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(298 Fed. 878.)

which the defendant accepted and
paid for. Thereafter certain corre-
spondence by letter and telegram
took place between the parties, from
which it appears that on July 30,
1920, the defendant wrote to plain-
tiff at Detroit and requested a can-
celation of the contract on account
of business conditions, stating that
there was a great quantity of sugar
in the state of Iowa and a poor de-
mand. This request was refused.
Thereafter, in other letters and tele-
grams between the parties, the de-
fendant stated it would not accept
any more sugar, and declared un-
equivocally that it would not accept
any, if shipped. The plaintiffs in-
sisted all along that they would ship
in accordance with the agreement,
and that, if the sugar was not taken,
it would be sold for the defendant's
account. Thereafter the plaintiff
shipped the balance of 1,800 bags of
the quality and in the manner
called for, and drew sight drafts for
it on defendant. The sugar arrived
at Des Moines on September 9th.
The defendant refused to accept it
or pay the drafts. The plaintiff
The plaintiff
then sold it for the account of de-
fendant, and brought this action to
recover the difference between the
contract price of the 1,800 bags and
the amount realized from the sale,
plus freight, interest, and demur-

rage.

The defense may be summarized as follows: That when the contract was entered into, and for several months prior thereto, the sugar market was "wild," due to a supposed shortage, and the price rose steadily to unprecedented heights. That the defendant understood and believed the meaning and sense of the provision of the contract set out above was understood and intended by the plaintiffs and the defendant that, should there be an abrupt and material rise in the price of sugar prior to the filling of the orders by the plaintiffs, whereby performance would cause plaintiffs material loss, they would be excused, and, for the same reason, if there should be an abrupt and material decline in

the price of sugar, whereby the tak-
ing of said sugar would cause the
defendant material loss, then, in that
event, the defendant would be re-
lieved from accepting or paying for
the sugar. That on this understand-
ing, and no other, the defendant
signed the contract.

Other evidence was introduced,
from which it appears that the plain-
tiff had purchased from other par-
ties on June 3, a large quantity of
sugar at 27 cents, in order to fulfil
its contract with the defendant.
That the defendant, between July
30th and October 15th, purchased
2,750 bags of cane sugar, most of it
in September, at a price less than
that called for in its contract with
Edgar, and handled a total of 6,733
bags during that period, and at all
times continued to buy sugar and
supply their usual trade, selling
sugar in August, for instance, at .
$21 per hundred weight, about the
time it wrote Edgar it would accept
no more. Its sugar business during
this time was 40 per cent of normal.
It is undisputed that the price of
sugar began its advance in the fall
of 1919 and went to 14 cents in
January. In March or April it start-
ed up again and was quoted at 30
cents in June, 1920. Then followed
a sudden break in the price, and
a continual and material decline
through the balance of the year, to
7 cents in January, 1921. The stip-
ulation states that at the time the
defendant refused to perform, the
market price of the quality specified
in the contract was $22.50 per 100
pounds.

At the conclusion of the case the defendant moved for a directed verdict on the grounds, among others, that "the record in this case affirmatively established as a matter of law that on August 5, 1920, that being the date when the defendant categorically refused to receive of plaintiff any further sugar, it had become commercially impracticable. That the defendant had further notified the plaintiff that it would not accept any further sugar, and hence, under the terms of the contract be

tween the parties, the defendant, under the terms of the contract, was relieved from accepting any further sugar; it having given such notice prior to the consignment of the second shipment of sugar. It affirmatively appears as a matter of law that on the 1st day of August, 1920, the price of sugar, both at the point of delivery, which was New Orleans, and also in Iowa, was materially less than the contract price, and that the market steadily declined from day to day and from week to week throughout said month, and thereafter declined continually until the end of the year. That as a matter of law it thereby became and was commercially impracticable for the defendant to take said sugar, and it was hence relieved under the terms of the contract."

This motion was properly denied. The plaintiff requested an instruction, among others, that the verdict should be for the plaintiff. It was refused, and proper exceptions taken. The trial court asked the jury to determine whether or not, on or about August 5, 1920, "business conditions and other extraneous causes" were such as to render the performance of the contract commercially impracticable, and directed that should they answer this question in the affirmative, then to find for the defendant. The jury answered this special interrogatory, "Yes," and judgment was entered accordingly.

After reviewing this record, we think it fair to say that the only motive or excuse offered by the defendant for declining to accept the second consignment is that, between the date of the contract and the performance, the price broke sharply, and it became very evident that the defendant could not resell, except at a loss. The market in Iowa, where it did business, was overstocked, and the public and dealers were curtailing purchases, due, no doubt, to the extremely high price of the commodity, even after the first break in price. There is no allegation, however, that the per

formance would have crippled the defendant financially. It is admitted that it was able to perform its engagements and continued so to do.

