Kemp and others v Baerselman

English Court of Appeal 1906

The Facts
George H. Kemp, the plaintiff was … a cake manufacturer, carrying on business at two places in
London (Annette Road, and Martineau Road), and having a depot at Cardiff. Baerselman, the
defendant, was a provision merchant.

By an agreement dated March 24, 1904, made between Kemp and Baerselman it was agreed as
follows:-
“1. Baerselman agrees to supply and Kemp agrees to accept all the fresh shell eggs
Star Wreaths or equal to Star Wreaths that he shall require for manufacturing
purposes for one year from April 1, 1904, to April 1, 1905, at … [certain specified
prices].
2. …
3. Baerselman agrees to deliver all shell eggs ... to either of Kemp's London factories
free of charge and all goods for Kemp's Cardiff depot free on rail or boat.
4. Every 14 days a statement of account is to be rendered. Payments are due two
months from the date of each delivery.
5. During the continuance of this agreement or so long as Baerselman shall continue
to supply sound fresh eggs satisfactorily to Kemp, Kemp undertakes not to purchase
eggs from any other merchant.”

In July 1904, G. H. Kemp purchased the business of a company called the National Bakery Company,
carrying on business at Brewery Road, London, and at the same time transferred this business,
together with his business at Annette Road and at Cardiff, to a new company called George Kemp
Limited. The business at Martineau Road was abandoned.

The National Bakery Company received as the purchase-money of their business $29,000 of bonds
issued by George Kemp Limited. The whole of the ordinary share capital of George Kemp Limited,
consisting of 20,000 shares of $1 each, (with the exception of seven shares) was taken by G. H.
Kemp, who acted as the manager of the amalgamated businesses.

On September 7 notice of the amalgamation was given to Baerselman. On September 17 Baerselman

wrote to Kemp, "As the whole of your business and everything belonging to you is now merged in the
limited company, by your own admission George H. Kemp as a trader is dead, and consequently the
agreement is at an end". Baerselman then refused to supply any more eggs under the agreement.

Kemp and the company George Kemp Limited as co-plaintiffs sued Baerselman for breach of contract
and claimed damages for non-delivery of eggs at Brewery Road as well as at Annette Road and at the
Cardiff depot.

The dispute was tried before Channell J. The trial judge held that under the contract Kemp was
entitled to a supply of eggs for the purposes of the business that he was carrying on at certain defined
places, and that the benefit of this agreement was assignable, and passed by the transfer of the
business to George Kemp Limited, though the liability to pay for eggs supplied remained with Kemp.
He held accordingly that the plaintiffs were entitled to recover damages for the refusal to deliver eggs
at Annette Road and at the Cardiff depot, but not in respect of the refusal to deliver at Brewery Road.

Baerselman appealed the decision of the trial judge.

Following is the decision of the Court of Appeal.

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Edited argument by counsel for the plaintiffs before the Court of Appeal
The benefit of the contract with the defendant was assignable by Kemp to the company. Tolhurst v
Associated Portland Cement Manufacturers establishes that the benefit of a mercantile contract for
the supply of goods is always assignable unless it is expressed to be personal. Here there is nothing
restricting the benefit of the contract to G. H. Kemp. The words "that he shall require for
manufacturing purposes" mean "that shall be required at Annette Road." To limit the quantity to be
supplied by reference to his personal requirements is to read into the contract something which is not
there. …

Edited argument by counsel for the defendant before the Court of Appeal
The defendant's contract was with Kemp personally. It was limited to his personal requirements -
"that he shall require." That was the only limit. The supply was not restricted to manufacture carried
on at any particular place, it was to meet his requirements "for manufacturing purposes" generally.
And it may be that under the contract, if Kemp had taken another factory in addition to those which he
had already got, and had carried on business there himself, he would have been entitled to a supply of
eggs for that additional factory. But he ceased to carry on business at all. The contract being personal
to Kemp, the benefit of it was not assignable to the company. Where there is a contract to supply
goods and the quantity to be supplied is undefined except by reference to the requirements of the
purchaser, it is obvious that the contract cannot be assigned.

[As regards the case] Tolhurst v Associated Portland Cement Manufacturers, in that case it was
indeed held that where an owner of chalk quarries contracted to supply a certain cement company
with as much chalk as the company should require for the whole of their manufacture of Portland
cement upon their land near the quarries, the benefit of that contract was assignable by the company
although the company's assigns were not mentioned in the contract.
That case is distinguishable upon the ground that there the capacity of the company's land and the
machinery thereon rather than anything personal to the company was the measure of the quantity to be
supplied.

