Wertheim v. The Chicoutimi Pulp Company [1910] UKPC 1 (18 March 1910)

Wertheim contracted to purchase 3,000 tons of wood pulp from Chicoutimi Pulp Company for delivery between September and November 1900. Delivery was delayed until June 1901. The Privy Council held that damages for late delivery should reflect actual loss sustained, not the theoretical market price difference, as Wertheim had resold the goods at prices limiting his actual loss.

Facts

The Appellant, Sally Wertheim, a German merchant trading through Hamburg, contracted with the Respondent, The Chicoutimi Pulp Company, on 13th March 1900 for the purchase of 3,000 tons of moist wood pulp to be delivered f.o.b. at Chicoutimi between 1st September and 1st November 1900 at approximately 25s. per ton. The contract contained the words ‘si possible’ (if possible) regarding delivery timing.

The Respondents failed to deliver within the contract period, claiming their obligations under earlier contracts with other purchasers prevented delivery. The River Saguenay froze over in late November 1900, making delivery impossible until spring. The pulp was eventually delivered in June 1901.

The Appellant claimed damages under three heads: (1) delay in delivery; (2) inferior quality of pulp; and (3) deficiency in weight. The primary claim concerned delay damages.

Issues

Primary Issue

What is the proper measure of damages for late delivery of goods under a contract of sale when the buyer has resold the goods at a price higher than the market price at the time of actual delivery?

Secondary Issues

Whether the Respondents had committed a breach of contract given the ‘si possible’ clause, and whether damages should be calculated on 3,000 tons or a lesser quantity.

Judgment

The Privy Council held that the proper measure of damages was 5s. per ton, representing the difference between the market price at the time the goods should have been delivered (70s. per ton at Manchester) and the price at which the Appellant actually sold them (65s. per ton), rather than the difference between the contract-time market price and the delayed-delivery market price (42s. 6d. per ton).

Lord Atkinson, delivering the judgment, established the fundamental principle that damages for breach of contract should place the injured party in the same position as if the contract had been performed, but no better:

And it is the general intention of the law that, in giving damages for breach of contract, the party complaining should so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed.

The Court rejected the Appellant’s argument that he should receive 27s. 6d. per ton (the full market price difference), noting this would result in unjust enrichment:

One cannot but feel that the reasoning which leads to results so unjust and anomalous must be fallacious.

On the quantity issue, the Court found that the Trial Judge had correctly determined that the Respondents had sufficient stock to deliver all 3,000 tons within the contract period, and therefore damages should be calculated on the full 3,000 tons, not the 2,000 tons used by the lower court.

Legal Principles

Measure of Damages for Late Delivery

The market price rule (difference between market prices at contract delivery time and actual delivery time) is merely a presumptive measure designed to secure indemnity. When the purchaser has resold goods at a price demonstrating their actual value to him, that price rebuts the presumption and establishes the true measure of loss.

No Profit from Breach

A party cannot be permitted to make a profit from a breach of contract or be compensated for a loss never actually suffered.

Implications

This case establishes an important qualification to the market price rule for measuring damages in sale of goods cases. While the market price difference remains the standard measure, it operates as a rebuttable presumption. Where actual resale prices demonstrate that the buyer’s loss was less than the market price difference would suggest, damages must be limited to the actual loss sustained. This prevents windfall gains and ensures the compensatory purpose of contract damages is fulfilled without enabling unjust enrichment.

Verdict: Appeal dismissed but judgment amended to increase the amount awarded by £2,102 14s. 8d. (or equivalent in dollars). Damages for delay fixed at 5s. per ton on 3,000 tons, plus freight and interest. Each party to bear their own costs of the appeal.

Source: Wertheim v. The Chicoutimi Pulp Company [1910] UKPC 1 (18 March 1910)