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Scammell v Ouston (1940) House of Lords
The plaintiffs engaged in negotiations to purchase a new van from the defendants. They established a price and a trade-in value for the plaintiffs' old van. The negotiations revealed that the plaintiffs intended to acquire the item under hire purchase conditions, and the concluding note of the agreement dispatched by the plaintiffs to the defendants stated, ‘This order is issued with the understanding that the remaining purchase price can be financed on hire purchase terms over a duration of two years.’ The defendants retracted from the sale and contended that a contract had never existed. It was determined that no contract existed. The agreement to implement 'hire purchase provisions' was excessively ambiguous to be enforceable. Hire purchase agreements may manifest in various forms, and there is no evidence indicating that any specific terms were intended by the parties involved. It constituted a non-binding agreement to negotiate. (III) The parties remained in negotiations and did not achieve any agreement.
The plaintiffs engaged in negotiations to purchase a new van from the defendants. They established a price and a trade-in value for the plaintiffs' old van. The negotiations revealed that the plaintiffs intended to acquire the item under hire purchase conditions, and the concluding note of the agreement dispatched by the plaintiffs to the defendants stated, ‘This order is issued with the understanding that the remaining purchase price can be financed on hire purchase terms over a duration of two years.’ The defendants retracted from the sale and contended that a contract had never existed. It was determined that no contract existed. The agreement to implement 'hire purchase provisions' was excessively ambiguous to be enforceable. Hire purchase agreements may manifest in various forms, and there is no evidence indicating that any specific terms were intended by the parties involved. It constituted a non-binding agreement to negotiate. (III) The parties remained in negotiations and did not achieve any agreement.
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Guthing v Lynn (1831) Court of King's Bench
The plaintiff consented to purchase a horse from the defendant for a consideration of 60 guineas, with an additional stipulation that if the horse proved fortunate, the plaintiff would either remit an extra £5 or acquire another horse. The luckiness of the horse and the arrangement to purchase another horse were both too ambiguous for the court to enforce. The only enforceable component of the consideration was the payment of 60 guineas. According to Lord Tenterden CJ:
We must suppose the substantial part of the contract to be that declared
upon, and consider the rest as amounting merely to one of those honorary
engagements which seem very much to prevail among persons in this
way of business.
The plaintiff consented to purchase a horse from the defendant for a consideration of 60 guineas, with an additional stipulation that if the horse proved fortunate, the plaintiff would either remit an extra £5 or acquire another horse. The luckiness of the horse and the arrangement to purchase another horse were both too ambiguous for the court to enforce. The only enforceable component of the consideration was the payment of 60 guineas. According to Lord Tenterden CJ:
We must suppose the substantial part of the contract to be that declared
upon, and consider the rest as amounting merely to one of those honorary
engagements which seem very much to prevail among persons in this
way of business.
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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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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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Williams v. Carwardine (1833) CKB
The defendant displayed advertisements promising a £20 reward for information that would lead to the identification of William Carwardine's murderer. The plaintiff provided the material due to her distressing and unfortunate circumstances, believing she has a limited time to live, in an effort to alleviate her conscience and in hopes of future absolution. The court determined that the plaintiff was entitled to the award, even though the material was provided for reasons other than claiming the reward. Her motivations for claiming the reward were inconsequential to her entitlement to do so. At least two of their Lordships (Denman CJ and Littledale J) emphasized the importance of the plaintiff's awareness of the prize when she provided the information.
The defendant displayed advertisements promising a £20 reward for information that would lead to the identification of William Carwardine's murderer. The plaintiff provided the material due to her distressing and unfortunate circumstances, believing she has a limited time to live, in an effort to alleviate her conscience and in hopes of future absolution. The court determined that the plaintiff was entitled to the award, even though the material was provided for reasons other than claiming the reward. Her motivations for claiming the reward were inconsequential to her entitlement to do so. At least two of their Lordships (Denman CJ and Littledale J) emphasized the importance of the plaintiff's awareness of the prize when she provided the information.
