Judgement Appeal from a decree of the High Court (December 21, 1908) reversing a decree of White C.J. (August 28, 1906). The action, which was for damages, was brought by the respondent, who alleged that the appellants had entered into a contract with one Chinnappa Iyer for the supply to him of 1500 teak sleepers as per the Madras Railway Companys specification on certain terms, and that the contract had been duly transferred to the respondent, the appellants accepting him as the purchaser of the sleepers. He further alleged that two consignments of 748 and 600 sleepers delivered by the appellants under the contract were not in accordance with the specification or fit for the purpose for which they were required; that the railway company had rejected 593 sleepers of the first consignment and 513 sleepers of the second consignment ; and that the respondent was entitled to damages for breach of the contract. Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 91 The appellants admitted the contract and its transfer, but denied liability to supply the sleepers in accordance with the Madras Railway Companys specification or as alleged by the respondent. They relied on the stipulation that their passing of the goods at Moulmein or Rangoon was to be final both as regards measurement and quality; and alleged that the sleepers had in fact been passed in terms of the contract. The Chief Justice before whom the case was tried held that the action must be dismissed on the ground that the goods had been passed by the appellants agents within the meaning of the contract, and that this passing was binding on the respondent. Apart from this ruling he would have held that the respondent was entitled to damages. He said " As regards this part of the case, I am of opinion that the goods were ordered for a specified purpose, for which goods of the denomination mentioned in the order are usually sold within the meaning of s. 114 of the Contract Act, and that, consequently, there was an implied warranty by the seller that the goods supplied were fit for that purpose. The word sleepers itself indicates the purpose, for which the timber was to be used, quite as clearly as the word coatings in the case of Drummond v. Van Ingcn. (( 1887) 12 App. The word sleepers itself indicates the purpose, for which the timber was to be used, quite as clearly as the word coatings in the case of Drummond v. Van Ingcn. (( 1887) 12 App. Cas. 284.) .... The next question is Does the evidence establish that there has been a breach of the implied warranty ? " On this question the learned Chief Justice recorded his finding in the affirmative, holding that there was a breach of warranty with regard to 850 sleepers. In appeal the High Court came to the conclusion that the specification contained in the circular of the Madras Railway Company was the basis of the contract; and as to the stipulation about the passing of the sleepers by the defendant companys agents it said " We think that what was intended by the parties was that if the defendants through competent persons bona fide exercised their judgment and skill in manufacturing the sleepers wanted by the plaintiff having in regard the purpose for which sleepers are ordinarily required and the standard of quality mentioned in the specification, which as we have said is the ordinary standard of a good sleeper, they would not be liable, if, in the opinion of the railway company or of the Court if the matter went so far, the sleepers supplied were not in fact in accordance with the specification. But if the articles turned out by the defendants are in fact neither suitable for such purpose nor of the requisite quality and the defendants wish to bring themselves within the exemption, they must satisfy the Court, that in manufacturing and selecting the sleepers for the purposes of the contract they had in regard not merely the use to which they were intended to be put, but also the specified standard of quality. If the defendants manufactured them in accordance with what they thought might serve the purpose designated by the word sleeper but made no attempt whatever to conform to the stipulated quality they cannot be held to have exonerated themselves." The Court found that in manufacturing the sleepers the appellants had not kept in view the contract standard and were not protected by the clause as to passing. Martelli, K.C., and D. C. Leck, for the appellants, contended that the contract did not contemplate that the sleepers should be in accordance with the specification of the Madras Railway Company. Martelli, K.C., and D. C. Leck, for the appellants, contended that the contract did not contemplate that the sleepers should be in accordance with the specification of the Madras Railway Company. The judgment of the Chief Justice was right that the passing of the sleepers delivered had been duly made under the terms of the contract and was