It is material to note that, when this contract was entered into, both parties had knowledge that the price had soared to unheard-of figures, several times the price that obtained under normal conditions, which would be 7 to 8 cents. Therefore it may be said that they were engaged not in dealing in a commodity, but in a highly speculative venture, and with their eyes open undertook a gamble which necessarily could have no other result than a big profit to one and a corresponding loss to the other, depending on the way the market went. Both were experienced in this business, and must have known that, although the market might continue to soar, eventually the inexorable working of economic laws would cause a break as sharp and sensational as the rise had been. If this premise is true, neither party can be heard to complain that they did not anticipate what in fact happened, and which as a matter of law must have been in the contemplation of the parties on June 9th. The contract was less than sixty days old when defendant repudiated it. On July 30th the defendant made a request for cancelation that admittedly was not a rescission or exercise of any right under the contract. No change in conditions is shown from this date until the defendant formally breached the contract less than a week later.

It would seem that the defendant was logically forced to take the position it did, to wit, that, because sugar sold at $22.50 per 100 pounds at a time when its contract compelled it to pay $25.50, it was excused from performance. Is this a violent fluctuation, in view of the conditions that had existed in the sugar market, according to the defendant's answer, for nearly a year prior to the contract? Did any material factor enter into the sugar

(298 Fed. 878.)

business that was not present, or could not have been reasonably anticipated, when the contract was signed? Millions of dollars' worth of business is done and large profits and losses taken every day in reliance on agreements, written and oral, and, for courts to allow the obligation of contract to be treated lightly, and disregarded every time either of the parties thereto find they have entered into a bad bargain, would result in chaos, and rightly bring the administration of justice into disrepute.

The defendant has not shown that this unusual term or expression, "commercially impracticable," had some definite recognized meaning in the trade within which it brought itself. Further, it is undisputed that the defendant continued to supply its usual trade at current market prices, for which it obtained large quantities of sugar from sources other than the plaintiff at a slightly lower price. The clause, therefore, cannot be Sale-provision defined as claimed mercial imprac- by the defendant. construction. So there was no

against com

ticability

question for the jury, and plaintiff's request for an instructed verdict should have been granted.

This conclusion necessitates the consideration of another question; to wit, the measure of damages. As the jury found for the defendant, it might be said to be moot; but, as our decision on the first question requires that damages be assessed, a final settlement of this litigation will be expedited if we indicate our views on it. The plaintiff's fourteenth requested instruction-which was properly refused-asked the court to charge that it was entitled to recover the difference between the contract price and the price actually realized, plus freight and storage charges, provided the jury found that, in incurring and paying such charges, it was acting with ordinary, reasonable care and diligence to protect the defendant against unnecessary loss. The court

38 A.L.R.-14.

charged as follows: "So, if under all the circumstances you find that the plaintiffs, when they got notice, absolute notice, of the refusal of the defendants to take the goods, could have saved part of the loss, though small, by selling at that time and place, or if they could have saved a part of the loss, though small, by retaining it there instead of shipping it here in the face of directions by the defendant that it would not be taken, that amount which could have been saved by exercising such effort, even if it was nothing more than the freight, would have to be deducted from the damages they may recover."

By the great weight of authority the English doctrine of anticipatory breach has been adopted by American courts, but with some modifications. The defendant's repudiation. was absolute, so the plaintiff had the right, in the sit- -anticipatory

of seller.

uation as it then ex- breach-right
isted, either to treat
the notice as a breach and bring suit
promptly, or await the time of per-
formance and bring its action there-
after. In either event it was excused
from the necessity of performing or
being ready to perform. For an in-
teresting discussion of this question,
see Williston on Contracts, vol. 3,
pp. 2345-2391; Roehm v. Horst, 178
U. S. 1, 44 L. ed. 953, 20 Sup. Ct.
Rep. 780; 13 C. J. 651 et seq.;
United Press Asso. v. National
Newspaper Asso. (C. C. A. 8th) 150
C. C. A. 429, 237 Fed. 547.

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modity which it could have as promptly disposed of at that time as later. It was the duty of the plaintiff to take all steps that it reasonably could to mitigate the damages. Mr. Williston says on this question, supra, at page 2347: "There is a line of cases running back to 1845 which holds that, after an absolute repudiation or refusal to perform by one party to a contract, the other party cannot continue to perform and recover damages based on full performance. This rule is only a particular application of the general rule of damages that a plaintiff cannot hold a defendant liable for damages which need not have been incurred, or, as it is often stated, the plaintiff must, so far as he can without loss to himself, mitigate the damages caused by the defendant's wrongful act."

In 8 R. C. L. § 14, p. 442, it is said: "It is a fundamental rule that one who is injured in his person or property by the wrongful or negligent acts of another, whether as the result of a tort or of a breach of contract, is bound to exercise reasonable care and diligence to avoid loss or to minimize the resulting damage; and that to the extent that his damages are the result of his active and unreasonable enhancement thereof, or are due to his failure to exercise such care and diligence, he cannot recover."

