Must there be consensus ad idem?

Raffles v Wichelaus1864).

Facts: Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods were
to be shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware
that there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one
arriving in October and the other in December. Wichelhaus thought he had purchased the cotton
arriving on the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to
accept delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for
breach of contract.

Holding and Rule

1. No. If a latent ambiguity arises that shows that there had been no meeting of the minds,
there is no mutual assent to contract.
2. Yes. Parol evidence is admissible to determine the meaning each party had assigned
regarding a latent ambiguity

Byrne v Van Tienhoven

D's offered to sell goods to P by letter dated 1 October. On 8 October, prior to acceptance, D's
posted a letter revoking the offer. This letter was received by P on 20 October. In the meantime,
on 11 October P received the letter and dispatched an acceptance. Was there a contract?

Held : To be effective revocation must be communicated. Where post is used for acceptance,
acceptance occurs when and where sent (provided it is contemplated as a means of acceptance)
(the 'postal rule'). However, this rule does not apply in relation to revocation of offers - thus, if
post is used for revocation, communication is only effective if and when it is received by the
offeree. As this occurred after acceptance there was a contract formed in this case.

An offer was containing a price escalation clause. A counter offer was then made without this
clause; it contained a detachable receipt which the company (original offeror) sent back with a
notation that they assumed it was on their terms.

Storer v Manchester City Council [1974] 3 All ER 824

Facts:

o earlier case also involving a council tenant's right to buy his property
o D sent P a document titled Agreement for Sale and a letter which stated: If you will
sign the Agreement and return it, I will send you the Agreement signed on behalf
of the council in exchange
o P signed and returned the Agreement for Sale
 o Labour party took control of the council and did not return a signed copy, refusing
to sell the property
o P sued for breach of contract

Held:

o there was a binding obligation on D to sell

o Lord Denning: In contracts you do not look into the actual intent in a man's mind.
You look to what he said and did. A contract is formed when there is, to all outward
appearances, contract. A man cannot get out of a contract by saying 'I did not intend
to contract' if by his words he has done so...
o objectively, to a reaosnable man D's letter appeared to commit to selling the
property if P returned the documents

G Percy Trentham v Archital Luxfer (1993)

(Offer and Acceptance)
Fact: contractor and works contractor, no contract but oral and written exchange and transections
were fully executed, defendent issue letter on 17/2 and the plaintiff replied, plaintiff sue
defendent for delay, defendent argued that no contract had formed;
Held: there exist contract by conduct performed by both parties, letter on 12/7 is not offer but an
evidence of existing agreement, plaintiff's reply is merely confirming the position, "commercial
character of the transection" could be an agreement to form contract;

Hartog v Colin & Shields

D offered to sell hare skins which were incorrectly priced
C accepted the offer, knowing that they were incorrectly priced
D realised error and refused to sell
JUDGEMENT - An offeree cannot ‘snap up’ an offer which he knows or ought to have known
was made in error
‘there really was no contract, because you knew that the document which went forward to you, in
the form of an offer, contained a mistake... I am satisfied that anyone with any knowledge of the
trade must have realised that there was a mistake... the plaintiff could not reasonably have
supposed that that offer contained the offerors’ real intention’

Indicia of Agreement
Gibson v Manchester C.C
D sent the C a letter stating that the council ‘may be prepared to sell the house to you at the
purchase price of £2,725... if you would like to make a formal application to buy your council
house please complete the form and return it to me as soon as possible’
The C completed and returned the form
The D then changed its policy on the sale of council houses
The C was advised that the Council (D) was unable to proceed with his application
C brought the action claiming that the Council’s letter was an offer which he had accepted by
returning the application form
The House of Lords/Supreme Court found in favour of the D’s
Ratio decidendi – the letter sent to C said ‘may be prepared to’, therefore it lacked clarity and
certainty, and was deemed not to be an offer

Statement of Present Intention or Preliminary Negotiation

Harvey v. Facey,
Facts: Facey (D) was in negotiations with the Mayor and Council of Kingston regarding the sale
of his store. Harvey (P) sent Facey a telegram stating: “Will you sell us Bumper Hall Pen?
Telegraph lowest cash price-answer paid.” On the same day, Facey sent Harvey a reply by
telegram stating: “Lowest price for Bumper Hall Pen £900.” Harvey sent Facey another telegram
agreeing to purchase the property at the asking price. D refused to sell and P sued for specific
performance and an injunction to prevent Kingston from taking the property. The trial court
dismissed on the grounds that an enforceable contract had not been formed and P appealed. The
Supreme Court of Jamaica reversed and D appealed.

Holding and Rule: No. A mere statement of the minimum selling price is an invitation to treat
and not an offer to sell. The court held that by replying to P’s question regarding the lowest price
of the property, D did not make an affirmative answer to the first question regarding his
willingness to sell. The court held that D had made an invitation to trade and not an offer.