a complete answer to the action. De Gruyther, K.C., and Kenworthy Brown, for the respondent, contended that the delivery made by the appellants was not in accordance with the contract because it was not in accordance with the specification, and that the passing relied on by the appellants was not in view of the special requirements of the contract and therefore was not within the meaning of the provision relied on. The agents of the appellants did not satisfy themselves that the sleepers delivered were in accordance with Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 92 contract. Reference was made to Brown v. Edgington (( 1841) 10 L. J. (C.P.) 66.) and Jones v. Just. (( 1868) L. R. 3 Q. B. 197.) Martelli, K.C., replied. The judgment of their Lordships was delivered by LORD ATKINSON. This is an appeal from a judgment and decree of the High Court of Judicature at Madras dated December 21, 1908, made in the exercise of its appellate jurisdiction, whereby the judgment and decree of the Chief Justice of the same Court made in the exercise of its ordinary jurisdiction were reversed, and judgment entered for the respondent, the plaintiff in the suit, for the sum of Rs.11,913.4.6. damages for the breach of contract for the sale and delivery to the plaintiff of 1500 teakwood railway sleepers. The facts of the case are not complicated and as far as it is necessary to set them out are as follows. A person named M. Chinnappa Iyer, of 209, Thambu Chetty Street, Madras, in the month of May, 1905, entered into a contract with the Madras Railway Company for the sale to them of 1500 teakwood sleepers of the dimensions 12 by 12" by 7", deliverable in two instalments of 750 each. A person named M. Chinnappa Iyer, of 209, Thambu Chetty Street, Madras, in the month of May, 1905, entered into a contract with the Madras Railway Company for the sale to them of 1500 teakwood sleepers of the dimensions 12 by 12" by 7", deliverable in two instalments of 750 each. The company had advertised for tenders for 3000 teak sleepers on a specification which set forth that the sleepers should be of the dimensions above mentioned and should be of the following description —" Each teak sleeper to be delivered at the Terminal Buildings yard at Rayapuram must be straight, sound, and well seasoned, sawn uniformly square and to correct dimensions throughout its length, and be free from holes, shakes, cracks, sap, and other imperfections. The sleepers so delivered at Rayapuram will be inspected by an engineer deputed by the chief engineer, whose decision as to those to be accepted or rejected will be final. The sleepers which may be condemned as not complying with this specification will not be paid for, and they must be removed from our yard at your own cost within seven days of your receiving notice to do so." The price to be paid was apparently Rs.210 per ton. The appellants are large timber merchants, part of whose business it is to manufacture and supply teak sleepers. Their duly accredited agents at Madras are Messrs. Arbuthnot & Co., one of the members of which firm is Mr. F. S. Arbuthnot. Iyer, before tendering to the railway company for this contract, entered into negotiations with F. S. Arbuthnot in reference to the terms upon which they would supply him with sleepers to enable him to carry out any contract which he might make with the railway company for the supply of any portion of the sleepers required. This cannot be disputed. It is practically admitted; and, from the following letter signed by F. S. Arbuthnot and addressed to the appellants manager at Rangoon, coupled with the evidence which he gave at the trial hereafter referred to, it would rather look as if he regarded the appellants as the real contractors, and Iyer and a firm of King & Co. merely as intermediaries. The letter is Exhibit D and runs as follows — " Madras, " 22nd May, 1905. " Dear Sir, " Sleepers.—With reference to your telegram of 20th April for 3000 sleepers 12 ft. merely as intermediaries. The letter is Exhibit D and runs as follows — " Madras, " 22nd May, 1905. " Dear Sir, " Sleepers.—With reference to your telegram of 20th April for 3000 sleepers 12 ft. by 12 ins. by 7 ins. age at Rs.170 landed Madras, we have just heard unofficially that we have secured the business—1500 through King and 1500 through another dealer. This sale will be advised definitely next Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 93 week when we receive written confirmation from the buyers." Ultimately Iyer entered into a contract with the appellants through Arbuthnot & Co. for the sale to him of 1500 sleepers 12 by 12" by 7" at the rate of Rs.170 per ton (Rs.40 per ton less than the price to be paid by the railway company), landed at Madras, to be shipped from Moulmein or Rangoon at appellants option. The contract is contained in the letters which passed between the parties. It never was embodied in a