Where there was a written contract for the delivery of a certain
number of barrels of flour at a given price, to be delivered within
a named time at the seller's option, and evidence was offered by
the purchaser of an usage existing that a margin should be put up,
the court below was right in refusing to, allow this evidence to go
to the jury because it was too indefinite and uncertain to
establish an usage.
And moreover, if the usage existed, the proof would have been
inadmissible to affect the construction of the contract, in which
there was no ambiguity or doubt on the face of the instrument.
Any parol evidence of conversations or of an understanding of
the parties that the contract was made subject to such an usage was
inadmissible, as these were merged in the written instrument.
The contract was made in Baltimore, between the purchasers and
an agent of the seller, the seller residing in New York. The
latter, and not the agent, was bound to bring the suit, as the
character of the agent was disclosed on the face of the contract.
There is no distinction in the principle governing agencies of this
description between the cases of a home or foreign principal.
This was an action of assumpsit brought by Ford, a citizen of
New York, against Oelricks & Lurman, merchants of Baltimore,
upon a contract in writing made by the defendants, who agreed to
purchase from Bell, agent for Ford, ten thousand barrels of flour,
deliverable at seller's option at the prices
Page 64 U. S. 50
and upon the terms stated in the contract, which is fully set
forth in the opinion of the Court and need not be repeated. Ballard
was the broker who made the contract on behalf of Oelricks &
Lurman.
The evidence given upon the trial by the plaintiff and
defendants was very voluminous, and was both oral and written.
The points of law which arose in the case will be manifest from
the prayers to the court offered by the counsel for the plaintiff
and from the instructions to the jury given by the court, which
were as follows:
1. That the evidence in this case is insufficient to authorize
the jury to find that there is an usage in the City of Baltimore
with regard to contracts for the sale of merchandise to be
delivered at a future time by which the defendants were authorized
to annul the contract bearing date the 7th November, 1855, given in
evidence, upon the failure of the plaintiff to put up a margin in
money, as security for its performance, in compliance with the
demand contained in the letter of the witness, Ballard, to J. W.
Bell, of the 21st December, given in evidence.
2. That such an usage, if found by them to exist, is invalid and
not binding, because it is unreasonable.
3. That evidence of such an usage, if it should be established
by competent evidence and be held reasonable by the court, is
inadmissible in this case because it contradicts or waives the
written contract dated the 7th November, 1855, given in
evidence.
4. That if the jury find that before the 21st day of December,
1855, J. W. Bell had left the City of Baltimore without authorizing
any person to represent him in his absence, and have never since
returned, the letters of the witness, Ballard, of the 21st and 24th
December, 1855, left at the former place of business of said Bell,
as proved by the said Ballard, did not affect the plaintiff with
notice of the demand for a margin mentioned in said letters, even
if, under any usage or contract, the defendants were authorized to
make such demand.
5. That if the jury find that the witness, Ballard, reduced the
said contract, dated the 7th November, and given in evidence,
Page 64 U. S. 51
to writing, at the request of the defendant Lurman, and that
said Ballard signed two copies of the same and procured the
approval of the defendants, and of Bell, as agent of the plaintiff,
to the same, by their signatures thereto, and delivered one of the
said contracts to the defendants, and the other, which has been
given in evidence by the plaintiff, to said Bell, and shall further
find all this was done on the 23d November, 1855, after the
interview at the Exchange between the defendant, Lurman, and the
said Bell, spoken of by the witness, Ballard, and shall also find
that at said interview the defendant Lurman declined to have the
clause inserted in said contract having reference to putting up a
margin, and if the jury find that said Bell, upon the 12th and 15th
December, delivered 2,000 barrels of flour under said contract,
which were received by the defendants and paid for by them, and if
the jury shall further find that the plaintiff offered to deliver,
and was prepared and willing to deliver, the balance of the 8,000
barrels contracted to be delivered under said contract at the times
and at the prices testified to by the witnesses of the plaintiff,
and that the defendants refused to receive the same, then the
plaintiff is entitled to recover in this suit the difference
between the price of flour mentioned in said contract $9.25 and the
market value of the parcels of flour tendered by the plaintiff on
the days on which they were respectively tendered, with interest
thereon from such periods respectively. But the court rejected the
prayers of the plaintiff, and each of them, and in lieu of them
granted the following instructions to the jury:
"1. If the jury shall find from the evidence in this case that
the defendants entered into the written contract dated the 7th of
November, 1855, which has been offered in evidence, and that the
plaintiff offered to deliver to the defendants in the months of
January and February, 1856, eight thousand barrels of flour in
pursuance of the stipulations of said contract and in the mode
therein pointed out, and that when said offers were made by the
said plaintiff, he had the requisite amount of flour to comply in
good faith with said offers, and could have delivered the same if
the defendants had been
Page 64 U. S. 52
willing to receive the same, and shall further find that the
defendants wholly refused to receive and pay for said flour
according to the terms of said contract, then the plaintiff is
entitled to recover such damages as the jury may find from the
evidence he has suffered from said refusal of defendants to execute
the said contract on their part."
