United Kingdom House of Lords Decisions

Lord Chancellor—This is an appeal from an interlocutor of the Second Division of the Court of Session. The facts may be very shortly stated. The appellants entered into a number of contracts to sell to the respondents certain manufactured jute. The contracts were made in Calcutta, and the effect of them was that the appellants sold to the respondents these goods c.i.f. Buenos Ayres, shipment from Calcutta. Each contract contained the following terms.—“ War Risk for Buyers' Account.—Any delay in shipment caused by fire, strike, breakages, or accidents, and/or war, and/or civil strife, and/or any other unforeseen circumstances” (I omit a few words which are not material) “to be excepted, and the quantity short produced in consequence thereof to be deducted from the quantity named in this contract, or delivered soon as possible thereafter, buyers having the option of refusing it after time. Sellers must notify buyers within six days of such delay.” Then followed another clause—“Should the vessel by which freight has been engaged be commandeered or delayed by the Government, sellers shall not be responsible for any late shipment or other consequence arising therefrom, and the goods shall be sent forward as early as possible and each contract concluded with this clause—“Any dispute that may arise under this contract to be settled by arbitration in Dundee” (and then follow some words which are immaterial). As appears from the terms of the contracts, they were made in war time and had in contemplation events which might happen in war, such as the commandeering of a vessel or some other act of the Government consequent upon the war.

The shipments were to be made in July, August, and September 1917, but certain events happened which prevented the shipment of a large part of these goods. On the 12th May 1917 an Order was made by the Governor-General of India in Council prohibiting the export of jute except under licence. Licences were obtained by the appellants, but the two vessels on which they intended to ship the jute and on which space had been engaged were commandeered. There remained in Calcutta one vessel available for this purpose—a vessel called the “Amatonga”—which was due to sail in the month of August, and the appellants accordingly arranged to ship on board that vessel as much of the jute as she could carry, namely, 925 bales out of a total of 2800 which should have been shipped in July and August. That left a balance of 1875 bales for which arrangements could not be made. But the matter did not stop there. In the month of August it was declared by the Government of India that after the “Amatonga” had sailed, and subject to her sailing, the export of jute to the Argentine should be wholly prohibited. Accordingly the “Amatonga” sailed with the 925 bales, but the 1875 bales remained unshipped. It should be added that in consequence of changes in the Order of the Indian Government arrangements were subsequently made under which the bales which were to be shipped in September were in fact shipped in other vessels, and the only question which arises is as to the 1875 bales not shipped.

On the prohibition of the export of jute to the Argentine in the month of August the appellants cabled to the respondents in these terms—“We are shipping ‘Amatonga’ nine hundred twenty-five bales. After this steamer leaves Government prohibit further exports River Plate. According Indian contract law balance July/August contracts become void, and September contracts if prohibition is not lifted by end of September. We are selling in Calcutta balance July/August goods on behalf of whom it may concern. Telegraph confirmation”; and the answer sent by the respondents, the buyers, on the 3rd September was in these terms—“Referring to your telegram 29th, do not accept cancelment July/August, neither September shipment. You must abide by your contract and ship as early as possible. Cannot recognise Indian contracts law.” Clearly the request in this telegram to “ship as early as possible” had reference to the clause which I have quoted from the contracts providing that if any delay should be caused by war or any other unforeseen circumstances the goods should be delivered as soon as possible thereafter.

A dispute having thus arisen between the parties the respondents, after an interval, proposed to refer the matter to arbitration under the arbitration clause, and accordingly they appointed an arbiter and called upon the appellants to appoint an arbiter on their behalf. The appellants contended that the arbitration clause did not apply, but under protest appointed a gentleman as their arbiter. The arbiters could not agree on the appointment of an oversman, but an oversman was ultimately appointed by the Sheriff-Substitute, and an appeal from that decision to the Sheriff failed. The appellants brought before the oversman the question whether he had jurisdiction to entertain the determination of the dispute above described; he decided that question in the affirmative, and thereupon the appellants commenced this action against the respondents, claiming in effect a declaration that the arbitration clause did not apply and an injunction to prevent the oversman from proceeding to determine the dispute. The decision of the Lord Ordinary in the action was in favour of the respondents, his decision was unanimously affirmed by the Court of Session, and thereupon the present appeal was brought.

The point taken on behalf of the appellants appears to be in substance this—“The dispute which has arisen is not a dispute under the contract but a dispute as to the existence of the contract. Our contention is that by reason of the Order in Council prohibiting the export of jute to the River Plate the contract was, as regards the 1875 bales not shipped, frustrated and destroyed, and this question cannot be determined by the arbiter. The contract having gone, the arbitration clause has gone with it, and the whole jurisdiction of the arbiters and of the oversman falls to the ground.”

I do not think it necessary in this appeal

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