WYATT v. KREGLINGER AND FERNAU. [1932. W. 2620.] Restraint of Trade--Grant of Pension by Employers to Employee--Stipulation that Recipient of Pension was not to enter the Wool Trade--No Covenant by Recipient of Pension--Acceptance of Pension on Term stated-- Action to recover Pension. The defendants, on June 25, 1923, wrote to the plaintiff, who had been in their service for many years, a letter as follows : " Upon your retirement on 31st July next we have decidod to grant you a pension of 2001. per annum, payable by monthly instaiments. You are at liberty to undertake any other employment or enter into any business, except in the wool trado, and the only other stipulation we attach to the continuance of this pension is that you do nothing at any time to our detriment (fair business compotition excoptod)." The plaintiff's reply by letter was lost, but he must have said that he was entitled to three months' notice, because the defendants wrote on June 26 : " Your letter to hand. I was unaware of the arrangement regarding three months' salary; consequently you will reoeive full salary until 30th September, and from that date remuneration at the rate of 200l. per annum, in accordance with the terms and conditions of our letter of yesterday." The plaintiff's reply to this letter was also lost. The defendants paid the plaintiff a pension or remuneration at the rate of 200l. a year from 1923 until 1932, but on April 1, 1932, they wrote to the plaintiff that the allowance of 200l. would ho discontinued as from June 30 next. The plaintiff thereupon commenced am action claiming a declaration that upon the true construction of the letters of June 25 and 26, 1923, the defendants were liable to pay him a pension of 200l. a year upon tho terms and conditions thorein set forth. The defendants denied that any such agreement as alleged existed, and further, that if there was such am agreement it was void as being in restraint of trade. Macnaghton J. held that the promise of the defendants contained in the two letters of June 25 and 26, 1923, to pay the plaintiff a pension or remuneration of 200l. a year was a gratuitous promise and gave rise to no legal obligation. On appeal :-- Held, that, assuming that a contractual obligation was created by the two letter, the contract was in restraint of trade and therefore void as being against public policy, notwithstanding that there was no negative covenant by the plaintiff that he would not enter into the wool trade, but merely a stipulation that if he did so he would forfeit the pension. Per Scrutton L.J.: The letter of June 25 was a gratuitous promise creating no legal obligation. ACTION tried before Macnaghton J. The plaintiff, Mr. Henry Wyatt, who was seventy of age, was formerly in the employment of the defendants, Messrs. Kreglinger & Fernau, a Belgian firm, which had been estblished over 120 years, with a head office in Antwerp and a branch office in London. The plaintiff was employed by the London branch of the defendant firm as manager of their import and export department at a salary of 400l. per annum and commission, and had been in their employment since 1914, when the defendant firm took over the business from a Mr. Kreglinger, who in his turn had taken over the business in 1900 from a Mr. Brunninghausen. The plaintiff had entered the employment of Mr. Brunninghausen in 1876, and had remained in his employment and that of his successors, Mr. Krenglinger and the defendants, down to 1923. In 1923 the plaintiff retired from employment, and on the occasion of his retirement the defendants wrote to him the following letter, dated June 26, l923 :--- "Dear Mr. Wyatt,-- Upon your retirement on 3lst July next we have decided to grant you a pension of 200l. per annum, payable by monthly instalments. You are at liberty to undertake any other employment, or enter into any business on your own acount, except in the wool trade, and the only other stipulation we attach to the continuance of this pension is that you do nothing at any time to our detriment (fair business competition except). Wishing you every happiness and success in the future. We remain, yours sincerely, KREGLINGER & FERNAU." Mr. Wyatt replied to that letter in writing, but the original letter was lost, and Mr. Wyatt had no recollection of its contents; but from the contents of a further letter written by the defendant on June 26 it was evident that Mr. Wyatt must have pointed out to the defendants that by the terms of his employment he was entitled to three months notice. The letter of June 26, 1923, from the defendants was in the following term :--- "Dear Mr. Wyatt,-- Your letter to hand. I was unaware of the arrangement regarding three months' notice; consequently you will receive full salary until 30th September, and, from that date, remuneration at the rate of 200l. per annum, in accordance with the terms and conditions of our letter of yesterday. Your salary, as hitherto, will be paid free of income tax. It will not be necessary for you to return to the office for duty, as we are making other arrangements regarding the rooms used by imports department. You will, of