"2. The rule of damages in this case is the difference between
the contract price of the flour and the market value in the City of
Baltimore of the same on the several days on which the plaintiff
offered to deliver the same in accordance with the provisions of
said contract, with interest on such sum in the discretion of the
jury."
To the granting of which instructions the defendants prayed
leave to except, and upon this exception the case came up to this
Court.
Page 64 U. S. 59
MR. JUSTICE NELSON delivered the opinion of the Court.
This is a writ of error to the Circuit Court of the United
States for the District of Maryland.
The suit was brought by Ford against the defendants in the court
below upon the following contract:
"BALTIMORE, November 7, 1855"
"For and in consideration of one dollar, the receipt whereof is
hereby acknowledged, I have this day purchased from J. W. Bell,
agent for Benjamin Ford, New York, for account of Oelricks &
Lurman, Baltimore, ten thousand barrels superfine Howard Street or
Ohio flour, deliverable, at seller's option, in lots of five
hundred barrels, each lot subject to three days' notice of delivery
and payable on delivery at the rate of nine dollars and twenty-five
cents per barrel,
viz.: "
Page 64 U. S. 60
2,000 barrels, seller's option, all December, 1855
4,000 " " " January, 1856
4,000 " " " February, 1856
------
10,000
"L. E. BALLARD, Broker"
"Approved:"
"OELRICKS & LURMAN"
The 2,000 barrels deliverable in December were delivered,
accepted, and paid for as per contract. The 4,000 barrels to be
delivered in each of the months of January and February were duly
tendered to the defendants and payments demanded, and which were
refused.
The only objection to the acceptance of the flour at the time
tendered was the refusal of Ford to a demand made upon his agent to
deposit $5,000 in one of the banks in Baltimore to secure the
punctual delivery of the flour at the time mentioned. This demand
for a deposit of money was denied by the plaintiff on the ground
that the contract contained no such stipulation.
After much testimony given by both parties on the trial on the
subject of a usage among the dealers in flour in the City of
Baltimore to demand on time contracts a deposit of money, or
margin, as it is called, and the right to rescind the contract if
refused, the court charged the jury that if they shall find from
the evidence the defendants entered into the contract given in
evidence, and that the plaintiff offered to deliver the flour
therein mentioned according to its terms, and that when the offer
was made, he had the requisite quantity of flour to comply with the
contract, and could have delivered it if the defendants had been
willing to receive it, and that they had refused, then the
plaintiff was entitled to recover. The court further instructed the
jury that the rule of damages was the difference between the
contract price of the flour and the market value in the City of
Baltimore on the several days of the tenders, with interest on this
sum, in the discretion of the jury. The jury found for the
plaintiff.
Page 64 U. S. 61
One of the principal grounds of objection to the ruling of the
court is its refusal to submit the question of usage which was the
subject of evidence on the trial to the jury.