formal instrument. Much controversy arose as to whether Iyer had, during his negotiations with Arbuthnot & Co., ever given to F. S. Arbuthnot, who appears to have been the member of the firm in charge of this transaction, a copy of the specification of the company on which he had tendered, thus making it the basis of his contract with them. The Chief Justice, the trial judge, was of opinion that the respondent had failed to establish that Iyer had done this. The Court of Appeal thought the contrary. A copy of the specification in the form of a letter (marked Exhibit A), signed by the chief engineer of the company, and addressed to Messrs. Arbuthnot & Co., was, on search, subsequently found amongst the papers of Mr. F. S. Arbuthnot. This gentleman stated on his examination that he knew nothing about this letter till after the suit was instituted. He admits it bears his signature, as well as those of Mr. Young and M. Arbuthnot (members of the firm), and also of a Mr. Peebles. All letters, he states, came to him in the ordinary course of business, and this letter after having been initialled was sent down to be placed among the records of the office. He adds " My firm did not tender. King & Co. did not tender. Young and M. Arbuthnot (members of the firm), and also of a Mr. Peebles. All letters, he states, came to him in the ordinary course of business, and this letter after having been initialled was sent down to be placed among the records of the office. He adds " My firm did not tender. King & Co. did not tender. They procured the 1500 through my firm. I knew they (the sleepers) were required for the Madras Railway. I think it is probable I was told they were for the purpose of the contract for 3000 with the Madras Railway. I expect I added 1500 and 1500 together." Lower down on the same page he states that their firm considered they had the control of the Madras Railway contract, that they had power to select the person who was to have the order, that Chinnappa Iyer unlike King & Co. (who would not take sleepers from Moulmein) had not been doing business with them regularly, and that they had only selected him because they had been asked by one Dubash of the import department to give him a chance. Their Lordships think it unnecessary to decide this point as to the alleged delivery of the copy specification to F. S. Arbuthnot by Iyer for these reasons First, because they concur in the opinion expressed by the Court of Appeal that" the evidence shews that Exhibit A (the copy specification) merely contains an enumeration of the qualities of a good sleeper usually insisted on by railway authorities," and secondly because the appellants, having through their agents been fully informed of the purpose for which Iyer purchased these sleepers from them, must be taken to have impliedly warranted that they were reasonably fit for that purpose, and thirdly because they think that a sleeper whose qualities are inferior to those " of a good sleeper, as usually insisted upon by railway authorities," cannot well be considered to be a sleeper of the dimensions specified reasonably fit for use by the Madras Railway Company. The point therefore becomes, in their Lordships view, irrelevant. The point therefore becomes, in their Lordships view, irrelevant. One of the letters forming the written contract with Iyer, namely that dated May 23, 1905, written by Arbuthnot and addressed to Iyer, contains the following paragraph — " The passing of our Moulmein or Rangoon friends, the Bombay-Burma Trading Corporation, Limited, is as usual final as regards both measurement and quality, which please take note." In their Lordships view the defence of the appellants to the claim made against them will ultimately be found to rest upon this paragraph, the rights it confers, and the manner in which those rights have been exercised. The first question is as to its true construction. What does it mean ? It cannot mean that the appellants were entitled to deliver under the contract any kind of sleeper they chose . It must have contemplated that there was some standard with which these sleepers should be compared. That Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 94 standard must at the lowest have been the standard set up, expressly or impliedly, by the contract between the parties; that was the specification, or at the least the requirement that the sleepers were reasonably fit, as sleepers of the dimensions described, for use by the Madras Railway Company. So that the right conferred upon the appellants amounted merely to the right to determine by and through the skilled and experienced persons whom they should necessarily employ for the purpose, acting honestly and impartially according to the best of their judgment, whether the goods supplied were in conformity with the requirements of the contract under which they were so supplied. So much as to the contract entered