'File 14/115 VII Annex (B 9) Abu Musa oxide: collected background material on the case' [‎112v] (235/1904)

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manager authorised to conclude independently. It is not a case ui a p
an agreement, very similar to that with WOnckhaus, - f \ l V ari( j
bound to the; offer for six months until the arrival of tetnck ana 'O.... v.
may not sell to anyone else for six months after the loading o< > ne oxi e,.
It remains to examine the question whether Hassan bamaih immea^ ' ,,^
bv the conclusion of the agreement with Mr. Wonckhaus and^wnether So, won ^ ^ _
been justified in complaining on this ground. It appears, irom ' lCA 0U j K ^ /*.
complaint given in the British Memorandum, that the company is _ held to e been
injured by the circumstance that, in consequence of the agreement wu,n '
it is orecluded from profiting by any rise that may take place in. jiie price o •
That is an obiection that might be raised against any contract toi c e ivexy cone u e
for a certain' term, and is of no importance so far as Mr, vvonckLiaus is co < -
There might oossibly, indeed, be a question whether the agreement as a wnole ib
iniurious to the mte/ests of the company, and whether in the circumstances Hassan
Samaih, as a good man of business, was justified in concluding such an agreement tor
the company. „ rm -
The provisions of the agreement are in substance as follows, i he company is
bound to deliver to Mr. Wonckhaus free on board ship at Abu Musa annuaiiy .or a
term of four years 2,000 to 5,000 tons of oxide of a particular quality at tne price o*
15s. 6d. per ton. Mr. Wonckhaus is bound to pay this _ price ana to take at least
2,000 tons, and, further, if he requires more, and there is enough oxiae, to bay up
to 5,000 tons. On the other hand, the company may not sex! oxide to anyone eise,
with the exception of about 5,000 to 6,000 sacks, which it may sen to India. On uhe
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 heavy loss. It appears trom the books of the
company—which were kept very neatly, clearly, and well-—that the tota. expenditure
from the commencement of the works to the beginning of December x 9^ & amounted
to 301.043 rupees Indian silver coin also widely used in the Persian Gulf. .'®' On the other side, the receipts amount to L07,804 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
lom time before the previous losses could have been made good and a dividend declared.
^ The agreement with M. Wonckaus gave the company an opportunity oi selling,
at a fixed mice, 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 m a
position to count with certainty on receiving a minimum of 1,050/ a-year and to
arrange its whole work accordingly. These receipts might be raisea to 3,875/., not
counW 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 m the nature
of things that the company should have to accept into the bargain certain limitations
and obligations Agreements like the one m question Detween producers ana merchants
are usual in all parts of the world, and if a normal price and a fixed minimum sale are
miaranteed 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 diveited nuo
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 bouna to take over the
minimum quantity at the guaranteed price, and runs the risk of having to ao 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
oj all It is likewise a very ordinary thing that, m view of these possibilities, tne
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. The
circumstance also deserves particular consideration tnat, 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 may 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
by 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
paid, all the expenses, while the remaining partners paid nothing.