The witnesses introduced by the defendants to prove the usage
speak in a very qualified manner as to its existence, as well as to
the instances in which they have known it to have been adopted or
acquiesced in, and all of them admit they have no knowledge that it
was general among the dealers. Some of them state that they
recognized and had acted upon a custom in their own business under
which either party to the contract might require a margin to a
reasonable amount, to be put up to secure the performance, and that
the contract might be rescinded if the party refused; that they
could not say such was the general custom; that different persons
have different customs; some consider there is such a usage and
some do not. One witness states that he had at all times in his
business considered it to be a right which might be exercised by
either party to a time contract whenever he apprehended a risk;
that if the party was solvent, he supposed there was no right to
demand it; another that in his business he had always considered
such contracts to be subject to the right of either party to demand
the margin; that the occasion of exercising it was rare, as
contracts made by his house were made with responsible persons;
that he did not know that this was a general usage in Baltimore.
The broker who negotiated the contract for the defendants states
that he considered it a clearly understood right of both parties to
such contracts to demand a margin to a reasonable amount; that he
entertained the belief from conversations with various merchants on
the subject; that he recollected but one instance where, when the
demand was made, the margin was put up, which was a margin of
twenty-five cents on the barrel in a contract for 500 barrels.
There were ten witnesses, flour merchants for many years in the
city, who state that they knew of no such usage.
It will thus be seen from a careful analysis of the evidence
that the defendants wholly failed to prove any general or
established usage or custom of the trade in Baltimore, as claimed
in the defense. Every witness called on their behalf fails to
Page 64 U. S. 62
prove facts essential to make out the custom in the sense of the
law; on the contrary, most of them expressly disprove it. They
express opinions upon the subject of a margin as a right to be
exercised in their own business, but admit that it is not founded
upon any general usage, and none of them speaks of its having been
claimed or exercised in his own business but in one or two
instances. Whether a usage or custom of the kind set up existed in
the trade in Baltimore was a question of fact to be proved by
persons who had a knowledge of it from dealing in the article of
flour. Opinions of persons as to what rights they might exercise in
their own business in respect to time contracts fall far short of
any legal proof of the fact, especially when they admit that there
was no general usage of the kind known to them.
Then as to the precise limit or character of the custom claimed,
the opinions of the witnesses are various and indefinite. The
margin, they say, must be reasonable, but the pretended usage
contains no rule by which a reasonable margin may be determined. It
is said the amount may be referred to merchants. But there is no
evidence that this is a part of the custom, or that any such mode
of adjusting it ever occurred in the trade. Some of the witnesses
state that the margin must be a sum of money sufficient to make the
party safe according to the state of the market. One states that at
the time the demand was made in this case for a margin, flour had
fallen, and the price lower than the price in the contract; yet
this, in his judgment, did not affect the right to make the demand,
as the general opinion among dealers was that the price would
advance; that there were great fluctuations in the price, and that,
in such a condition of things, a reasonable margin would depend
upon the extent and character of the fluctuations, and upon the
speculative ideas of the future value of flour.
The broker of the defendants, who purchased this flour, states
his view of the reasonableness of the margin, which is the
difference between the intrinsic value of the flour and its
speculative value; by intrinsic value, he says he means the cost of
the production, and by speculative value, the price at
Page 64 U. S. 63
which it was rating above its intrinsic value; and to a question
what, in his opinion, would be a reasonable margin under the
custom, when flour in the market was lower than the contract price,
he answered, that he considered the demand reasonable in this case,
because he believed flour was going up to twelve dollars per
barrel. It would be difficult to describe a custom more indefinite
and unsettled.
But, independently of the total insufficiency of the evidence to
establish the usage, we are satisfied, if it existed, the proof
would have been inadmissible to affect the construction of the
contract. This proof is admissible in the absence of express
stipulations, or where the meaning of the parties is uncertain upon
the language used, and where the usage of the trade to which the
contract relates, or with reference to which it was made, may
afford explanation, and supply deficiencies in the instrument.