An advertisement
Partridge v Crittenden
C placed an advert offering to sell a live wild bird (contrary to the Protection of Birds Act)
It was held that the advertisement was merely an invitation to treat
Ratio decidendi – advertisements are invitations to treat

An offer that looks like an advertisement

Carlill v Carbolic Smoke Ball Co (1893)
(Offer and Acceptance)
Fact: posted in advertisment to pay 100 pounds "reward" to anyone caught influenza, deposited
of 1000 pounds in the bank;
Held: (COA): advertisment is not mere puff, deposit of 1000 pounds in the bank evidenced its
seriousness, advertisment is an offer to the world, communication of acceptance not necessary;
A display of items
Fisher v Bell

Fact:
A shopkeeper displayed in his shop window a knife with a price ticket behind it. He was charged
with offering for sale a flick knife, contrary to s. 1 (1) * of the Restriction of Offensive Weapons
Act, 1959.
Held: the shopkeeper was not guilty of the offense with which he was charged because the
displaying of the knife in the shop window was merely an invitation to treat and the shopkeeper
had not thereby offered the knife for sale, within the meaning of s. 1 (1) of the Act of 1959.

PSGB v Boots Cash Chemists

Fact :The defendants operated a retail self-service chemist. The customers took the items they
required from the shelves, put them into a basket, and then took them to the cash desk. The
pharmacist supervised the transaction at the cash desk. The issue was whether the sale was
completed at the shelf when the goods were selected, or at the cash desk. The provisions of the
Pharmacy and Poisons Act 1933 s18 stated that it was unlawful to sell certain drugs, unless the
sale is affected under the supervision of a registered pharmacist.

HELD Somervell LJ

The usual view has been that customers (say in a bookshop) select the item they wish to
purchase, and then take it to the assistant, who accepts it and completes the contract. I cannot see
that this situation is any different. The plaintiff contends that the defendant has offered to sell the
goods by displaying them on the shelves, and that the plaintiff accepts the offer by taking them
from the shelf. If this is correct, then a person who takes something from the shelves cannot then
replace the item if they see something which they would prefer more. It seems clear that the sale
takes place at the cash register, under the supervision of the pharmacist, in conformity with the
Act.

Letter of Intent
BSV v Cleveland Bridge & Engineering Co.
An ‘if contract’ is where one party makes an offer capable of acceptance on the basis that ‘if you
do this for us, we will do that for you’. Often used in the construction industry. Goff J said: “the
question whether .. any contract has come into existence must depend on a true construction of the
relevant communications which have passed between the parties and the effect (if any) of their
actions pursuant to those communications. There can be no hard and fast answer to the question
whether a letter of intent will give rise to a binding agreement; everything must depend on the
circumstances of the particular case. In most cases where work is done pursuant to a request
contained in a letter of intent, it will not matter whether a contract did or did not come into
existence; because if the party who has acted on the request is simply claiming payment, his claim
will usually be based upon a quantum meruit, and it will make no difference whether that claim is
contractual or quasi-contractual. Of course, a quantum meruit claim (like the old actions for money
had and received and for money paid) straddles the boundaries of what we now call contract and
restitution; so the mere framing of a claim as a quantum meruit claim, or a claim for a reasonable
sum, does not assist in classifying the claim as contractual or quasi-contractual. . . As a matter of
analysis the contract (if any) which may come into existence following a letter of intent may take
one of two forms: either there may be an ordinary executory contract, under which each party
assumes reciprocal obligations to the other; or there may be what is sometimes called an “if”
contract, ie a contract under which A requests B to carry out a certain performance and promises
B that, if he does so, he will receive a certain performance in return, usual remuneration for his
performance. The latter transaction is really no more than a standing offer which, if acted upon
before it lapses or is lawfully withdrawn, will result in a binding contract. The former type of
contract was held to exist by Judge Fay QC in Turriff Construction Ltd. v. Regalia Knitting Mills
Ltd (1971) 9 BLR 20; and it is the type of contract for which [Counsel for CBE] contended in the
present case. Of course, as I have already said, everything must depend on the facts of the particular
case; but certainly, on the facts of the present case – and, as I imagine, on the facts of most cases
– this must be a very difficult submission to maintain.”

If there is no contract there can be no question of a party to a transaction being in breach of an

obligation of the type which can only arise under a contract. “In my judgment, the true analysis of
the situation is this. Both parties confidently expected a formal contract to eventuate. In these
circumstances, to expedite performance under that anticipated contract, one requested the other to
commence the contract work, and the other complied with that request. If thereafter – as anticipated
– a contract was entered into, the work done as requested will be treated as having been performed
under that contract; if, contrary to their expectation, no contract was entered into, then the
performance of the work is not referable to any contract of which the terms can be ascertained,
and the law simply imposes an obligation on the party who made the request to pay a reasonable
sum for such work as has been done pursuant to that request, such an obligation sounding in quasi-
contract or, as we now say, in restitution.”

