Tolhurst v. Associated Portland Cement Manufacturers
(1903), A. C. 414
(Assignment, Restraint of Trade, Standing Offer-Uncertainty)
Tolhurst, owner of chalk quarries, entered into a contract for supply of chalk to an Imperial Co. (herein after Co.) for 50 years which was to take its supplies only from Tolhurst. It was agreed that Co. would buy from him at least 750 tons of chalk and so much more as required for whole of its manufacturing purposes at specified rate, payment to be made in cash. Imperial Co. when became liquidated, assigned the contract to Associated Co., thereafter giving due notice to Tolhurst. He then brought an action claiming that he was not bound by the contract with Associated Co. in substitution with Imperial Co.
Court of Appeal:
The contract was non-assignable and parties to contract were Imperial Co. and Tolhurst only: Tolhurst, while entering into contract, reposed confidence in creditworthiness and competence of Imperial Co. This ‘credit’ was material to the formation of contract. Hence, the contract was with Imperial Co. only.
1) Whether the impugned contract was assignable, and hence, binding on Tolhurst?
2) Whether there is any need for Imperial Co. to join the suit as assignor?
House of Lords (majority judgment):
1) Only rights and benefits under a contract, and not the liabilities, are assignable unless the contract is personal in its nature or the rights are made incapable of assignment either by law or by parties within the contract. Therefore, while determining whether parties implicitly intended to do away with any such assignment, nature of contract and surrounding circumstances (like length of duration of contract, persons engaged in it, etc.) are to be taken into account.
Firstly, there was nothing personal about the contract for sale of chalk from quarries and respective use by manufacturers. Neither there was any element of personal skill or personal confidence involved. Secondly, the contract was to last for at least 50 years. In these circumstances, it was the plain intention of the parties that the rights and benefits under the contract could be assigned.
2) As a general rule assignor needs to be made a party to the suit by the assignee, while enforcing rights/ benefits under the assignment. But when assignor is mere name, as Imperial Co. in present case, without any executive or board of directors, then such rule can be dispensed with.
Kemp v. Baerselman:
Defendant agreed to supply a cake manufacturer with all the eggs that he might require for a year and latter was not to purchase elsewhere. Payment was to be made by drawing bills of exchange on the manufacturer. Manufacturer assigned its benefits under the contract to another Co. but defendant refused to continue performance of contract with latter.
CoA held that since contract here involved personal creditworthiness of the manufacturer as to the mode of payment, hence, wasn’t capable of being assigned.
GBC v. Coca Cola:
Court observed that every contract by which man agrees to sell his whole output to one person for any future period is a contract in restraint of trade because it restrict his liberty to sell as he pleases, and is void.
However, in same case, it was held that when an agreement is in promotion or for facilitation of a particular trade as contracted by parties; thereby regulating the normal commercial relations between them, then it cannot be held as restraint of trade. Further restraints which subsist between the parties only during the contract as against those which are stipulated to be held operative even after the contract, are generally held as valid if reasonable and for due protection of interest of both.
Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)