course, have access to all books and papers relating to the Tres Puentes Company, Ld., and we will keep a special file for all papers, letters, etc., arriving during your absence. It appeared from the correspondence that Mr. Wyatt must have answered that letter, though the actual contents of the letter were not known, because on July 2 the defendants wrote to him again :-- "Dear Mr. Wyatt,-- I am in recept of your letter of the 28th ultimo, for which I thank you. Kindly note that you will be retaining the secretaryship of the Tres Puentes Co., Ld., until this company is liquidated. Yours faithfully, KREGLIMGER & FERNAU Mr. Wyatt received his full salary down to September 30, 1923, and thereafter until 1932 he received from the defendant firm a pension or remuneration at the rate of 200l. a year by monthly payments of 16l. 13s. 4d. On April 1, 1932, the defendant wrote to Mr. Wyatt the following letter:-- "Dear Mr. Wyatt,-- In going through the London figures my partners and myself were greatly surprised at finding that an allowance of 200l. was being paid to you at the London office, whereas very drastic steps have been taken of late to reduce the overhead expenses in London which had become unbearable in pro or- tion to the present-day values of wool and produce. After due consideration of the past services and of the resent situation, we came reluctantly to the conclusion that this allowance should be discontinued as from 30th June next. We believe that your situation is such that you can dispense with this allowance without feeling hardship, which many of our other London clerks are put to by reductions in the salaries or by discontinuance of employment. Will you please take note of our decision. We remain, dear Mr. Wyatt, sincerely yours, KREGLINGER & FERNAU. " Mr. Wyatt was very surprised on the receipt of that letter, because, according to his understanding of the matter, the pension or remuneration of 200l. a year was a payment which the defendants were bound to make, and to continue to make, to him during the continuance of his life. The defendants paid the monthly instalments of the pension for the months of April, May and June. Mr. Wyatt on July 6 commenced this action, by which he claimed damages for the repudiation by the defendants of the agreement contained in the letters of June 25 and 26, 1923. At the trial the statement of claim was amended by adding an alternative claim for a declaration that upon the true construction of the letters of June 25 and 26, 1923, the defendants were liable to pay to the plaintiff by monthly instalments a pension of 200l. a year upon the terms and conditions therein set forth. The defendants, who had by their defence denied that any contract for the payment of the moneys, the subject-matter of the action, ever existed, or that the plaintiff ever gave any consideration therefor, amended their defence at the same time by pleading that if it should be held that any contract of employment existed between the plaintiff and the defendants, as alleged by the plaintiff, the contract was terminable by a reasonable notice, and that such reasonable notice was given by the letter of April 1, 1932, and also that such alleged contract if any, was void as being in restraint of trade. St. John Field for plaintiff. Comyns Carr K.C. and R. Fortune for defendants. MACNAGHTEN J. [after stating the facts set out above, continued:] The question at issue in the action is, what is the true construction of the letters of June 25 and 26, 1923; whether the promise to pay what is in the first letter called a "pension" and in the second letter "remuneration" at the rate of 200l. a year by monthly payments was a gratuitous promise which gives rise to no legal obligation, or whether it was a promise made for good consideration and one which is therefore enforceable at law. The first letter begins: "Upon your retirement on 31st July next we have decided to grant you a pension of 200l. per annum, payable by monthly instalments." Standing by itself, that sentence seems to indicate that the promise was a gratuitous promise of an ex gratia payment. A contract requires the consent of two parties. The sentence begins "we have decided"--that is to say, the defendants have come to a decision of their own motion and without requiring any consent or obligation on the part of the plaintiff--" to grant you." The word "grant" is not far removed from the word "give"; it would be an appropriate word to use for the purpose of describing a voluntary payment made to a retiring employee or servant. And so with the word "pension": although a pension may be a payment to which the recipient has a contractual right, in many cases a pension is a payment made voluntarily and without any right on the part of the recipient to sue for it. I will here notice an argument that was put forward by Mr. Comyns Carr that he did not understand from the statement of claim that the plaintiff was claiming that he was entitled to receive this 200l. a year for the rest of his life. I am disposed to think that when an employer says to an aged employee, " I will give you a pension," such a