question turns on the consideration of what a policy of insurance against fire is, and on that the right of the plaintiff depends. The policy is really a contract to indemnify the person insured for the loss which he has sustained in consequence of the peril insured against, which has happened, and from that it follows, of course, that as it is only a contract of indemnity, it is only to pay that loss which the assured may have sustained by reason of the fire which has occurred. In order to ascertain what that loss is, everything must be taken into account which is received by and comes to the hand of the assured, and which diminishes that loss. It is only the amount of the loss, when it is considered as a contract of indemnity, which is to be paid after taking into account and estimating those benefits or sums of money which the assured may have received in diminution of the loss. If the proposition is stated in that manner it is clear that the office would be entitled to the benefit of anything received by the assured before the time when the policy is paid, and it is established by the case of Darrell v. Tibbitts, 5 Q. B. D. 560, that the insurance company is entitled to that benefit, whether or not before they pay the money they insist upon a calculation being made of what can be recovered in diminution of the loss by the assured; if they do not insist upon that calculation being made, and if it afterwards turns out that in consequence of something which ought to have been taken into account in estimating the loss, a sum of money, or even a benefit, not being a sum of money, is received, then the office, notwithstanding the payment made, is entitled to say that the assured is to hold that for its benefit, and although it was not taken into account in ascertaining the sum which was paid, yet when it has been received it must be brought into account, and if it is not a sum of money, but a benefit that has been received, its value must be estimated in money. Now Lord Blackburn, in the case of Burnand v. Rodocanochi, 7 App. Cas. 339, states the principle in these words: "The general rule of law (and it is obvious justice) is that where there is a contract of indemnity (it matters not whether it is a marine policy or a policy against fire on land, or any other contract of indemnity), and a loss happens, anything which reduces or diminishes that loss reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already

paid it, then if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having that amount back." In Darrell v. Tibbitts, to which I have already referred, the question which we had to consider was whether the insurance office was entitled to the benefit produced in consequence of a covenant to repair if the building should be damaged by an explosion of gas. In my opinion it was not intended in any way to limit the right of the insurer, as an insurer, to cases where the contract in respect of which benefit had been received related to the same loss or damage as that against which the contract of indemnity was created by the policy. That was what was before this court in that case, and undoubtedly expressions do occur as to a contract relating to the loss or affecting the loss; but the principle was not limited to contracts. The principle. which I have enunciated goes further, and if there is a money or any other benefit received which ought to be taken into account in diminishing the loss or in ascertaining what the real loss is against which the contract of indemnity is given, the indemnifier ought to be allowed to take advantage of it in order to calculate what the real loss is, even although the benefit is not a contract or right of suit which arises and has its birth from the accident insured against. Of course, the difficulty is to consider what ought to be taken into account in estimating that loss against which the insurer has agreed to indemnify, and we have been pressed in argument with many difficulties. One which possibly was put to us most strongly, was that the contract of sale has nothing to do with destruction by fire, and if any part of the purchase money is to be taken into account, why is a gift not to be taken into account? That may be said to diminish the loss as well as a contract of sale. The answer is that when a gift is made afterwards in order to diminish the loss, it is bestowed in such terms as to show an intention to benefit the assured, and to give the insurer the benefit of that would be to divert the gift from its intended object to a different person. That really was what was decided in Burnand v. Rodocanochi. There the money bestowed, not as a matter of right, but as a gift, was intended to benefit the assured beyond the amount which they had got in consequence of

