract but to set it aside and substitute another for it, as the two contracts are in conflict with each other w.r.t. fundamental or material provisions which go to their ‘root’.

Present case involves the breach of original contract and formation of arrangement B in lieu of it. B was the ‘accord’ by which obligations under original contract A were discharged. Further, withdrawal of legal proceedings by both parties was the ‘satisfaction’ which acted as consideration for making the accord operative.

2) Baron’s refusal of due payment under contract B (even after 3 months period was over) unless delivery of remaining goods was made, amounted to repudiatory breach (which when accepted by plaintiff—could have amounted to rescission). Since, he himself was at breach, hence, could not claim any damages from plaintiff.

Judgment for plaintiff. Contrast: Lata Construction & Ors. v. Dr. Rameshchandra Ramniklal Shah over-ruled.

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)