promise would be understood by most people to mean that the pension would continue for the rest of the life of the pensioner. So far the first words of this letter on their true construction mean, I think, that the pension was a voluntary gratuitous pension which the defendants were free to give or withhold at their pleasure and discretion. But the letter contains a second paragraph which it is said shows that there were obligations undertaken by the plaintiff that there was a consideration moving from him and that, under those circum- stances, although the actual letter accepting the pension is lost, the fact that the pension was accepted on the terms set out in that letter does constitute a contract enforceable in law. The second paragraph is:-- You are at liberty to undertake any other employment, or enter into any business on your own account, except in the wool trade, and the only other stipulation we attach to the continuance of this pension"---and there again the word--pension" is used--- "is that you do nothing at any time to our detriment (fair business competition excepted)." With regard to the latter part of the sentence, the stipulation that the plaintiff was to do nothing to the detriment of the defendants,--fair business competition excepted," cannot amount to any consideration in law. With regard to the first part of the sentence, the permission thereby given to Mr. Wyatt to undertake any other employment, or enter into any business on his own account, is qualified by the words "except in the wool trade." I read those words as meaning that Mr. Wyatt is not, so long as he is in receipt of a pension, to enter into business in the wool trade. It seems to me that might be a good consideration in law, subject to the point made by Mr. Comyns Carr that it would be a covenant in restraint of trade. Mr. Comyns Carr says: Here is this gentleman undertaking--if the view is accepted that it is a contract--- that he, at the age of sixty-one, will not ever enter into the wool trade in any part of the world. Such an agreement is obviously in restraint of trade; the public are going to be deprived of whatever advantages they might get from Mr. Wyatt entering the wool trade, and that agreement is on the face of it so wide as to be unreasonable, and is therefore void. It is not necessary for me to determine the matter on that argument, which will be available to Mr. Comyns Carr in the Court of Appeal, because the second paragraph of the letter of June 25 does not modify the opinion I have formed as to the meaning of the first paragraph--namely, that the pension was a voluntary gratuitous payment which the defendants were at liberty to give or withhold at any time at their discretion. I think the words: " You are at liberty to undertake any other employment, or enter into any business on your own account, except in the wool trade," are merely an intimation that they did not desire Mr. Wyatt to enter into the wool trade, and that if he did enter into the wool trade he must not expect them to continue the payment. But it is said, quite rightly, that the construction of the letter of June 25 cannot be considered apart from the letter of June 26, and that the letter of June 26 assists the plaintiff in his view that this was a contractual obligation. Now, in the first place, it is to be observed that the defendants when they wrote the lettcr of June 25 (the writer was a Mr. Gibbs) were unaware of the plaintiff's right to three months' notice, and as soon as the plaintiff called attention to that fact the defendants at once agreed. Although they did not require Mr. Wyatt's services, and they were making other arrangements in their office, they agreed to give him his full salary for the three months. So far there is no ground for saying, and, indeed, it is not suggested, that this pension was granted in satis- faction of any obligation that the defendants might be under to Mr. Wyatt in respect of the contract of service which was at that time in force. It is clear that the defendants fully discharged all their obligations to Mr. Wyatt under that contract of service, and if any fresh contract was, as is suggested, made by these letters it was a new contract, separate and distinct from the contract of service under which he had been employed. Now the words of the second letter are: "I was unaware of the arrangement regarding three months' notice; consequently you will receive full salary until 30th September"--that is giving him the three months' notice--" and, from that date, remuneration at the rate of 200l. per annum, in accordance with the terms and conditions of our letter of yesterday." The word "remumeration" usually impress a payment for servicas rendered or to be rendered, and the promise of "remuneration" in accord- ance with the terms and conditions of our letter of yesterday" would seem to imply some obligation on the part of Mr. Wyatt. But the only obligation which can be got out of the letter of June 25 is an obligation not to enter the wool trade, and, as I have already said, I do not think it means in that letter, and, therefore, it cannot mean in the letter of