'File 14/115 VII Annex (B 9) Abu Musa oxide: collected background material on the case' [‎93v] (197/1904)

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manager authorised to conclude independently. It is not a case of a single sale, )U ^ 0
an agreement, very similar to that with Wonckhaus, under which the company die
bound to the offer for six months until the arrival of Strick and Cos. answer, an
may not sell to anyone else for six months after the loading of the oxide.
It remains to examine the question whether Hassan bamaih injured the company
by the conclusion of the agreement with Mr. Wonckhaus and whether Isa womd av ? e
been justified in complaining on this ground. It appears, from the account 01 iSdS
complaint given in the British Memorandum, that the company is held to ^have been
injured by the circumstance that, in consequence of the agreement with Mr. W(3nckhaus,
it is precluded from profiting by any rise that may take place in the price of oxide.
That is an objection that might be raised against any contract for delivery concludea
for a certain term, and is of no importance so far as Mr. Wonckhaus is concerned.
There might possibly, indeed, be a question whether the agreement as a wnole is
injurious to the interests of the company, and whether in the circumstances Hassan
Samaih, as a good man of business, was justified in concluding such an agreement for
the company. f ^
The orovisions of the agreement are in substance as follows. The company is
bound to 1 deliver to Mr. Wonckhaus free on board ship at Abu Musa annually for a
term of four years 25000 to 5,000 tons of oxide of a particular quality at the price of
15s. 6d, per ton. Mr. Wonckhaus is bound to pay this price and to take at least
2j000 tons, and, further, if he requires more, and there is enough^ oxide, to buy up
to 5,000 tons. On the other hand, the company may not sell oxide to anyone else,
with the exception of about 5,000 to 6,000 sacks, which it may seil to India. On the
expiration of the agreement Mr. Wonckhaus has the right of renewing the agreement
on the same terms or the terms offered by another serious applicant.
For a proper appreciation of this agreement it must be remembered that^ the
company had till then worked at a heavv loss. It appears from the books of the
Company— -whic h .were kept very neatly, cle arly, and well—that the total expenditure
from the commencement of the works to the beginning of December 19U8 amounted
to 801,043 rupees Indian silver coin also widely used in the Persian Gulf. ."® On the other side, the receipts amount to 207,804 rupees Indian silver coin also widely used in the Persian Gulf. ,_ so
that there is a deficit of 93,209 rupees Indian silver coin also widely used in the Persian Gulf. . These figures show that the financial position
of the company was very bad, and that it would have had to work at a profit for a
long time before the previous losses could have been made good and a dividend declared.
" The agreement with M. Wonckaus gave the company an opportunity of selling,
a,t a fixed '"price, which was independent of the fluctuations of the market, and was
guaranteed to it for a number of years, a considerable minimum quantity of oxide,
and possibly two and a-half times as much. The company was therefore in a
position to count with certainty on receiving a minimum of l,5o0/. a-year, and to
arrange its whole work accordingly. These receipts might be raised to 3,87 not
counting what was sold to India. The prospects of the company from a commercial
point of view were therefore such as it had never had before. It was in the nature
of things that the company should have to accept into the bargain certain limitations
and obligations. Agreements like the one in question between producers and merchants
are usual in all parts' of the world, and if a normal price and a fixed minimum sale are
guaranteed to the producer, he on his part must give security to the merchant, who
makes his arrangements accordingly, that the article shall not suddenly be diverted into
the hands of his competitors. The chief point is that the risk to the producer here sinks to
a minimum, while the risk to the merchant remains great. He is bound to take over the
minimum quantity at the guaranteed price, and runs the risk of having to do so when
the market price is such that he is obliged to sell the article at a small profit or no
profit at all, or even at a loss, or he may have to buy it when he cannot sell it
at all. It is likewise a very ordinary thing that, in view of these possibilities, the
price should from the first be fixed at such a figure that _ a certain margin is left to the
merchant, since otherwise the latter could not take part in the transaction at all. Tne
circumstance also deserves particular consideration that, in a case like the one under
discussion, the producer is not in a position to avail himself of the opportunities of gain
to the same extent as the merchant. However skilled in business Hassan Samaih and
Abdallatif mav be, it will not be possible for them to dispose of the produce of the oxide
mines on Abu Musa directly and without the interposition of a middleman, and to profit
bv the constant changes in the international market, as they do not possess either the
* In the account of expenditure is included 5 per cent, simple interest, on the total sum, which Hassan
Samaih reckons as due to himself, since, apart from the 2,000 rupees Indian silver coin also widely used in the Persian Gulf. which Malcolm put into the concern, he
paidl all the expenses, while the remaining partners paid nothing.