Blackburn Bobbin Co Ltd v T W Allen & Sons Ltd 20 Jun 1918 [1918] 2 KB 467, CA

Facts

In early 1914, the defendants, T. W. Allen & Sons Ltd, who were timber merchants in Hull, agreed to sell 70 standards of Finland birch timber to the plaintiffs, Blackburn Bobbin Co. Ltd. The delivery was to be free on rail at Hull. It was the normal course of business for English timber merchants like the defendants to import timber from Finland and hold it in stock. However, at the time of the contract, the defendants had no stock of Finland birch timber and intended to fulfil the contract by sourcing it directly from their supplier in Finland for shipment. The plaintiffs were unaware of the defendants’ specific sourcing arrangements and believed they were purchasing from the defendants’ existing stock. Following the outbreak of the First World War in August 1914, military operations by Germany, particularly in the Baltic Sea, cut off England from Finland, making further timber imports impossible. The defendants had not yet secured the timber and consequently failed to deliver it, citing the impossibility of performance.

Issues

The central legal issue was whether the contract was frustrated by the supervening event of war, which prevented the defendants from sourcing the timber from Finland. The court had to determine if there was an implied condition in the contract that the timber would be available from Finland, such that its unavailability would discharge both parties from their obligations. The key question was whether the continued possibility of sourcing goods from a particular country, unknown to the buyer, could be considered a fundamental assumption upon which the contract was based.

Judgment

The Court of Appeal, affirming the decision of McCardie J., held that the contract was not frustrated and that the defendants were liable for damages for non-delivery.

Reasoning of the Court

The court drew a critical distinction between a contract for the sale of specific, identified goods and a contract for the sale of unascertained, or generic, goods. In cases like Taylor v. Caldwell, where the subject matter (a specific music hall) was destroyed, the contract was deemed frustrated because its performance was physically and fundamentally impossible. However, the present case concerned unascertained goods (Finland birch timber). The sellers had made an unqualified agreement to supply these goods. The method by which they intended to procure them was a matter for them alone and was not a term of the contract or a shared underlying assumption. The buyers were not concerned with, and had no knowledge of, the sellers’ specific supply chain arrangements.

Lord Justice Scrutton provided the leading judgment, articulating a clear principle for the allocation of risk in such commercial transactions. He reasoned that the onus is on the seller, who makes an absolute promise, to protect themselves against unforeseen events through express contractual clauses.

The plaintiffs bought from the defendants a certain quantity of Finland birch timber. They were not concerned as to the source from which the defendants obtained it. The defendants, it is true, had in their mind that they would get it from a particular place in a particular way, but the plaintiffs did not know that. From the point of view of the plaintiffs the timber was merely unascertained goods. The defendants’ contract was to deliver the timber at Hull, and it was their business to get it there. … This is a case of sale of unascertained goods. The seller has not protected himself by any clause as to war, strikes, or other contingencies. He has undertaken to deliver a certain quantity of goods, and he is not able to do so. Why should he be excused? … I see no reason why a seller of goods, who has not protected himself by war, or other clauses, should be able to say, because he had intended to get the goods from a particular source which is now not available, that he is excused from his contract.

The court concluded that the interruption of the sellers’ intended source of supply did not destroy the foundation of the contract itself. The subject matter was ‘Finland birch timber,’ not ‘timber to be shipped from Finland in the summer of 1914.’ The defendants bore the commercial risk of sourcing the goods to meet their contractual obligation.

Implications

This decision is a cornerstone authority on the limits of the doctrine of frustration in the context of the sale of unascertained goods. It establishes that a seller’s private intention or usual method for sourcing generic goods is not, by itself, a fundamental basis of the contract. For frustration to apply in such cases, the contract must be for goods from a specific source known to and agreed by both parties. The case underscores the commercial importance of including force majeure clauses in contracts to allocate the risk of supervening events, such as war, strikes, or supply chain failures. It reinforces the principle of commercial certainty by holding parties to their absolute promises unless performance becomes legally or physically impossible in a manner that undermines the contract’s core purpose, rather than just making one party’s chosen method of performance more difficult or expensive.

Verdict: The appeal was dismissed; the sellers were held liable for breach of contract.

Source: Blackburn Bobbin Co Ltd v T W Allen & Sons Ltd 20 Jun 1918 [1918] 2 KB 467, CA