June 26, anything but an intimation that the defendants do not wish Mr. Wyatt to enter into the wool trade, and that he must take note that if he does so they will not pay the pension. The other terms of the letter throw no light upon the matter. The conclusion I have come to is the one I have already expressed, that the defendants are free to give or to withhold this 200l. per annum to or from Mr. Wyatt at their discretion, and, therefore, in my view, the action may be dismissed with costs. Judgment for defendants. The plaintiff appealed. The appeal was heard on February 7, l933. Macashie K.C. and St. John Field for the appellant. The judge was wrong in holding that there was no contract by the defendants to pay the pension of 200l. a year to the plaintiff, and that it was a mere voluntary payment on their part. The conditions attached to the grant of the pension in the letter of June 25 show that it was not a mere gratuitous promise on their part giving rise to no legal obligation. The plaintiff was to be at liberty to undertake any other employ- ment, or enter into any business on his own account, except in the wool trade, and so long as he complied with those conditions he was entitled to receive the pension. The letter goes on to refer to the stipulations the defendants attsched to the continuance of the pension. The word " stipulation " was con- sidered in Hill v. Fox (1), where Wightman J. spoke of it as being synonymous with " agreement " and differentiated it from an " understanding," because it was difficult to say what an " understanding " meant. In the letter of June 26 the defendants referred to the " remuneretion " at the rate of 200l. per annum, which the plaintiff would receive in accordance with the terms and conditions of their letter of June 26. Blackburn J. in Reg. v. Postmaster General (2) said : " I think the word ' remuneration ' . . . . means a quid pro quo. If a man gives his services, whatever consideration he gets for giving his services seems to me a remuneration for them." Here the defendants said to the plaintiff that so long as he did not go into the wool trade they would pay him the pension of 200l. a year. There was a definite stipulation or condition, which the plaintiff might accept or not as he chose, preventing him from entering the wool trade on the terms that the defendants should grant him remuneration at the rate of 200l. a year. There was no discrimination in the letter of June 26 between the plaintiff's full salary and his subsequent remuneration. In Bishop v. Kitchen (3) a traveller covenanted not to solicit orders for any person but his employers in the West of England, South Wales, or any district whatsoever in consideration of a salary and an annuity. An action was brought for arrears of salary while in the defendants' service, and of annuity when he had left their service. The defendants demurred to the count for the annuity on the ground that the agreement set out was bid as in restraint of trade. The Court held that the agreement having been executed and the plaintiff having submitted to the restraint, he was entitled to recover the consideration due in respect of it. That case was commented on by Scrutton L.J. in Evans (Joseph) & Co. v. Heathcote (4), where he said that he did not understand now you can sue on a contract which is void in res~raint of trade. (1) (1859) 4 H. & N. 359. 364. (3) (1868) 38 L.J. (Q.B.) 20. (2) (1876) 1 Q. B. D. 658, 663. (4) [1918] 1 K. B. 418, 437. [SLESSER L.J. Lord Macnaghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. (1) said: "The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule."] In the present case the stipulation that the plaintiff is to receive a pension so long as he does not enter into the wool trade does not amount to a covenant in restraint of trade. In Whitwood Chemical Co. v. Hardman (2) the manager of a manufacturing company agreed to give during a specified term the whole of his time to the company's business, and it was held by the Court of Appeal that in the absence of any negative stipulation in that behalf the company were not entitled to an injunction to restrain the manager from giving, during the term, part of his time to a rival company. The burden of showing that an agreement is not in restraint of trade is upon the covenantee who imposed the burden. There are special circumstances in this case which prevent this agreement from being in restraint of trade. [SCRUTTON L.J. referred to Morris (Herbert), Ltd. v. Saxelby (3) and to the third point laid down by Younger L.J. in Attwood v. Lamont (4), as established by the decisions of the House of Lords as follows : " An employer is not entitled by a covenant taken from his employee to protect himself after the employment has ceased, again his former servant's competition per se, although a purchaser of good- will is entitled to protect himself against such competition on the part of his vender."] The distinction between those cases and the present is that those covenants were contained in the contract of service, which is not the fact in the present case. The plaintiff does not bind himself that he