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Errington v Errington and Woods (1951) Court of Appeal
In 1936, E purchased a residence in Newcastle for £750, contributing £250 herself and securing a mortgage for the outstanding £500. The residence was intended for E's son and daughter-in-law, however E retained ownership of the property and was the mortgagor. E entrusted the building society book to his daughter-in-law, instructing her to retain possession of it, and conveyed that the house would be transferred to the son and daughter-in-law upon the mortgage's settlement. The couple resided in the house and remitted a mortgage of 15 shillings weekly, while E covered the rates of 10 shillings per week on their behalf. In 1945, E passed away, bequeathing all his assets to his wife. The son departed from his wife and took up residence with his mother, E's spouse. The plaintiff, E's wife, thereafter claimed custody of the house from the daughter-in-law, who remained residing there with her sister, W. The daughter-in-law was entitled to reside in the residence. E's commitment to convey the property to the couple upon their payment of the mortgage constituted a unilateral contract that remained enforceable by his successor, the plaintiff, upon his demise.
Per Denning LJ:
…the father [E] expressly promised the couple that the property should
belong to them as soon as the mortgage was paid, and impliedly promised
that so long as they paid the instalments to the building society they should
be allowed to remain in possession.
The father’s promise:
…could not be revoked by him once the couple had entered on
performance of the act, but it would cease to bind him if they left it
incomplete and unperformed.
On the other hand, the couple were not bound to pay the mortgage
instalments, even after they had started to do so. (The payments of rates by
E were simply gifts, not made under a contract.
In 1936, E purchased a residence in Newcastle for £750, contributing £250 herself and securing a mortgage for the outstanding £500. The residence was intended for E's son and daughter-in-law, however E retained ownership of the property and was the mortgagor. E entrusted the building society book to his daughter-in-law, instructing her to retain possession of it, and conveyed that the house would be transferred to the son and daughter-in-law upon the mortgage's settlement. The couple resided in the house and remitted a mortgage of 15 shillings weekly, while E covered the rates of 10 shillings per week on their behalf. In 1945, E passed away, bequeathing all his assets to his wife. The son departed from his wife and took up residence with his mother, E's spouse. The plaintiff, E's wife, thereafter claimed custody of the house from the daughter-in-law, who remained residing there with her sister, W. The daughter-in-law was entitled to reside in the residence. E's commitment to convey the property to the couple upon their payment of the mortgage constituted a unilateral contract that remained enforceable by his successor, the plaintiff, upon his demise.
Per Denning LJ:
…the father [E] expressly promised the couple that the property should
belong to them as soon as the mortgage was paid, and impliedly promised
that so long as they paid the instalments to the building society they should
be allowed to remain in possession.
The father’s promise:
…could not be revoked by him once the couple had entered on
performance of the act, but it would cease to bind him if they left it
incomplete and unperformed.
On the other hand, the couple were not bound to pay the mortgage
instalments, even after they had started to do so. (The payments of rates by
E were simply gifts, not made under a contract.
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Daulia Limited v Four Millbank Nominees Limited (1977) Court of Appeal
The plaintiffs and defendants concurred on the terms for the plaintiffs' acquisition of specific properties in London from the defendants. The defendants verbally assured that they would formalize a contract for the sale provided the plaintiffs visited the defendants' offices by 10:00 AM on 22 December 1976 and presented their portion of the contract together with a banker’s draft for the deposit. The plaintiffs attended with the contract and banker’s draft; nevertheless, the defendants declined to exchange contracts. The defendants' commitment to exchange contracts constituted an offer of a unilateral contract. The plaintiffs had completely executed the actions required for acceptance.
The plaintiffs and defendants concurred on the terms for the plaintiffs' acquisition of specific properties in London from the defendants. The defendants verbally assured that they would formalize a contract for the sale provided the plaintiffs visited the defendants' offices by 10:00 AM on 22 December 1976 and presented their portion of the contract together with a banker’s draft for the deposit. The plaintiffs attended with the contract and banker’s draft; nevertheless, the defendants declined to exchange contracts. The defendants' commitment to exchange contracts constituted an offer of a unilateral contract. The plaintiffs had completely executed the actions required for acceptance.
