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Hillas & Co Ltd v Arcos Ltd (1932) House of Lords
The plaintiffs were timber merchants, whereas the defendants were the English corporation facilitating the sale of timber from the Government of the Soviet Union in England. On 21 May 1930, the parties executed a written agreement commencing with the phrase, ‘We agree to purchase 22,000 standards of softwood items of acceptable specification throughout the 1930 season under the following conditions’. Several prerequisites were enumerated from (1) to (11). Condition (9) was as follows:
Buyers shall also have the option of entering into a contract with the sellers
for the purchase of 100,000 standards for delivery during 1931. Such
contract to stipulate that, whatever the conditions are, buyers shall obtain
the goods on conditions and at prices which show to them a reduction of
5% on the fob value of the official price list at any time ruling during 1931.
Such option to be declared before the 1st January 1931.
The parties exchanged in accordance with the agreement throughout the 1930 season. On 20 November 1930, the sellers agreed to sell the entirety of the 1931 output to a third party. Subsequently, on 22 December, the buyers, aware of this transaction, communicated with the sellers, claiming to exercise their option under condition (9). The option constituted an enforceable contract. (I) It was not simply an unenforceable agreement to enter into an agreement for two primary reasons: (i) Interpreting condition (9) within the broader context of the agreement dated 21 May, the phrase ‘of softwood goods of fair specification’ (which is stated at the beginning of the agreement) must be inferred in the clause following ‘100,000 standards’. The phrase 'of fair specification' denoted a balanced assortment of types, qualities, and sizes, as stipulated in the primary agreement for the 1930 season, which had been effectively executed by the parties. Furthermore, the mention in condition (9) of 'whatever the conditions are' pertained not to conditions subject to contractual determination, but rather to market conditions for softwood. (II) May and Butcher Limited v R did not establish a universal principle. Rather, these instances pertain to the formulation of specific agreements. According to Lord Wright, it was the Court's obligation to interpret such papers equitably and liberally, avoiding excessive astuteness or subtlety in identifying errors.
The plaintiffs were timber merchants, whereas the defendants were the English corporation facilitating the sale of timber from the Government of the Soviet Union in England. On 21 May 1930, the parties executed a written agreement commencing with the phrase, ‘We agree to purchase 22,000 standards of softwood items of acceptable specification throughout the 1930 season under the following conditions’. Several prerequisites were enumerated from (1) to (11). Condition (9) was as follows:
Buyers shall also have the option of entering into a contract with the sellers
for the purchase of 100,000 standards for delivery during 1931. Such
contract to stipulate that, whatever the conditions are, buyers shall obtain
the goods on conditions and at prices which show to them a reduction of
5% on the fob value of the official price list at any time ruling during 1931.
Such option to be declared before the 1st January 1931.
The parties exchanged in accordance with the agreement throughout the 1930 season. On 20 November 1930, the sellers agreed to sell the entirety of the 1931 output to a third party. Subsequently, on 22 December, the buyers, aware of this transaction, communicated with the sellers, claiming to exercise their option under condition (9). The option constituted an enforceable contract. (I) It was not simply an unenforceable agreement to enter into an agreement for two primary reasons: (i) Interpreting condition (9) within the broader context of the agreement dated 21 May, the phrase ‘of softwood goods of fair specification’ (which is stated at the beginning of the agreement) must be inferred in the clause following ‘100,000 standards’. The phrase 'of fair specification' denoted a balanced assortment of types, qualities, and sizes, as stipulated in the primary agreement for the 1930 season, which had been effectively executed by the parties. Furthermore, the mention in condition (9) of 'whatever the conditions are' pertained not to conditions subject to contractual determination, but rather to market conditions for softwood. (II) May and Butcher Limited v R did not establish a universal principle. Rather, these instances pertain to the formulation of specific agreements. According to Lord Wright, it was the Court's obligation to interpret such papers equitably and liberally, avoiding excessive astuteness or subtlety in identifying errors.
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