will not enter the wool trade, there is merely a stipulation that if he does do so he will forfeit his pension. (1) [1894] A. C. 535, 565. (3) [1916] 1 A. C. 688. (2) [1891] 2 Ch. 416. (4) [1920] 3 K. B. 571, 589. Comyns Carr K.C. and R. Fortune for the respondents were not called on. SCRUTTON L.J. This is an interesting case and not very easy. The first and main point to be considered is what do four letters mean, two of which we have not in (which is not a very promising start for any case), and when that particular point has been decided a question of general importance arises as to principle. Now the position is this : The defendant firm which was very old-established, in the sense that it had carried on business under various names and various amalgamations for about 125 years, took into its service in 1900 the plaintiff, who had been serving for some twenty years previously with another firm which was amalgamated with the defendant firm. In 1923 the defendant firm, which had a London branch, found itself compelled to out down its expenses. It had the right under its contract with the plaintiff to terminate his engagement on there months' notice, and it was under no obligation whatever to give him any pension. There was no contributory scheme to which the plaintiff had been contri- buting or having deductions made from his salary in relation to a pension, and the firm could, if they had wished, have given him three months' notice and dismissed him and he would have had no legal claim for any pension. But the defendant firm did not desire to take that attitude, and they wrote certain leters to the plaintiff, to which he wrote certain answers. He now says that the firm then contracted as a matter of law to pay him a pension, and the firm has no power to withdraw that pension. The fact is that after paying the pension for some nine years, pecuniary fcircum- stances again becoming difficult, the defendant firm withdrew the pension and alleged that there was no obligation on them to continue paying int pension. Now the members of the Court are agreed as to the result, but they are not agreed as to all the grounds which have been argued before them. I take the same view as the learned judge below did. I am of opinion that these letters are not letters of contract; that is the view that the learned judge below has taken. My brcthers do not agree with that view; they think that an agreement was thereby created. But the whole Court takes the view that if there is an agreement it is an agreement which the Court cannot enforce at the instance of either party to it, on the ground that it is contrary to public policy as being an agreement in restraint of trade. First of all as to the construction of the letters. I think the Court is plaoed in a great difficulty when it has to find a promise and an acceptance giving legal results from four letters, and it has only in two of the letters, the letters written by the plaintiff having been lost. The letters the Court has seen are these. One is a letter of June 25, 1923, written by the defendants to the plaintiff, as follows : " Dear Mr. Wyatt. Upon your retirement on 31st July next we have decided to grant you a pension of 200l. per annum payable by monthly instalments." Now the defendants were under no obligation whatever to pay him a pension, and the whole transaction seems to have begun with a voluntary, gatuitous offer on their part. There is no question of agreement. They say " We have decided." I start therefore with a letter which appears to begin not as a contract but as an intimation of an intention. Thr letter continues : " You are at liberty to undertake any other employment, or enter into any business on your own account." That does not look like contract; that is merely stating what is the present position, that when the plaintiff's contract of service is terminated he is likely to undertake any other employment or enter into any business on his own account. For the moment I leave out the next words, "except in the wool trade." I will come back to them, but I leave them out for the present. The letter continues: "The only other stipulation we attach to the continuance of this pension is that you do nothing at any time to our detriment (Fair business competition excepted)." The view I take of that clause is that it is meaningless, it is too vague to form any part of a legal obligation. We have not seen the plaintiff's answer to that letter, but I infer from the next letter from the defendants that it was not an acceptance of the first letter. I think it is quite clear that the plaintiff in his reply said : " You cannot terminate my agreement summarily as I am entitled to three months' notice " because the second letter of the defendants is : " I was unaware of the arrangement regarding three months' notice ; conse- quently you will receive full salary until 30th September, and, from that date, remuneration at the rate of 200l. per annum "--the word " pension " is changed to " remunera- tion "---- in accordance with the terms and conditions of our letter of yesterday." There is nothing in the rest of the letter of any