There is [also an] additional reason for holding the contract not to be assignable. The judge below
held rightly that, in the absence of any evidence of a novation, the obligation to pay for the eggs,
assuming the contract to be still subsisting, remained with Kemp, the assignor. But the terms upon
which the businesses were amalgamated … might materially affect his capacity to pay, and by the
terms of the contract the eggs were to be supplied on credit. That consideration alone would show that
from and after the transfer of the business to George Kemp Limited, the contract was at an end.

Judgement of the Court of Appeal

Lord Alverstone C.J.
… I regret to have to differ from the trial judge Channell J., and the reasons why I differ from him are
these:
Channell J. seemed to be of opinion that, because this was a contract for the supply of an ordinary
marketable commodity like eggs, the benefit of the contract could be assigned, and that it made no
difference to the defendant who the person/s were to whom the eggs were to be supplied.
He did not anywhere in his judgment deal with clause 5 - the clause whereby the purchaser bound
himself not to buy eggs from any other persons - and did not sufficiently consider the personal
element which that clause introduced.

I can find nothing in [the House of Lords decision] in Tolhurst's Case which can be interpreted as
laying down a general principle … that the benefit of all contracts of this kind can be assigned. What
the House of Lords did say in that case, was that in that particular case the contract for the supply of
chalk for fifty years was to be treated as a contract for the supply to a given cement-making place, and
not a personal contract.

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There is nothing that I can see in the present contract which enables me to say that it is a contract to
supply eggs to a particular place. The first clause provides that Baerselman shall supply, and Kemp
shall accept, all the fresh eggs that Kemp shall require for manufacturing purposes for one year. Then
by clause 5, Kemp undertakes not to purchase eggs from any other merchant. That, as I have said,
imposes a personal obligation upon the purchaser which may be very material to the contract. It is not
seriously contended that George Kemp Limited … would be bound by that obligation unless there
was something amounting to a novation; and here there was no evidence of a novation.

I think this contract was not one the benefit of which can be assigned simply by a sale of the business,
and that when [the sale of the business] became known to Baerselman he was entitled to refuse to
continue the supply.

I base my decision on the ground that clauses 1 and 5 show that the contract was a personal one, the
measure of the defendant's obligations as to supply being the extent of Kemp's personal requirements,
and the undertaking by Kemp not to buy eggs of other merchants being an undertaking which was
purely personal to himself. The defendant's appeal, therefore, must be allowed.

Sir Gorell Barnes, President

… I think that as the Court is differing from the view taken by the trial judge Channell J., it is
desirable that I should express very shortly how the matter appears to me. I think that Channell J’s
judgment is based upon the elimination altogether of any consideration of a personal element in this
contract, and that he has treated it as if it made no difference by whom or to whom the goods were
supplied. That is a matter which, having regard to the terms of this contract, I feel compelled to differ
from him. In my opinion the contract was intended to be a personal one, for in the first place the
goods were to be supplied "as Kemp shall require for manufacturing purposes"; and, secondly, during
the continuance of the agreement, and so long as the seller should supply eggs according to the
contract, Kemp undertook not to purchase eggs from any other merchant. How that latter provision
can be read so as to give the benefit to the vendor Baerselman when the contract is assigned to another
purchaser [George Kemp Limited] I fail to see. …
I agree that the appeal should be allowed.

Farwell L.J
In my opinion this agreement contains two considerations moving to the defendant, one being the
payment of the price, and the other being Kemp's undertaking not to purchase eggs from any other
merchant. It is obvious that the value of the latter consideration must in a large measure depend upon
the person who gives the undertaking and the business carried on by him, and to that extent the
personal element enters into the question.

As regards payment, it is conceded that novation cannot be compulsory so as to make the person
supplying the goods accept against his will the liability of another person to pay for them in
substitution for the liability of the original purchaser. In that respect also the contract is personal.

Thirdly, the contract contains a personal element in that the quantity to be supplied is measured by the
requirements of Kemp himself. When he assigned his three business [outlets] to the new company one
of them was given up [ed. the Martineau Road outlet] and a much larger business [Brewery Road]
taken in its place. That fact brings into prominence the importance of the provision in clause 1 that the
defendant shall supply to Kemp as many fresh eggs as "he shall require for manufacturing purposes."
The requirements of Kemp for manufacturing purposes are one thing, and the requirements of anyone
to whom Kemp may assign his business are another.

In Tolhurst's Case … the Court of Appeal … laid stress on the fact that "The measure of an original
contractor's requirements may be very different in a given case from those of a substituted person,"
and said that when that is the case "the contract would be personal and could only be fulfilled by the

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contractee himself." That appears to me to apply with great force to clause 1 in the present case. I do
not find here anything to indicate that the supply was to be measured by the requirements of the
business at a particular specified place, as [the House of Lords held] to be the case in Tolhurst's Case.
…

In my opinion the benefit of this contract was not assignable, and the appeal of the defendant must
consequently be allowed.