Acceptance
R v Clarke (1927) 40 CLR 227, 233
A reward was offered for information leading to the arrest of the murderer of two policemen.
Clarke, himself suspected of the crime, gave information because he wished to clear himself and
with no intention of claiming the reward. The claim for the reward failed

Taylor v Allen [1966] 1 QB 304

Taking a car out on the road does not amount to an acceptance of an offer to insure unless there
is clear evidence that the party intended to deal with that insurance company.

The difficulty with acceptance by conduct is that it is difficult to determine precisely what the
terms of the contract are. This may result in the court refusing to acknowledge the existence of a
contract at all. In situations where the price may not have been fixed the courts are prepared to
impose a reasonable price provided that it clear that the parties have agreed to contract as
opposed to merely ‘agreeing to agree': Sale of Goods Act s. 8(2); and see below.

Termination of offers

Lapse of time
Routledge v Grant

 Facts:
o defendant (D) offered to buy plaintiff's (P) house for a specific price with a
definite answer to be given within six weeks
 Held:
o D was not bound to keep the offer open
o Best CJ: .. if six weeks are given on one side to accept an offer, the other has six
weeks to put an end to it. One party cannot be bound without the other...

Pitt v PHH Assets Management Co.

There was a conversation between the plaintiff, who had been gazumped, and the defendant, who
was playing the plaintiff off against another interested party in a private treaty sale. The
defendant agreed orally not to market the property for a short period, and he confirmed this by
letter. The defendant appealed agaisnt a finding that he had broken his promise, saying that the
1989 Act had not been complied with.
Held: A negative undertaking in the form of a lock out agreement, with a short stipulated period
was enforceable, even though it was oral only. It was not itself a contract for the sale of any
interest in land, and was not governed by the 1989 Act, and had not been required to be in
writing.

Death
Bradbury v Morgan
JM Leigh requested Bradbury & Co to give credit to HJ Leigh, his brother. JM Leigh guaranteed
his brother's account to the extent of £100. Bradbury thereafter credited HJ Leigh in the usual
way of their business. JM Leigh died but Bradbury, having no notice or knowledge of his death,
continued to supply HJ Leigh with goods on credit. JM Leigh's executors (Morgan) refused to
pay, arguing that they were not liable as the debts were contracted and incurred after the death of
JM Leigh and not in his lifetime. Judgment was given for the plaintiffs, Bradbury.

Revocation
Byrne v Van Tienhoven (1880)
1 Oct. D posted a letter offering goods for sale.
8 Oct. D revoked the offer; which arrived on 20 Oct.
11 Oct. P accepted by telegram
15 Oct. P posted a letter confirming acceptance.

It was held that the defendant's revocation was not effective until it was received on 20 Oct. This
was too late as the contract was made on the 11th when the plaintiff sent a telegram. Judgment
was given for the plaintiffs.

Dickinson v Dodds
D made an offer to sell his property to C, stating that ‘this offer is to be left over until Friday
9o’clock’
C heard a rumour that D had been offering/agreeing to sell the property to a 3rd party
(COMMUNICATION OF REVOCATION)
C delivered an acceptance to D on Friday
However, D had sold the property to 3rd party on Thursday
The court found in favour of D
Ratio decidendi – ‘there was no consideration given for the undertaking or promise, to whatever
extent is may be considered binding, to keep the property unsold until 9o’clock on Friday
morning... this promise, being a mere nudum pactum, was not binding, and that at any moment
before a complete acceptance by C of the offer, D was as free as C himself’
In the absence of any consideration for the promise to keep the offer open, that promise was
unenforceable. If consideration had been given by C in return for D’s promise to keep the offer
open, then that would have been binding; an option contract... e.g. if C had paid him some
money to keep the offer open...
COMMUNICATION CAN BE DELIVERED BY A THIRD PARTY!!!

Errington v Errington and Woods (1952)

A father bought a house on mortgage for his son and daughter-in-law and promised them that if
they paid off the mortgage, they could have the house. They began to do this but before they had
finished paying, the father died. His widow claimed the house. The daughter-in-law was granted
possession of the house by the trial judge and the Court of Appeal.

Denning LJ stated: "The father's promise was a unilateral contract - a promise of the house in
return for their act of paying the instalments. It could not be revoked by him once the couple
entered on performance of the act, but it would cease to bind him if they left it incomplete and
unperformed, which they have not done. If that was the position during the father's lifetime, so it
must be after his death. If the daughter-in-law continues to pay all the building society
instalments, the couple will be entitled to have the property transferred to them as soon as the
mortgage is paid off; but if she does not do so, then the building society will claim the
instalments from the father's estate and the estate will have to pay them. I cannot think that in
those circumstances the estate would be bound to transfer the house to them, any more than the
father himself would have been."
Daulia v Four Millbank Nominees (1978)

The defendant offered to sell property to the plaintiff. The parties agreed terms and agreed to
exchange contracts. The defendant asked the plaintiff to attend at the defendant's office to
exchange. The plaintiff attended but the defendant sold to a third party for a higher price. It was
held that the contract fell foul of s40(1) Law of property Act 1925 and the plaintiff's claim was
struck out. However, Goff L.J. stated obiter:

In unilateral contracts the offeror is entitled to require full performance of the condition imposed
otherwise he is not bound. That must be subject to one important qualification - there must be an
implied obligation on the part of the offeror not to prevent the condition being satisfied, an
obligation which arises as soon as the offeree starts to perform. Until then the offeror can revoke
the whole thing, but once the offeree has embarked on performance, it is too late for the offeror
to revoke his offer.