importance. Again we have not seen the plaintiff's answer to that letter. So that we have to find a contract from certain letters when all the letters on one side are absent. The next letter from the employers was on July 2, and was as follows : " Dear Mr. Wyatt, I am in receipt of your letter of the 28th ultimo, for which I thank you "--so that there was something which the employer thought he ought to thank the employee for--" Kindly note you will be retaining the secretaryship of the Tres Puentes Co., Ltd., until this company is liquidated." Now the words on which special reliance is placed as showing there was a contract importing legal obligations are the words in the first letter : " You are at liberty to undertake any other employment, or enter into any business on your own account, except in the wool trade." The judge below has exactly expressed the view I take of these words, reading them in a letter which in my opinion starts by being a letter of a gratuitous offer imposing no legal obligation. The learned judge says : " The opinion I have formed as to the meaning of the first paragraph [is] that the pension was a voluntary gratuitous payment which the defendants were at liberty to give or withhold at any time at their discretion. I think the words : ' You are at liberty to undertake any other employment, or enter into any business on your own account, except in the wool trade,' are merely an inti- mation that they did not desire Mr. Wyatt to enter into the wool trade and that if he did enter into the wool trade he must not expect them to continue the payment." That exactly expresses the view that I take of these words coming as they do in a letter which starts with being an intimation of a gratuitous payment. It has to be borne in mind that not every formal proposal and acceptance constitute a legal contract. " Will you come to dinner on Tuesday ? " " I have pleasure in accepting your kind invitation " constitute a proposal and acceptance, but no legal contract, because the parties never intended it to be a legal contract. I once had the pleasure as a judge of the King's Bench Division of hearing an animated dispute as to whether a particular gentleman was entitled to a prize under the terms of a golf competition held at the Devonshire Club at Eastbourne, and I decided--- and no appeal was made against my decision---that no one concerned with that competition ever intended that there should be any legal results following from the conditions posted and the acceptance by the competitor of those conditions. I take the same view of these letters. I gather my brothers do not agree. We are each entitled to his own judgment. Now comes the question, supposing there is an agreement and assuming it to be an agreement in the most favourable terms for the plaintiff, which is that it is not an agreement by him not to enter into the wool trade, but that it is an agreement in restraint of trade, and further that it is a point does not enter the wool trade, I take the view that it is an which the Court takes because it relates to a matter of public policy, and the Court does not enforce arrangements which are contrary to public policy. Mr. Macaskie agrees that if it were an agreement by the plaintiff not to enter the wool trade for all time and space it would be unenforceable, because it would be in restraint of trade, injurious to the public, and contrary to the principle laid down as to such contracts between employer and employee, as distinguished from contracts between a person selling a business and a person buying the business. The principle is stated at length, and justified by quotations from authorities, by Younger L.J. in his judgment in Attwood v. Lamont (1), in which Atkin L.J. concurred. Now this agreement, stated in the most favour- able form for the plaintiff, namely a stipulation by the employer that he will pay the plaintiff so much a year if the plaintiff does not enter into the wool trade for the rest of his life in any part of the country or world, appears to me to be a contract in restraint of trade which is unenforcable just as much as a contract by the employee not to trade in the wool trade for the rest of his life in any part of the world, and that the country is thereby being deprived without any legitimate justification of the services of a man of sixty years of age who is quite competent to enter into business, because he is given leave to enter into any kind of business other than the wool trade. That I think is well within the principles stated in Attwood v. Lamont. (1) For these reasons, dealing with the matter firstly as a question of the construction of the letters and, secondly, as a question of law, without any consideration of whether the employers ought or ought not to have continued the pension, I have come to the conclusion that the learned judge arrived at the right rest, and that consequently the appeal must be dismissed. QREER L.J. This case when it was before the learned judge who tried the case involved a question as to the true construction of certain documents that passed between the parties at the end of June and the