into between the appellants and Chinnappa Iyer. Some short time after that event, and before any sleepers had been delivered, Iyer, finding himself unable to pay the deposit stipulated for in his contract, with the consent of the appellants and of the railway company, transferred to the respondent the benefit of his contracts with both com panies and procured the latter to be accepted in both in his stead. A formal agreement was drawn up between the respondent and the railway company and was duly executed by both. A formal agreement was drawn up between the respondent and the railway company and was duly executed by both. It is dated June 19, 1905, and the description of the sleepers to be supplied contained in it differs from that contained in Exhibit A in this, that the words "from teakwood " are inserted in the agreement after the word " sawn." In other respects the descriptions were identical. There was much controversy on the point as to whether, whatever the precise contract between the appellants and Iyer may have been, new terms were not, on the occasion of this transfer, added to it, and the stipulation made then, if not before, that the sleepers supplied should conform to the specification of the railway company. The question turns upon the two letters following, dated respectively June 16 and 21, 1905, and three paragraphs from a letter of Arbuthnot & Co., dated the 23rd of the same month, coupled with the evidence of F. S. Arbuthnot on the point. The letters are as follows " Madras, 16th June, 1905. " Mr. Ago, Mahomed Khaleel Shirazi, " 36-37, Ungappa Naick Street, “Madras. “Dear Sir, We are in receipt of your letter of to-days date enclosing original letter from M. Chinnappa Iyer from winch we note that he has transferred to you his contract with Madras Railway for 1500 sleepers 12 X 12" X 7", for which he has contracted with us at Rs.170 per ton, landed Madras. To this we agree, on condition that you send us by return your cheque for the deposit due, Rs.8925, all other terms and conditions as mentioned in our various letters to M. Chinnappa Iyer. You ask us to allow interest on the deposit, but this is only granted to our two very large contractors, and on account of the troubles which M. Chinnappa Iyer has given us over this contract we are not disposed to make an exception in his favour. As, however, the contract is now transferred to you, as a special case we agree to allow you interest on the deposit at the rate of 5% per annum, hit on the condition only that each shipment of sleepers arriving for you is paid for in full immediately on arrival. " Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 95 “Yours faithfully, " Per pro. " Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 95 “Yours faithfully, " Per pro. Arbuthnot & Co., " (Signed) F. S. Arbuthnot, " Agents, B. B. T. C. (Ltd.)." " 36-37, Ungappa Naick Street, Madras, 21st June, 1905. "To " Messrs. Arbuthnot & Co., " Agents, B. B. T. C, Limited, " Madras. " Dear Sirs, " In your letter of the 16th instant you said that the terms and conditions are as mentioned in your letters with Mr. M. Chinnappa Iyer. On my enquiry he said that the conditions are this (i.e.) the teak sleepers of 750, 12 X 12" X 7" should be delivered in the month of October and the remainder of 750 in March next. The same should be taken delivery within a month, if it exceeds a month, an interest of 9% should be charged. The teak sleepers must be delivered as per railway specification which was sent to you by Mr. M. Chinnappa Iyer, an interest of 5°/o must be allowed on deposit money. On these conditions I herein enclose you a cheque on Chartered Bank of India, Australia, and China for Rs.8925 (eight thousand nine hundred and twenty-five). An early reply with the receipt is solicited. " I am, Sirs, " Yours faithfully, " (Signed) Mahomed Khaleel Shirazi." " Madras, 23rd June 1905. " Mr. Aga Mahomed Khaleel Shirazi, " 36-37, Ungappa Naick Street, " Madras. “ Dear Sir, “We are in receipt of your letter of 21st instant enclosing a cheque on the Chartered Bank of India, Australia, and China for Rs.8925, which has been placed to the credit of your account as a deposit Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 96 against the order of M. Chinnappa Iyer (now transferred to you) for 1500 sleepers 12 X 12" X 7" at Rs.170 per ton landed Madras. " As regards the terms of delivery M. Chinnappa Iyer is under a misapprehension. We have never undertaken to deliver 750 sleepers in September and 750 in March next, nor could we under any circumstance bind ourselves to deliver the sleepers precisely in the months specified by you. We have, however, informed our friends of the delivery which would suit you best. We have never undertaken to deliver 750 sleepers in September and 750 in March next, nor could we under any circumstance bind ourselves to deliver the sleepers precisely in the months specified