Supervening Impossibility

Financings Ltd v Stimson (1962)

The defendant at the premises of a dealer signed a form by which he offered to take a car on HP
terms from the plaintiffs. He paid a deposit and was allowed to take the car away. He was
dissatisfied with it and returned it to the dealer, saying he did not want it. The car was stolen
from the dealer's premises and damaged. The plaintiffs, not having been told that the defendant
had returned the car, signed the HP agreement.

It was held by the Court of Appeal (a) that the defendant had revoked his offer by returning the
car to the dealer. (b) In view of an express provision in the form of the contract that the
defendant had examined the car and satisfied himself that it was in good order and condition, the
offer was conditional on the car remaining in substantially the same condition until the moment
of acceptance. That condition not being fulfilled, the acceptance was invalid

Counter offers
Hyde v Wrench
D offered to sell C a farm for £1000
C made a counter offer of £950 (thus rejecting the first offer)
D rejected the counter offer
C then tried to accept the original offer – and upon D refusing, C sought an order for ‘specific
performance of contract’
The court found in favour of D
Ratio decidendi – ‘the defendant offered to sell it for £1000, and if that had been at once
unconditionally accepted, there would undoubtedly have been a perfect binding contract; instead
of that, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby
rejected the offer previously made by the defendant’

Stevenson,Jacques & Co v Mclean

Facts :The defendant held documents of title to certain quantities of iron and offered to sell them
to the plaintiff for 40/- cash, indicating that the offer would be held open until the following
Monday. The plaintiff was a broker and would only buy once they had lined up a buyer to take
from them.

On Monday at 9:42am P sent a telegram to D sounding out what flexibility there might be to
negotiate before the days trading got under way. The market was unstable and P wanted to know
the negotiating range. "Please wire whether you would accept 40 for delivery over 2 months, if
not, longest time limit."

There was no response from D and P later purported to accept the original offer. D claimed that
the acceptance was not effective as their telegram had rejected the offer by way of counter-offer.

HELD :This case should be distinguished from Hyde v Wrench (1840). In that case D had
offered his estate for £1000. P offered to pay £950. When this was refused, P then purported to
agree to pay the full £1000. P could not claim the estate, because his original counter-offer had
put an end to D's offer. Here, the telegram was not a counter-proposal, but a mere inquiry "which
should have been answered" [morally or legally?]. It was not as a rejection of the offer. Pothier
has suggested a more subjective view. He has argued that if the offeror changes their mind (but
does not communicate this) before acceptance, then at the moment of acceptance, there is no
meeting of minds, and therefore no contract. However a more objective view is preferable. Once
an offer is made, it is taken to be continuing each moment until accepted or withdrawn. The law
will regard the intention evidenced in the offer as continuing, until notice of its revocation has
been communicated to the other party. As stated in Byrne v Van Tienhoven (1880) "an
uncommunicated revocation is, for all practical purposes and in point of law, no revocation at
all". As no notice of withdrawal was given by the offeror, the P could regard it as a continuing
offer, and their acceptance of it made the contract complete.

An issue of “acceptability” is also raised where the offer is

mistakenly expressed.
Hartog v Colin & Shields
D offered to sell hare skins which were incorrectly priced
C accepted the offer, knowing that they were incorrectly priced
D realised error and refused to sell
JUDGEMENT - An offeree cannot ‘snap up’ an offer which he knows or ought to have known
was made in error
‘there really was no contract, because you knew that the document which went forward to you, in
the form of an offer, contained a mistake... I am satisfied that anyone with any knowledge of the
trade must have realised that there was a mistake... the plaintiff could not reasonably have
supposed that that offer contained the offerors’ real intention’

Facts
Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods were to be
shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware that
there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one arriving in
October and the other in December. Wichelhaus thought he had purchased the cotton arriving on
the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to accept
delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for breach
of contract.