any insurance. There is another ground which may possibly exclude gifts. It may be that the right of the insurer to have a sum brought into account in diminution of the loss, against which he has given a contract of indemnity, is confined to that which is a right or other incident belonging to the person insured, as an incident of the property at the time when the loss takes place. This definition would not include a sum subsequently bestowed on the assured by way of gift, for it can in no way be said to have been appertaining to him as owner of the property at the time when the loss took place. But, in the present case, what we have to consider is whether the contract of sale is not an incident of the property, belonging to the owners at the time of the loss in such a way that it ought to be brought into account in estimating the loss, against which the insurer has undertaken to indemnify. What was the position of the parties? The defendants' house was insured, and there was a loss from fire, the damage caused by the fire being estimated by the parties at £330. Ultimately, the property having been already agreed to be sold at a fixed price, the assured received the whole amount of that price. Now they did that in respect of a contract relating to the subject insured, the house; and, to my mind, if they received the whole amount of the price which they previously had fixed as the value of the house, that must of necessity be brought into account when it was received, for the purpose of ascertaining what was the ultimate loss against which they had concluded a contract of indemnity with the insurance office. Here the purchasers have paid the money in full, and as the property was valued between the vendors and the purchasers at £3,100, the vendors got that sum in respect of that which had been burned, but which had not been burned at the time when the contract was entered into. They had fixed that to be the value, and then any money which they get from the purchasers, and which together with £330, the sum paid by the office, exceeds the value of the property as fixed by them under the contract to sell, must diminish, and in fact entirely extinguishes the loss occasioned to the vendors of the property by the fire. Therefore, though it cannot, to my mind, be said that the insurers are entitled, because the purchase is completed, to get back the money which they have paid, yet they are entitled to

take into account the money subsequently received under a contract for the sale of the property existing at the time of the loss, in order to see what the ultimate loss was against which they gave their contract of indemnity. On the principle of Darrell v. Tibbetts, when the benefit afterwards accrued by the completion of the purchase, the insurance company were entitled to demand that the money paid by them should be brought into account. Therefore the conclusion at which I have arrived is, that if the purchase money has been paid in full, the insurance office will get back that which they have paid, on the ground that the subsequent payment of the price which had been before agreed upon, and the contract for payment of which was existing at the time, must be brought into account by the assured, because it diminishes the loss against which the insurance office merely undertook to indemnify them. In my opinion, therefore, the decision below was erroneous. I think Chitty, J., based it upon this, that in this case there was no right of subrogation, no contract which the office could have insisted upon enforcing for their benefit. I think it immaterial to decide that question, because the vendors have exercised their right to insist upon the completion of the purchase.1

'Here follows a long opinion by Bowen, L. J.

Judgment reversed.

It is not probable that the doctrine of this case will prevail in the United States. Compare Nelson v. Bound Brook Mut. Fire Ins. Co., 43 N. J. Eq. 256. King v. State Mut. Fire Ins. Co., 7 Cush. 1. International Trust Co. v. Boardman, 149 Mass. 161. Insurance Co. v. Updegraff, 21 Pa. St. 513. Clinton v. Hope Ins. Co., 45 N. Y. 454. Smith v. Glens Falls Ins. Co., 62 N. Y. 85. See supra §§ 32, 158.

CHAPTER III.

GENERAL PRINCIPLES.

Consummation and Construction of the Contract.

SUPREME COURT OF JUDICATURE, 1889.

THOMPSON v. ADAMS.

(L. R., 23 Q. B. D. 361.)

A valid agreement to insure may be closed either by parol or by a binding slip.

MATHEW, J.-This was an action brought to recover the sum of £100, which it was alleged by the plaintiffs the defendant had agreed to cover by an insurance against fire upon the goods of the plaintiffs in premises of theirs in New Zealand. The action was resisted on the ground that there had been no contract of insurance, or in the alternative, if there had been. a contract of insurance, that it was subject to conditions which had not been fulfilled, and, therefore, that the underwriters were not liable.

The plaintiffs are merchants carrying on business in New Zealand, and they were represented in this country by a firm of Geard & Sons, who acted for them under a power of attorney. They instructed Geard & Sons to effect insurances upon goods on their premises in New Zealand; and Messrs. Geard & Sons, for that purpose, about the month of October, 1886, placed themselves in communication with a firm of insurance brokers of high standing, Messrs. Collins & Co., who undertook to endeavor to effect insurances to the amount of £20,000. Now, insurances had been effected in the same way previously, and amongst the insurances previously effected were some at Lloyd's. It appears, within the last four or five years the underwriters at Lloyd's have undertaken, in addition to their ordinary business, the business of insurances against risks