Alpha Trading Ltd v Dunshaw-Patten Ltd [1981] Q.B. 290

Facts: Early in January 1978 the plaintiffs were aware that a Dutch company called Mueller International B.V. (‘Mueller’) were interested in purchasing about 10,000 metric tons of cement at a price of US$49.50 per metric ton c. & f. Bandarshapur or Khorramshar in Iran. Mr Brodie was acting for the plaintiffs in the matter and first contemplated that the plaintiffs would buy the cement themselves, either from the defendants or from other suppliers, and would then resell it to Mueller at a profit. Early in January 1978 certain telexes were exchanged between the plaintiffs and the defendants on that basis, namely, that the plaintiffs would buy the cement from the defendants. Subsequently, however. Mr Brodie decided that it would be more convenient and more profitable if the cement were sold direct by the defendants to Mueller through the agency of the plaintiffs. In particular, this form of transaction would avoid the necessity of two letters of credit and two performance bonds. The basis of such transaction would be that the profit which the plaintiffs would have made on a resale would be covered by the defendants, in consideration of the plaintiffs introducing Mueller to them as buyers, paying the plaintiffs commission on the sale and also making certain other payments in connection with the demurrage payable at the port of discharge. The defendants were agreeable to this new arrangement and negotiations took place between them in January and February 1978 mainly by telex, but also in part by telephone conversations between Mr Brodie and Mr Marchant Lane. Simultaneously, further negotiations took place by telex between the defendants and Mueller in relation to a contract of sale between them of which the plaintiffs were kept informed. In the upshot, two contracts were made. First, there was a contract for the sale of 10,000 metric tons of cement, c. & f. Bandarshapur, between the defendants and Mueller. Secondly, there was an agency contract between the plaintiffs and the defendants under which the plaintiffs were to be remunerated for introducing Mueller to the defendants as buyers. This remuneration was divided into three parts. First, the plaintiffs were to receive a commission of $1.50 per metric ton of the cement sold. Secondly, they were to receive 25% of the demurrage, namely, 40 cents per metric ton per day, payable by Mueller to the defendants in respect of the first 10 days of unloading. Thirdly, the plaintiffs were to be paid half the difference, amounting to five cents per metric ton, between the rate of demurrage payable by the defendants to the shipowners, and that payable by Mueller to the defendants after the first 10 days of unloading had expired. Mueller should open a letter of credit for the price of the cement, and that the defendants should provide Mueller with a 3% performance bond. These two obligations on either side were duly carried out, but the contract of sale was never implemented by the defendants. There was evidence which showed that the defendants had met a claim made against them by Mueller by forfeiting the performance bond and paying a further sum of £21,000. The only reasonable inference from this is that the defendants were either unwilling or unable to perform the contract and, accordingly, defaulted on it. Following this default in the performance of the contract by the defendants, the plaintiffs claimed that they were entitled, despite such default, to be paid the remuneration agreed under the agency contract.