Holding and Rule

3. No. If a latent ambiguity arises that shows that there had been no meeting of the minds,
there is no mutual assent to contract.
4. Yes. Parol evidence is admissible to determine the meaning each party had assigned
regarding a latent ambiguity

Nature of acceptance

Conduct
Brogden v Metropolitan Railway
Brogden had supplied the Metropolitan Railway with coal for a number of years. Brogden
suggested a formal contract should be entered into between them. Each side's agents met together
and negotiated. Metropolitan's agents drew up some terms of agreement and sent them to
Brogden. After making amendments Brogden wrote "approved" at the end and sent it back.
Metropolitan's agent filed the documents and did nothing more. For a while, both acted
according to the agreement document's terms. But then some disagreements arose, and Brogden
argued that there had been no formal contract actually established. Held: Acceptance has been
made by conduct

G Percy Trentham v Archital Luxfer (1993)

(Offer and Acceptance)
Fact: contractor and works contractor, no contract but oral and written exchange and transections
were fully executed, defendent issue letter on 17/2 and the plaintiff replied, plaintiff sue
defendent for delay, defendent argued that no contract had formed;
Held: there exist contract by conduct performed by both parties, letter on 12/7 is not offer but an
evidence of existing agreement, plaintiff's reply is merely confirming the position, "commercial
character of the transection" could be an agreement to form contract;
Signature
L'estrange v Graucob (1934)

This case (L'Estrange v Graucob Ltd [1934] 2 KB 394) demonstrates that one cannot evade
being bound by the terms of a Contract, even an Exclusion clause on the basis that one did not
read or understand the terms.

Mrs L'Estrange owned a cafe. She ordered a cigarette machine from the manufacturers which, it
turned out, never worked properly. Although an implied contract term in the sale of goods is that
the goods will be suitable for the purpose intended, the contract -- which Mrs L'Estrange had
signed -- did state that the manufacturers disclaimed all liability regarding the malfunction of the
machine. It was held that Mrs L'Estrange could not claim damages on the grounds that she did
not see the clause in the contract. There was no evidence of fraud or misrepresentation that might
have mitigated this judgement.

Saunders v Anglia Building Society

Lord Wilberforce in Saunders v Anglia Building Society [1971] AC 1004 analysed historical
background and stated a test of admissibility of non est factum plea:
The plea of non est factum has a long history. In medieval times, when contracts were made by
deeds, and the deed had a kind of life in the law of its own, illiterate people who either could not
read, or could not understand, the language in which the deed was written, were allowed this plea
(that is what 'non est factum' is—a plea): the result of it, if successful, was that the deed was not
their deed. I think that three things can be said about the early law. First, that no definition was
given of the nature or extent of the difference which must exist between what was intended and
what was done—whether such as later appeared as the distinction between 'character' and
'contents' or otherwise. Secondly, the … cases are for the most part as between the original
parties to the deed, or if a third party is concerned … he is a successor to the estate granted.
Thirdly, there is some indication that the plea was not available where the signer had been guilty
of a lack of care in signing what he did: there is no great precision in the definitions of the
disabling conduct…
How, then, ought the principle, on which a plea of non est factum is admissible, to be stated? In
my opinion, a document should be held to be void (as opposed to voidable) only when the
element of consent to it is totally lacking, that is, more concretely, when the transaction which
the document purports to effect is essentially different in substance or in kind from the
transaction intended. Many other expressions, or adjectives, could be used—'basically' or
'radically' or 'fundamentally'… In other words, it is the lack of consent that matters, not the
means by which this result was brought about. Fraud by itself may do no more than make the
contract voidable.
Secondly, a man cannot escape from the consequences, as regards innocent third parties, of
signing a document if, being a man of ordinary education and competence, he chooses to sign it
without informing himself of its purport and effect…
Thirdly, there is the case where the signer has been careless in not taking ordinary precautions
against being deceived…. In my opinion, the correct rule, …, is that, leaving aside negotiable
instruments to which special rules may apply, a person who signs a document, and parts with it
so that it may come into other hands, has a responsibility, that of the normal man of prudence, to
take care what he signs, which, if neglected, prevents him from denying his liability under the
document according to its tenor.
Communication of Acceptance
Carlill v Carbolic Smoke Ball Co (1893)
(Offer and Acceptance)
Fact: posted in advertisment to pay 100 pounds "reward" to anyone caught influenza, deposited
of 1000 pounds in the bank;
Held: (COA): advertisment is not mere puff, deposit of 1000 pounds in the bank evidenced its
seriousness, advertisment is an offer to the world, communication of acceptance not necessary;

Holwell Securities Ltd v Hughes

Hughes, in an agreement dated 19 Oct 1971 granted Holwell an option to purchase premises. The
agreement said that the option could be exercised by notice in writing addressed to the vendor at
any time within 6 months from that date. It was accepted that Holwell posted a letter to Hughes
on 14 April 1972 but this was not received. Holwell sought specific performance. The action was
dismissed at trial.

HELD Lawton LJ.

It is a truism of the law relating to options that the grantee must comply strictly with the
conditions stated for its exercise. The document was carefully drafted and should be strictly
construed. The wording is familiar to conveyancers and should be construed in the way they
would use such words. "Notice in writing" should be contrasted with "agreed in writing" and
"required in writing". The word "notice" comes from the Latin word "to know" and the Oxford
Dictionary suggests it means intimation or warning.