by you. We have, however, informed our friends of the delivery which would suit you best. " As regards other terms, the passing of our friends the Bombay-Burmah Trading Corporation, Limited, either at Rangoon or Moulmein (whichever port shipment may be made from) is as usual final as regards both measurement and quality. No exception is ever made to this rule . . . . " Mr. Arbuthnots evidence is in substance to the effect that he considered the third paragraph of this letter of June 23 a contradiction of the statement contained in the letter to which it was a reply as to the obligation to deliver sleepers according to the way specification, but not as a contradiction of Iyers allegation that the specification had been sent to him. The evidence of this gentleman on this point cannot be regarded as satisfactory ; but having regard to the view which their Lordships have taken as to the true nature of the implied warranty to be imported into the written contract, the point so much discussed is, they think, as already stated, irrelevant. There is not and cannot be any pretence for the suggestion that the sleepers supplied were in fact either in conformity with the specification, or were reasonably fit to be used as sleepers of the specified dimensions by the Madras Railway Company. Of the 748 sleepers delivered by the appellants on Sep tember 8 no less than 593 were rejected by that company, and of the 600 delivered on December 9, 1905, no less than 513 were" rejected, and as to the balance of the 1500 the contract was rescinded by mutual consent. The real defence, therefore, of the appellants is rested upon the alleged fact that the sleepers delivered were passed by the two expert persons they employed for the purpose in the impartial and honest exercise of their judgment. On examining the evidence of these witnesses, James McGeorge and William Pyne, however, it clearly appears that they did not correctly appreciate the position in which they had been placed, or the true nature of the task they were appointed to perform. On examining the evidence of these witnesses, James McGeorge and William Pyne, however, it clearly appears that they did not correctly appreciate the position in which they had been placed, or the true nature of the task they were appointed to perform. They were in truth constituted judges or arbitrators to decide upon a matter in which the interests of the two contracting parties were in conflict. They were the employees of one of these parties. That would render their task all the more delicate and difficult, and would make it all the more incumbent upon them to take care to avoid even the appearance of injustice to the respondent. Well, in the first place Mr. McGeorge had scarcely had skill and experience sufficient for the work he was put to do. And in addition neither he nor his colleague was ever supplied with the materials necessary to enable him to do it. He never saw the specification " A." He said he did not think he ever saw a " railway contract for sleepers." Pyne, the other witness, who was both skilled and experienced, was left in the same state of ignorance as to the contract. He never saw the specification, nor does he appear to have ever been informed what were the terms of the respondents contract with the appellants. At the bottom of page 130 he says, " Masters informed me as to dimensions and time for delivery. We had logs in stock. I had simply to go round and make suitable logs." At foot of page 131 he is reported as having said " I applied the same process of examining them as I did to them in ordinary course of business." And in reply to questions put to him by the Chief Justice he further deposed, " When I approached inspection I did so from point of view of passing goods in the ordinary routine of business as fit to be sent out." The Chief Justice finds that these men acted honestly according to the best of their skill and Law Rep. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 97 judgment. That may be so, but that is not the point. 38 Ind. App. 169 ( 1910- 1911) Bombay Burmah Trading Corpn. Ltd. v. Aga Mahomed 97 judgment. That may be so, but that is not the point. The point is that they never approached the question they had to determine, namely, the conformity of the goods supplied with the contract under which they were supplied. They never applied their minds to this. They merely determined that the sleepers were fit to be sent out as the manufacture of their employers. There was not, therefore, any " passing " of the sleepers within the meaning of the contract, and the contention of the appellants on this appeal that there was such a " passing," in their Lordships view, entirely fails. They accordingly think that the decision appealed from was right and that this appeal should be dismissed, and they will humbly advise His Majesty accordingly. The appellants must pay the costs of the appeal.