beginning of July, 1923, and if the true construction of these documents was that there was an agreement between the parties, a further question whether that agreement was one which could be enforced at law or whether it was an agreement which was void as being in restraint of trade. Now I am inclined to take the view that the learned judge was wrong in the censtruction he put upon the documents, but we have not thought it necessary to call upon Mr. Comyns Carr in support of the view which commended itself to the learned judge, and, therefore, I do not feel that I am entitled to give any (1) [1920] 3 K. B. 571, 580. final decision on the question of the construction of the documents. I am however inclined to take the view that the document which settles the rights of the parties is a letter of June 25, 1923, from Messrs. Kreglinger & Fernau to the plaintiff, and that when they said they required, as it seems to me they required, two stipulations from Mr. Wyatt, they were thereby asking him to give them a legal promise in consideration of the pension they were offering. As I say, we have not heard Mr. Comyns Carr on that question and I do not express any final opinion upon it. But, assuming it is right that a contractual obligation was thereby created, then I take the same view as is expressed in the judgment of Scrutton L.J., that the agreement wes in nostraint of trade and not binding; that is to say, the promise on the part of Mr. Wyatt was a promise not to engage in the wool trade and not to do anything at any time to the detriment of his employers throughout the whole of his natural life at any place and at any time, and that, assuming he bound himself by such an agreement, he bound himself to something which was void in law, and inasmuch as the consideration was void the agreement would be altogether woid. On those grounds I agree that this appeal should be dismissed. SLESSER L.J. I agree that this appeal should be dismissed. I assume for the purpose of my judgment that Mr. Wyatt has proved to the satisfaction of the Court that there was created by the letters of June 25 and 26, 1923, a subsisting enforcable agreement between him and Messrs. Kreglinger & Fernau. I say I assume that for the purpose of what I have to say, because we have not heard Mr. Comyns Carr on the matter, and it may be that he might have been able to throw a light upon the case which would have led the Court to a contrary opinion. But assuming that to be the case one has to consider what is the nature of the alleged contractual relation between the parties? As I read it it is this, that Messrs. Kreglinger & Fernau would pay 200l. a year--described sometimes as a " pension " and sometimes as a " remunera- tion"-- on certain stipulation : The material one is this : says : " Public policy requires that every man shall be at liberty to work for himself, and shall not be at liberty to deprive himself or the State of his labour, skill, or talent, by any contract that he enters into." That language, approved by Younger L.J., which I think is right, extends to any contract which has of necassity the effect of depriving skill. Of course it may well be that there are cases, irrespective of that consideration, where the restraint is so partial that it is not in the interests of the community that it should not be enforced, but to my mind it is quite clear, leaving aside that question, that the restraint in the present case is a restraint unlimited in time and space. It is not a restreint in consideration of the sale of a goodwill, such a case, for example, as Lord Macnaghten envisages in Nordenfelt's case (1), where he says : " What has the public to hope in the way of future service from a man who sells his business meaning to trade no more ? " In the pint case it is contemplated in the agreement itself that Mr. Wyatt will continue to carry on business, because there is an express provision that he is to be at liberty to undertake any other employment or enter into business on his own account but he must do nothing to the detriment of Kreglinger & Fernau, " fair business competition excepted." So this is a case where there is a general restraint imposed upon a person who otherwise, the agreement contemplates, might continue to serve the community in the wool business. Finally, I desire to say a word about one authority which has been cited to us but which is not very easy to understand --namely, the case of Bishop v. Kitchen. (2) In the very short report of the decision of the Court it appears to have been said, on an argument that the agreement was in restraint of trade, that the agreement having been executed and the plaintiff having submitted to the restraint he was clearly en- titled to recover the consideration due in respect of it. I cannot think that that report adequately accounts, for the decision of the Court. If the sgreement were void it is very difficult (1) [1894] A. C. 535, 567. (2) 38 L. J. (Q. B.) 20. to see how a party could found upon it. In the case of Evans (Joseph) & Co. v. Heathcote (1) Scrutton L.J. criticized Bishop v. Kitchen (2) as follows : " The case, as far as I can