Now notice in writing to the vendor meant that he was to be fixed with this information - but he
never was because it never got to him. The Plaintiffs were unable to do what the agreement said
they were to do, and fix the vendor with the knowledge of the exercise of the option. If this
construction of the option is correct, there is no room to apply the postal rule.

It was argued that the parties must have contemplated the use of the post, and this is enough to
bring in Henthorn. But that rule does not apply where the express terms of the offer specify that
acceptance must reach the offeror. The public are now familiar with this exception to the general
rule through their involvement with football coupons. Also, the rule does not apply if it would
lead to manifest absurdity or inconvenience. This means that having regard to all the
circumstances, including the subject matter being considered, the rule does not apply where the
parties cannot have intended that there should be a binding agreement until the acceptance has
been communicated to the other. In my view this principle applied here.
Instantaneous means
Entores Ltd v Miles Far East Corp
The claimant sent a telex message from England offering to purchase 100 tons of Cathodes from
the defendants in Holland. The defendant sent back a telex from Holland to the London office
accepting that offer. The question for the court was at what point the contract came into
existence. If the acceptance was effective from the time the telex was sent the contract was made
in Holland and Dutch law would apply. If the acceptance took place when the telex was received
in London then the contract would be governed by English law.

Held: To amount to an effective acceptance the acceptance needed to be communicated to the

offeree. Therefore the contract was made in England.

Brinkibon Ltd. Stahlwarenhandels

FACT: The offeror, Brinkibon (London, England) wanted to sue the offeree, Stahag (Vienna,
Austria) for breach of contract. Acceptance of Brinkibon’s offer had been by way of telex from
London to Austria. Which jurisdiction’s law applied? The answer to this question depended on
whether the postal rule applied - if it did the contract would have been concluded in England and
English law would apply; if it did not apply then the contract would have been concluded where
the acceptance was received – Vienna.

HELD: The postal rule does not apply to direct/instant forms of communication (including telex)
– as telex was used here the postal rule did not apply and the contract was formed in
Vienna. The Court also observed that even though with telex the message may not be received
by the intended recipient immediately (there may be agents or other third parties who receive the
messages to be passed on to the intended recipient) a telex that goes directly from the offeree’s
business to the offeror’s business (unlike a telegram which employs the use of a post office)
should be treated as if it were an instantaneous communication. If a telex is sent to an office
acceptance occurs when the telex reaches the place of business, not when it actually gets to the
person it is addressed to.

Adams v Lindsell (1818) 1 B & Ald 681

In the case of acceptance by post acceptance takes effect when the letter, correctly addressed, is
posted or handed to a post office employee authorised to receive letters for posting.

So here the defendants who have proposed by letter to sell this wool, are not to be held liable,
even though it be now admitted that the answer did not come back in due course of post. Till the
plaintiffs' answer was actually received, there could be no binding contract between the parties;
and before then, the defendants had retracted their offer, by selling the wool to other persons.

But the Court said, that if that were so, no contract could ever be completed by the post. For if
the defendants were not bound by their offer when accepted by the plaintiffs till the answer was
received, then the plaintiffs ought not to be bound till after they had received the notification that
the defendants had received their answer and assented to it. And so it might go on ad infinitum.
The defendants must be considered in law as making, during every instant of the time their letter
was travelling, the same identical offer to the plaintiffs; and then the contract is completed by the
acceptance of it by the latter. Then as to the delay in notifying the acceptance, that arises entirely
from the mistake of the defendants, and it therefore must be taken as against them, that the
plaintiffs' answer was received in course of post.

Silence
Felthouse v Bindley (1862)

Claimant wrote to his nephew about the sale of a horse offering to buy it. He explained that if he
heard no more about it he would consider the horse his. Held: Because the nephew had not
communicated his acceptance there was no contract.

Taylor v Allen [1966] 1 QB 304

Taking a car out on the road does not amount to an acceptance of an offer to insure unless there
is clear evidence that the party intended to deal with that insurance company.

The difficulty with acceptance by conduct is that it is difficult to determine precisely what the
terms of the contract are. This may result in the court refusing to acknowledge the existence of a
contract at all. In situations where the price may not have been fixed the courts are prepared to
impose a reasonable price provided that it clear that the parties have agreed to contract as
opposed to merely ‘agreeing to agree': Sale of Goods Act s. 8(2); and see below.

Who may accept an offer?

Powell v Lee (1908) 99 LT 284
Held: There is no acceptance if the fact of acceptance is communicated to the offeror through a
third party when the offeree has not given authority for the third party to communicate such
acceptance.

Mistaken acceptance
Raffles v Wichelaus1864).

Facts
Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods were to be
shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware that
there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one arriving in
October and the other in December. Wichelhaus thought he had purchased the cotton arriving on
the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to accept
 delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for breach
of contract.