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Cooper v. Luxor (Eastbourne) Limited (1940) HL
The plaintiff had to find a buyer and negotiate the price (i.e., act as an estate agent) in order to help the defendants sell particular movie theaters. After explicitly stating that they needed a specific price, the defendants wrote to the plaintiff, stating that "a procuration fee of £10,000 is to be paid to [the plaintiff] upon completion of the sale of the...cinemas." The plaintiff discovered a buyer who was prepared to pay the defendants' demanded price; nevertheless, the defendants declined to complete the transaction and, as a result, did not reimburse the plaintiff's fee. decided that the defendants were exempt from paying the fee. According to the agreement's specific provisions, payment was only due after a sale was completed. The issue was whether the defendants' promise not to unreasonably stop the sale from being completed would be included into the agreement.
Every contract needs to be evaluated on its own merits. Since an estate agent must anticipate taking on the risk of the vendor withdrawing in exchange for a sizable gain should the sale proceed, there was no need to imply such a term in this instance.
The plaintiff had to find a buyer and negotiate the price (i.e., act as an estate agent) in order to help the defendants sell particular movie theaters. After explicitly stating that they needed a specific price, the defendants wrote to the plaintiff, stating that "a procuration fee of £10,000 is to be paid to [the plaintiff] upon completion of the sale of the...cinemas." The plaintiff discovered a buyer who was prepared to pay the defendants' demanded price; nevertheless, the defendants declined to complete the transaction and, as a result, did not reimburse the plaintiff's fee. decided that the defendants were exempt from paying the fee. According to the agreement's specific provisions, payment was only due after a sale was completed. The issue was whether the defendants' promise not to unreasonably stop the sale from being completed would be included into the agreement.
Every contract needs to be evaluated on its own merits. Since an estate agent must anticipate taking on the risk of the vendor withdrawing in exchange for a sizable gain should the sale proceed, there was no need to imply such a term in this instance.
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Clarke v. The Earl of Dunraven and Mount: The Satanita (1896) HL The Mudhook Yacht Club announced a regatta scheduled for July 1894 on the Clyde. Participants were required to sign a letter addressed to the secretary of the Club, consenting to adhere to the regulations of the Yacht Club Association. In conjunction with other yacht owners, the two parties, each having executed a letter, registered their yachts, The Satanita and The Valkyrie, for a race. During the race, The Satanita collided with and sank The Valkyrie. The inquiry pertained to the enforceability of the Yacht Club Association's regulations concerning the compensation owed by the owner of the offending vessel to the proprietor of the damaged Valkyrie. The regulations could be upheld.
Per Lord Herschell:
I cannot entertain any doubt that there was a contractual relation between
the parties to this litigation. The effect of their entering for the race, and
undertaking to be bound by these rules to the knowledge of each other, is
sufficient, I think, where those rules indicate a liability on the part of the
one to the other, to create a contractual obligation to discharge that liability.
Per Lord Herschell:
I cannot entertain any doubt that there was a contractual relation between
the parties to this litigation. The effect of their entering for the race, and
undertaking to be bound by these rules to the knowledge of each other, is
sufficient, I think, where those rules indicate a liability on the part of the
one to the other, to create a contractual obligation to discharge that liability.