Technical, local, or doubtful words may be thus explained. So where
stipulations in the contract refer to matters outside of the
instrument, parol proof of extraneous facts may be necessary to
interpret their meaning. As a general rule, there must be ambiguity
or uncertainty upon the face of the written instrument arising out
of the terms used by the parties in order to justify the extraneous
evidence, and, when admissible, it must be limited in its effect to
the clearing up of the obscurity. It is not admissible to add to or
engraft upon the contract new stipulations, not to contradict those
which are plain. 2 Kent Com. 556; 3
id. 260, and note; 1
Greenl.Ev., sec. 295; 2 Cr. and J. 249, 250;
55 U. S. 14
How. 445
Applying these principles to the contract before us, it is quite
clear that the proof of the usage attempted to be established was
inadmissible, and should have been rejected. There is no ambiguity
or uncertainty in its terms or stipulations, and the condition
sought to be annexed was not by way of explanation or
interpretation, but in addition to the contract. The plaintiff
agrees to deliver a given number of barrels of flour on certain
days, at the price of $9.25 per barrel, in consideration of which
the defendants agree to receive the flour, and pay the price. This
is the substance of the written contract. But the
Page 64 U. S. 64
defendants insist that besides the obligations arising out of
the written instrument, the plaintiff is under an additional
obligation to give security, whenever called upon, for the faithful
performance, and this by the deposit in bank of the sum of $5,000.
The written instrument bound only the personal responsibility of
the plaintiff; the parol evidence seeks to superadd not a
responsible name as a surety, but in effect the same thing, a given
sum of money. The parol proof not only adds to the written
instrument, but is repugnant to the legal effect of it.
It was also urged on the argument that this contract was entered
into between the defendants and the agent of the plaintiff with the
understanding at the time that it should be subject to the usage;
but the answer to this is that no such usage existed, and if it did
the terms of the contract exclude it. Any conversations and verbal
understanding between the parties at the time were merged in the
contract, and parol evidence inadmissible to engraft them upon
it.
We are satisfied the court below was right in excluding the
consideration of the evidence of the usage from the jury 1, because
the usage was not proved, and 2, if it had been, it was incompetent
to vary the clear and positive terms of the instrument.
An objection has been taken on the argument which was not
presented to the court below, but which, it is insisted, is
involved in the exception to the charge, and that is, inasmuch as
it appears upon the evidence that the plaintiff was a resident of
New York and the contract made at Baltimore in the State of
Maryland by an agent, the presumption of law is that the credit was
given exclusively to the agent, the principal being the resident of
a foreign state, and hence that the contract, in legal effect, was
made with the agent, and not with the principal, and the former
should have brought the suit.
This doctrine is laid down by judge Story in his work on agency,
and which was supposed to be the doctrine of the English courts at
the time, and founded upon adjudged cases. Story on Agency, sec.
268 and note; secs. 290, 423. It did
Page 64 U. S. 65
not, however, at the time receive the assent of some of the
courts and jurists of this country. 2 Kent's Com. 630, 631, and
note; 22 Wend. 224; 3 Hill. 72. And the doctrine has recently been
explained, and judge Story's rule rejected, by the English courts.
In the case of
Green v. Kope, 36 Eng.L. & Eq. 396,
399, 1856, the court denied that there was any distinction, as it
respected the personal liability of the agent, whether the
principal was English or a foreigner. The Chief justice observed:
"It is in all cases a question of intention from the contract,
explained by the surrounding circumstances, such as the custom or
usage of the trade when such exists. No usage," he observed, "was
proved in the present case, and I believe none could have been
proved." Again he observed:
"It would be ridiculous to suppose that an agent, for a
commission of one-half percent, is to guaranty the performance of a
contract for the shipment of 1,000 barrels of tar."
The case was finally put upon the intent of the parties, as
derived from the construction of the contract, and which was that
the defendant contracted only as agent, and not to make himself
personally liable. Willes, J., doubted if evidence of custom was
admissible to qualify the express words of the contract, so as to
make the agent liable.
See also 14 Com.B. 390;
Mahoney v. Kekule, 5
Ellis & Black 125, 130.
In the present case, the broker's note, and which is approved by
the defendants, affixing the firm name, is too clear upon the face
of it to admit of doubt as to the person with whom the contract was
made. The purchase is from "J. W. Bell, agent for Benjamin Ford, of
New York," and the case shows that Bell had full authority. The
name of the principal is disclosed in the contract, and the place
of his residence, as the person making the sale of the flour,
through his agent. This fixes the duty of performance upon him and
exonerates the agent.
The judgment of the court below affirmed.