Holding and Rule

1. No. If a latent ambiguity arises that shows that there had been no meeting of the minds,
there is no mutual assent to contract.
2. Yes. Parol evidence is admissible to determine the meaning each party had assigned
regarding a latent ambiguity

Certainty of Agreement

Vagueness and Incompletness

HILLAS V ARCOS (1930) 147 LT 503
FACTS:
 P agreed to purchase 22,000 standards of softwood of fair specification from D, there was an
option to purchase an additional 100,000 standards
 P attempted to exercise the option to buy more, D refused
 D argued there was .. was an agreement to make an agreement, the terms of which were not
defined, and so was unenforceable....
HELD:
 there was an enforceable contract
 on the basis of previous agreements between the parties the seemingly vague words fair
specification had sufficient specific meaning
 also relevant that parties acted on the assumption there was a contract

Raffles v Wichelaus1864).

Facts

Raffles (P) contracted to sell 125 bales of Surat cotton to Wichelhaus (D). The goods were to be
shipped from Bombay to Liverpool, England on the ship “Peerless”. Neither party was aware that
there were two ships names “Peerless” carrying cotton from Bombay to Liverpool, one arriving in
October and the other in December. Wichelhaus thought he had purchased the cotton arriving on
the October ship, but Raffles sent his cotton on December ship. Wichelhaus refused to accept
delivery of the cotton arriving on the December ship and Raffles brought this lawsuit for breach
of contract.

Holding and Rule

 1. No. If a latent ambiguity arises that shows that there had been no meeting of the minds,
there is no mutual assent to contract.
2. Yes. Parol evidence is admissible to determine the meaning each party had assigned
regarding a latent ambiguity

Scammell v Ouston (1941)- Ouston agreed to buy a van from Scammell, providing
his old lorry in part-exchange and paying the balance ‘on hire-purchase terms’ over two years.

Before the precise nature of those terms could be negotiated, Scammell decided not to go ahead

with the deal, and claimed there was no contract between the parties. The House of Lords agreed,

pointing out that although the courts aimed to uphold an agreement if there really was one, the

terms used were too vague to signify any true agreement. The phrase ‘hire-purchase terms’ could

be used to describe many different arrangements: it left open such questions as whether
payments

would be made on a weekly, monthly or yearly basis; whether there would be an initial deposit;

and what the interest rate would be. Consequently, the parties could not be said to have made a

sufficiently certain agreement to constitute a contract.

NICOLENE LTD V SIMMONDS [1953] 1 QB 543

FACTS:
 D agreed to sell P steel bars
 letters between the parties (the alleged contract) it was stated: I assume that the usual conditions
of acceptance apply...
 D failed to deliver and sought to rely upon the statement to create uncertainty
ISSUE:
 did a lack of explicit agreement on the conditions of acceptance mean that there was no contract?
HELD:
 a valid contract existed as meaningless clauses are irrelevant
 Denning LJ: There were no usual conditions of acceptance and so it is said that those words are
meaningless, that there is nothing to which they can apply, and that, therefore, there was never
any contract between the parties. In my opinion, a distinction must be drawn between a clause
 which is meaningless and a clause which is yet to be agreed. A clause which is meaningless can
often be ignored, while still leaving the contract good, whereas a clause which has yet to be
agreed may mean that there is no contract at all, because the parties have not agreed on all the
essential terms...

Sudbrook Trading Estate v Eggleton [1983] AC AC 444 House of Lords

A lease gave the tenant an option to purchase the freehold of the property at a price to be agreed
by two surveyors one appointed by the tenant and one appointed by the landlord. The tenant
sought to exercise the option but the landlord refused to appoint a surveyor. The landlord
claimed that the clause was too vague to be enforceable as it did not specify a price.
Held:
The clause was not too vague to be enforceable as it put in place a mechanism to ascertain the
price.

Promise to Negotiate good faith

HILLAS V ARCOS (1930) 147 LT 503

FACTS:
 P agreed to purchase 22,000 standards of softwood of fair specification from D, there was an
option to purchase an additional 100,000 standards
 P attempted to exercise the option to buy more, D refused
 D argued there was .. was an agreement to make an agreement, the terms of which were not
defined, and so was unenforceable....
HELD:
 there was an enforceable contract
 on the basis of previous agreements between the parties the seemingly vague words fair
specification had sufficient specific meaning
 also relevant that parties acted on the assumption there was a contract
 Pitt v PHH Assets Management Co.
 There was a conversation between the plaintiff, who had been gazumped, and the
defendant, who was playing the plaintiff off against another interested party in a private
treaty sale. The defendant agreed orally not to market the property for a short period, and
he confirmed this by letter. The defendant appealed agaisnt a finding that he had broken
his promise, saying that the 1989 Act had not been complied with.
Held: A negative undertaking in the form of a lock out agreement, with a short stipulated
 period was enforceable, even though it was oral only. It was not itself a contract for the
sale of any interest in land, and was not governed by the 1989 Act, and had not been
required to be in writing.

Promise subject to contract

Chillingworth v Esche
S agreed to sell his land to P. The parties signed a written document recording the agreed terms.
This document said that the agreement was ‘subject to a proper contract to be prepared by the
vendor’s solicitors’. P paid a deposit. The terms of the anticipated formal agreement were settled
but P then informed S that he did not intend to proceed. He sought the return of the deposit.

