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breach of agreement, and reserves to himself the right to recover the penalties for which the Contractors have rendered themselves liable under the eighth clause of the contract. W. Gray, Secretary, General Post Office. (Above telegram was repeated to Captain Rice, commander s.s. " Vasco de Gama," Auckland.)

No. 36. Mr. Gray to Messrs. Owen and Graham. (Telegram.) Wellington, 25th November, 1875. Kindly inform me what arrangements Contractors have made for delivering incoming San Francisco mails at New Zealand ports. Has "Colima" sailed from San Francisco? This department has been informed that the "Macgregor" sailed from San Francisco with the mails. If this is correct, what has become of " Colima " ? I take it for granted that " Vasco de Gama' proceeds through to San Francisco. Reply fully. Reply free. Owen and Graham, Auckland. ■ W. Gray.

No. 37. Messrs. Owen and Graham to Mr. Gray. (Telegram.) Auckland, 25th November, 1875. The "Vasco de Gama" left this port 12 o'clock noon for Fiji. Captain Rice informs us that he expects to receive the N.Z. portion of the incoming mail from the " Colima" at Kandavau. Will return with it direct to Auckland, thence to Dunedin, calling at intermediate ports. The wires across Australia being down when " Vasco " left, can your information about " Macgregor " be reliable ? We are informed by the same authority that " Colima," after delivery of N.Z. mails, will sail from Kandavau direct for Sydney. The " Vasco de Gama" may be expected here about the sth December. W. Gray, Esq., Wellington. Owen and Graham. .

No. 38. Messrs. Owen and Graham to Mr. Gray. (Telegram.) Auckland, 26th November, 1875. The " Colima " left Frisco at contract time, 10th November. The Contractors have arranged for the " Vasco de Gama" to wait her arrival at Kandavau, receive the English mails for New Zealand and deliver them at Auckland and other ports. This steamer will then leave Dunedin on December 15th, and Auckland December 20th, with the outward English mails, and proceed to Kandavau, where she will take the mails from Sydney and go on to Frisco. The " Colima " awaits at Kandavau the arrival of the " City of San Francisco " with English mails, and comes on to New Zealand to deliver the same in January. The through boat this month is the " Cyphrenes," now waiting the arrival of the " Vasco de Gama" at Kandavau. We know nothing of the " Macgregor; believe any mails coming by her are under old contract. Should the " Vasco de Gama " arrive at the same time as the " Macgregor," we shall be happy to carry the mails down the coast, hut we fully expect she will bring the English mails from the " Colima." W. Gray, Esq., Wellington. Owen and Graham.

No. 39. Mr. Gray to Messrs. Owen and Graham. (Telegram.) Wellington, 26th November, 1875. Have received your two telegrams, for which I thank you. I desire to point out that the fact of " Vasco de Gama" proceeding only as far as Kandavau, and there transhipping mails to " Cyphrenes," is a distinct breach of contract. Government hold Contractors liable for this further breach of agreement. It is needless to state that department was not consulted in the matter by Contractors. New South Wales Government advised this department on the 13th that " Macgregor " left San Francisco with mails, and Sydney Morning Herald of the 16th states that she left on the 9th. This is confirmed by Auckland Agent of A.S.N. Co., who states that " Macgregor " comes to Auckland from Honolulu direct, and that she will reach Auckland about the 4th proximo. W. Gray. Owen and Graham, Auckland.