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Norweb plc v Dixon (1995) Queen's Bench Division Court
Mr. Dixon relocated to a flat and requested Norweb to provide power, which they fulfilled by installing a meter that necessitated the use of electricity payment cards. One year later, Norweb informed Mr. Dixon that he had a debt of £677.86 for energy delivered to the business at 25 Lownorth Road. Mr. Dixon had never resided at 25 Lownorth Road and bore no responsibility for the obligations. Norweb subsequently scheduled an inspection of Mr. Dixon's meter by one of its inspectors. Unbeknownst to Mr. Dixon, the inspector adjusted his meter to necessitate higher payments for reduced electricity consumption in order to recover the 'debt' of £677.86. Due to the heightened electricity charges and multiple correspondences from Norweb, Mr. Dixon experienced significant anxiety and occasionally abstained from food. Upon the revelation of these events, Norweb was accused of the offense of harassing an individual with the intent of coercing payment of a debt purportedly owed under a contract, in violation of section 40 of the Administration of Justice Act 1970. After being sentenced by the magistrates for this offense, Norweb appealed to the Divisional Court, contending that the amount of £677.86 was never asserted 'as a debt owed under a contract' since the agreements for power delivery did not constitute a contract. 26 Proposal and Acceptance The court determined that no contract existed, resulting in the success of Norweb's appeal. In the absence of extraordinary circumstances, Norweb was mandated to provide power under terms predominantly governed by the power Act 1989.
Per Dyson J:
There are many examples of cases where the law to some extent restricts
the freedom of parties to enter into a relationship, but where the
relationship that results is a contract… But, there are other cases in which
a relationship created by legal compulsion is clearly not contractual. Thus,
a person whose property is compulsorily acquired against his will does
not make a contract with the acquiring authority, even though he receives
compensation: see Sovmots Investments Ltd v Secretary of State for the
Environment (1977). In Pfizer Corporation v Ministry of Health (1965), the
House of Lords held that a patient to whom medicines are supplied under
the National Health Service does not make a contract to buy them either
from the chemist or the Minister of Health even if he pays a subscription
charge. The transaction is sui generis, the creation of statute and not a sale
pursuant to a contract… The issue in this case is: which side of the line
does the relationship between a tariff customer and a public electricity
supplier fall? In my judgment, the legal compulsion both as to the creation
of the relationship and the fixing of its terms is inconsistent with the
existence of a contract.
Mr. Dixon relocated to a flat and requested Norweb to provide power, which they fulfilled by installing a meter that necessitated the use of electricity payment cards. One year later, Norweb informed Mr. Dixon that he had a debt of £677.86 for energy delivered to the business at 25 Lownorth Road. Mr. Dixon had never resided at 25 Lownorth Road and bore no responsibility for the obligations. Norweb subsequently scheduled an inspection of Mr. Dixon's meter by one of its inspectors. Unbeknownst to Mr. Dixon, the inspector adjusted his meter to necessitate higher payments for reduced electricity consumption in order to recover the 'debt' of £677.86. Due to the heightened electricity charges and multiple correspondences from Norweb, Mr. Dixon experienced significant anxiety and occasionally abstained from food. Upon the revelation of these events, Norweb was accused of the offense of harassing an individual with the intent of coercing payment of a debt purportedly owed under a contract, in violation of section 40 of the Administration of Justice Act 1970. After being sentenced by the magistrates for this offense, Norweb appealed to the Divisional Court, contending that the amount of £677.86 was never asserted 'as a debt owed under a contract' since the agreements for power delivery did not constitute a contract. 26 Proposal and Acceptance The court determined that no contract existed, resulting in the success of Norweb's appeal. In the absence of extraordinary circumstances, Norweb was mandated to provide power under terms predominantly governed by the power Act 1989.
Per Dyson J:
There are many examples of cases where the law to some extent restricts
the freedom of parties to enter into a relationship, but where the
relationship that results is a contract… But, there are other cases in which
a relationship created by legal compulsion is clearly not contractual. Thus,
a person whose property is compulsorily acquired against his will does
not make a contract with the acquiring authority, even though he receives
compensation: see Sovmots Investments Ltd v Secretary of State for the
Environment (1977). In Pfizer Corporation v Ministry of Health (1965), the
House of Lords held that a patient to whom medicines are supplied under
the National Health Service does not make a contract to buy them either
from the chemist or the Minister of Health even if he pays a subscription
charge. The transaction is sui generis, the creation of statute and not a sale
pursuant to a contract… The issue in this case is: which side of the line
does the relationship between a tariff customer and a public electricity
supplier fall? In my judgment, the legal compulsion both as to the creation
of the relationship and the fixing of its terms is inconsistent with the
existence of a contract.
