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May and Butcher Limited v R (1929) House of Lords
Subsequent to the First World War, the government instituted the Disposals Board to manage the disposal of excess items. The Board entered into multiple agreements with the claimants for the sale of tentage materials. The initial agreement was established in April 1920, and the parties adhered to the same provisions, which were periodically renewed until a conflict emerged regarding the renewal agreement formed in January 1922. The plaintiffs agreed to deposit £1,000 with the defendant Board, which would then sell to the plaintiffs:
…the whole of the tentage which may become available in the United
Kingdom for disposal up to and including 31 March 1923.
The clause in respect of the price for the tentage was:
The price or prices to be paid…shall be agreed upon from time to time
between the Commission and the purchasers as the quantities of the said
old tentage become available for disposal, and are offered to the purchasers
by the Commission.
There was also an arbitration clause:
It is understood that all disputes with reference to or arising out of this
agreement will be submitted to arbitration in accordance with the
provisions of the Arbitration Act 1889.
Held there was no enforceable contract due to uncertainty. (I) If a critical
part of the contract is left undetermined, there is no contract. Per Viscount
Dunedin ‘price is one of the essentials of sale, and if it is left still to be
agreed between the parties, then there is no contract’. (II) According to s 8
of the Sale of Goods Act 1893 (re-enacted in s 8 of the Sale of Goods Act
1979, see 2.1.1), if the price is not determined by being fixed in the contract,
by being left to be fixed in a manner agreed in the contract or by the course
of dealings between the parties, then the buyer must pay a reasonable price.
Their Lordships held that this meant that a reasonable price would be
implied when a contract was silent on price. However, in this case, the
contract was not silent but made an agreement to agree the price later. (III)
The arbitration clause did not provide a mechanism for agreeing the price
because, per Lord Buckmaster:
The clause refers ‘disputes with reference to or arising out of this
agreement’ to arbitration, but until the price has been fixed, the agreement
is not there.
Subsequent to the First World War, the government instituted the Disposals Board to manage the disposal of excess items. The Board entered into multiple agreements with the claimants for the sale of tentage materials. The initial agreement was established in April 1920, and the parties adhered to the same provisions, which were periodically renewed until a conflict emerged regarding the renewal agreement formed in January 1922. The plaintiffs agreed to deposit £1,000 with the defendant Board, which would then sell to the plaintiffs:
…the whole of the tentage which may become available in the United
Kingdom for disposal up to and including 31 March 1923.
The clause in respect of the price for the tentage was:
The price or prices to be paid…shall be agreed upon from time to time
between the Commission and the purchasers as the quantities of the said
old tentage become available for disposal, and are offered to the purchasers
by the Commission.
There was also an arbitration clause:
It is understood that all disputes with reference to or arising out of this
agreement will be submitted to arbitration in accordance with the
provisions of the Arbitration Act 1889.
Held there was no enforceable contract due to uncertainty. (I) If a critical
part of the contract is left undetermined, there is no contract. Per Viscount
Dunedin ‘price is one of the essentials of sale, and if it is left still to be
agreed between the parties, then there is no contract’. (II) According to s 8
of the Sale of Goods Act 1893 (re-enacted in s 8 of the Sale of Goods Act
1979, see 2.1.1), if the price is not determined by being fixed in the contract,
by being left to be fixed in a manner agreed in the contract or by the course
of dealings between the parties, then the buyer must pay a reasonable price.
Their Lordships held that this meant that a reasonable price would be
implied when a contract was silent on price. However, in this case, the
contract was not silent but made an agreement to agree the price later. (III)
The arbitration clause did not provide a mechanism for agreeing the price
because, per Lord Buckmaster:
The clause refers ‘disputes with reference to or arising out of this
agreement’ to arbitration, but until the price has been fixed, the agreement
is not there.
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