This is the rule laid down in the cases supra, and 13 C. J. § 731, p. 655. Otherwise the injured party would have it in his power to inflict damages on a defendant without benefit to himself. The doctrine of anticipatory breach, according to Roehm v. Horst, 178 U. S. 1, 44 L. ed. 953, 20 Sup. Ct. Rep. 780, is based on Hochster v. De la Tour, 2 El. & Bl. 678, 118 Eng. Reprint, 922, 6 Eng. Rul. Cas. 576, where Mr. Justice Crompton, after stating that the injured party could treat the contract as at an end, stated that the latter could say: "But I will hold you liable for the damages I have sustained, and I will proceed

to make that damage as little as possible."

Therefore Chief Justice Fuller, in Roehm v. Horst, supra, says in such case the plaintiff is entitled to compensation based on what he would have suffered by the continued breach of the other party, down to the time of complete performance, "less any abatement by reason of circumstances of which he ought reasonably to have availed himself." This harmonizes with a case in this circuit, Kingman & Co. v. Western Mfg. Co. 34 C. C. A. 489, 493, 92 Fed. 490, where it is held: "(1) The measure of damages for a breach of a contract to purchase personal property is the difference between the market value and the contract price of the property at the time of the breach, if the latter be greater than the former."

It would therefore seem that the plaintiff, although he had the right to make an election as to the date of delivery, could not increase the damages by incurring unnecessary expenses, such as freight and storage, and the court should have so charged.

The judgment of the lower court is reversed, and the case remanded.

A petition for rehearing having been filed, Symes, District Judge, on July 9, 1924, handed down the following additional opinion (1 F. (2d) 220):

Counsel for defendant in error insist in their petition for a rehearing that the court should have given a definite meaning to the words "causes which render performance commercially impracticable," found in the contract for the sale and purchase of the sugar. Those words occur in the sentence reading this way: "All contracts subject to strikes, fires, transportation, and business conditions and other extraneous causes which render performance commercially impracticable." For these reasons it did not seem to us necessary to do so: (1) It did not appear from the evidence in the case, nor from the authorities

(298 Fed. 878.)

cited, nor were we able to find elsewhere a fixed meaning given to those words in the commercial world. (2) The only meaning which defendant in error insisted we should give to them was rejected, for reasons stated in our opinion.

We held that simply because sugar had dropped $3 per 100 pounds between the time the contract was made and the time of notice from the buyer to the seller that the buyer would not receive and pay for the balance of the sugar did not render performance of the contract commercially impracticable. Admittedly, the seller stood ready to deliver in compliance with his obligations to do so. When the buyer gave notice that it would not receive the sugar it did not claim that performance of the contract was commercially impracticable. On July 30 it addressed a letter to the seller, in which it requested a cancelation of the contract, and said: "We feel that you will have no trouble in placing this contract elsewhere." The seller at once wired refusal to cancel, and the buyer then gave notice that it would not accept the sugar. Inasmuch as the buyer felt that the seller would "have no trouble in placing this contract elsewhere," we confess that we felt some trouble in believing that the buyer even thought that performance of the contract was commercially impracticable then, and for that reason refused to further perform. That the contention was wholly without merit was demonstrated, we think, by the fact that the buyer then purchased elsewhere to supply its needs on a falling market and doubtless at a lower price. There was no basis for the belief, no ground on which a finding of fact could rest, that performance of this contract was commercially impracticable, in the face of the admitted fact that the buyer continued to enter into and perform like contracts for the purchase of sugar from others; and the record does not disclose that like transactions

were not being carried on through-
out the country. A transaction is
certainly not commercially imprac-
ticable of performance when like
transactions are being had and car-
If a com-
ried out in commerce.
modity is being dealt in on the
markets, no one can contend in
good faith that its purchase and
sale are commercially impracticable.
Throughout the life of this contract
the defendant was buying sugar
from others and selling it to the
retail trade. There was no em-
bargo; it moved freely from manu-
facturer to
facturer to consumer at quoted
There was
prices.
no financial
panic or restrictions that prevented
its purchase. There was neither
strike nor other cause that pre-
vented or seriously interfered with
its carriage and delivery. In short,
there was nothing that prevented,
interfered with, or retarded the
sale, purchase, delivery, and receipt
of sugar at current prices at the
time defendant refused to accept the
sugar.

The only reason assigned why defendant did not accept and pay for the sugar at the contract price was that the price declined after the contract of purchase was made. This, defendant contends, rendered "performance of the contract commercially impracticable." But we concluded that this defense was not made out; that there were no facts sustaining it or tending to sustain it. All that was needed was delivery by the sellers, which they were ready to make, and acceptance and payment by the buyer, which it refused, because sugar had fallen in price. In determining the rights of the parties to this litigation, we saw no necessity of going beyond the facts in the case. But, yielding to the insistence of counsel, we come to consider what meaning should be attributed to the

Contracts

words.

clause in the con- construction-
tract, as applied to meaning of
of
the character
transaction here presented. In the
absence of a special, fixed, and wide-
ly accepted trade meaning, words

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