The English Court of Appeal held that it was always a matter of construction whether the parties
intended to be contractually bound. In this case, making the agreement ‘subject to a proper
contract’ expressed an intention not to be contractually bound. There was nothing to indicate an
agreement that S could retain the deposit even though the transaction had fallen through and he
had to return it. The Court of Appeal spoke in terms of a conditional contract: the phrase used
showed that the parties saw entering into the ‘proper contract’ as a condition precedent to the
formation of the contract.

This case seems to mark the emergence of ‘subject to contract’ as a phrase with a definite legal
significance:

‘To my mind the words “subject to contract” or “subject to formal contract” have by this time
acquired a definite ascertained legal meaning – not quite so definite a meaning perhaps as such
expressions as f.o.b. or c.i.f. in mercantile transactions, but approaching that degree of definiteness.
The phrase is a perfectly familiar one in the mouths of estate agents and other persons accustomed
to deal with land; and I can quite understand a solicitor saying to a client about to negotiate for the
sale of his land: “Be sure that to protect yourself you introduce into any preliminary contract you
may think of making the words ‘subject to contract.’” (Sargant LJ at 114).

Alpenstow Ltd -v- Regalian Properties plc; ChD 1985

The parties agreed in writing for the sale of land, the agreement contained a right of pre-emption.
In the event of the owner wishing to sell it was to offer to sell a share in the property by notice.
Within 28 days of the notice, the grantee was to accept the offer ‘subject to contract’. Within seven
days thereafter a draft contract was to be submitted; the draft was to be approved within 28 days,
subject to any amendment reasonably required, and contracts were to be exchanged seven days
thereafter. Held: The agreement was binding. There was an incompatibility between the freedom
to withdraw from the transaction which the words ‘subject to contract’ suggested, and the duty to
submit a contract and to exchange it within a particular timetable.
Battle of Forms
Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1
WLR 401
Sellers offered to supply a machine for a specified sum. The offer included a ‘price escalation'
clause. The Buyers placed an order on their own terms and conditions which differed from the
Seller's. No price escalation clause and other differences. The Buyers' document contained a tear
off slip to be signed by the Sellers and returned to the Buyers stating that the Sellers accepted the
order on the terms contained therein. Sellers returned the tear off slip (duly signed) and stating in
the accompanying letter that they were ‘entering' the order ‘in accordance with' their offer.

HELD : this was an acceptance of the Buyer's counter-offer and that the contract was governed
by the Buyer's terms which did not include a price escalation clause. The seller's reply did not
prevail – even though it was ‘the last shot' in the series of communications.

Implied Agreement

Cross offers
Tinn v Hoffman (1873)
Acceptance was requested by return of post. Honeyman J said: "That does not mean exclusively a
reply by letter or return of post, but you may reply by telegram or by verbal message or by any
other means not later than a letter written by return of post."

In writing
Daulia v Four Millbank Nominees (1978)

The defendant offered to sell property to the plaintiff. The parties agreed terms and agreed to
exchange contracts. The defendant asked the plaintiff to attend at the defendant's office to
exchange. The plaintiff attended but the defendant sold to a third party for a higher price. It was
held that the contract fell foul of s40(1) Law of property Act 1925 and the plaintiff's claim was
struck out. However, Goff L.J. stated obiter:

In unilateral contracts the offeror is entitled to require full performance of the condition imposed
otherwise he is not bound. That must be subject to one important qualification - there must be an
implied obligation on the part of the offeror not to prevent the condition being satisfied, an
obligation which arises as soon as the offeree starts to perform. Until then the offeror can revoke
the whole thing, but once the offeree has embarked on performance, it is too late for the offeror
to revoke his offer.
Elias v George Sahely & Co (Barbados) Ltd
the plaintiff and the defendant had completed an oral agreement for the sale and purchase of
property. The purchaser’s attorney wrote to the seller’s attorney confirming the oral agreement
and setting out its terms. Enclosed with the letter was a cheque for the 10% deposit. The
purchaser’s attorney asked for a receipt. The seller’s attorney wrote back with a receipt for the
cheque. This confirmed that the money was a deposit for the property ‘agreed to be sold’. The
seller then refused to complete the transaction and pleaded the lack of a written memorandum. The
Privy Council allowed parol evidence to be adduced that linked the signed receipt with the letter
containing the terms of the agreement. It ordered specific performance.

Lord Scarman held that the modern law on linking two documents together in this way had been
correctly stated by Jenkins LJ inTimmins v Moreland Street Property Co Ltd. A document signed
by or on behalf of the party to be charged can be linked to another document to form a
memorandum satisfying CPO s.3(1) where the signed document contains an express or implicit
reference to some other document or transaction. When this condition is satisfied, parol evidence
can be introduced to identify the other document or explain the other transaction.