discover, has never been followed or doubted, but is cited in recent text-books without oomment. If there were some account stated it would stand on the same footing as Flight v. Reed (3), the case under the usury laws ; but in the absence of such an elenent I do not understand, with respect to the eminent judges who decided the case, how you can sue on a contract which is, in the language of Lord Halsbury in the Mogul Steamship Co.'s Case (4), 'void . . . . in restraint of trade : and contracts so tainted the law will not lend its aid to enforce. It treats them as if they had not been made at all' " Respectfully I associate myself with the criticism of Bishop v. Kitchen (2) there stated by Scrutton L.J., and I do not think that that case, without more explanation than appears in the report, can be regarded any longer as an adequate authority. Appeal dismissed. Solicitors for appallant: A. S. Wright & Webb. Solicitors for respondents: Cochrane & Cripwell. (1) [1918] 1 K. B. 418, 437 (3) (1863) 1 H. & C. 703. (2) 38 L.J. (Q.B.) 20. . (4) [1892] A.C. 25, 39. FOLEY v. CLASSIQUE COACHES, LIMITED [1933 F. 1528] Contract sale of land--Supplemental agreement by purchasers to take their petrol supplies exclusively from vendor--Petrol to be supplied "at a price to be agreed by the parties in writing and from time to time"-- Arbitration clause--Restraint of trade. By an agreement in writing the plaintiff agreed to sell and the defendants to purchase a piece of land, adjoining other land belonging to the plaintiff, which the defandants intended to use for their business as motor coach proprietors. The sale was made subject to the defendants entering into another agreement to purchase from the plaintiff all the petrol required for their said business. On the same date that second agreement, described as supplemental to the first, was executed, which, after reciting that the plaintiff was the proprietor of a petrol-filling station on the land retained hy him, provided that the defendants would purchase from him all the petrol required by them for the running of their said business, "at a price to be agreed by the parties in writing and from time to time"; and further, that the defendants would purchase no petrol from any other person so long as the plaintiff was able to supply them with quantities sufficient to satisfy their daily requirements. Clause 8 was in these terms:" If any dispute or difference shall arise on the subject matter or construction of this agreement the same shall be submitted to arbitration in the usual way in accordance with the provisions of the Arbitration Act, 1889." The land, the subject of the first agreement, was duly conveyed to the defendants, and for three years the defendants obtained their petrol from the plaintiff. Thereafter disputes arose between them, and thereupon the defendants purported to repudiate the second agreement, alleging that it had no binding force because (1.) no agreement in writing as to price had ever been made, and (2.) the clause requiring the defendants to take all their petrol supplies from the plaintiff was an unreasonable and unnecessary restraint of their trade. In an action by the plaintiff claiming a declaration that the petrol agreement was valid and binding, and an injunction to restrain the defendants from purchasing petrol required for their said business from any person other than the plaintiff:-- Held, (1.) that a term must be implied in the agreement that the petrol supplied by the plaintiff should be of reasonable quality and sold at a reasonable price, and that if any dispute arose as to what was a reasonable price it was to he determined by arbitration persuant to clause 8; (2.) that inasmuch as the defendants were only required to purchase petrol from the plaintiff for the purpose of the business carried on by them on the land purchased from the plaintiff, and so long only as it was supplied of a reasonable quality and at a reasonable price, the obligation was not an unreasonable and unnecessary restraint of their trade; and (3.) that the agreement therefore was valid and binding on the defendants. May & Butcher v. the King (1929) (post, p. 17) distinguished; Hillas & Co., Ld. v. Arcos, Ld. (1932) 147 L.T. 503 considered. Decision of Lord Hewart C.J. affirmed. APPEAL from a decision of Lord Hewart C.J. The plaintiff was a retail dealer in petrol and the defendants were the owners of motor coaches who carried on business at premises adjoining those of the plaintiff at 481 Lea Bridge Road, Leyton. By an agreement in writing dated April 11, 1930, it was agreed that the plaintiff should sell and the defendants should purchase for 1100l. the freehold pnoperty which immediately adjoined that retained by the plaintiff. The sale was made subject to certein conditions, among others that the defendants would enter into an agreement with the plaintiff as to the sale of petrol and/or oil, the terms of which had been agreed between them. On the same date the agreement as to the sale of petrol and/or oil was signed. It recited that it was " supple- mental to an agreement bearing even date herewith and made between the same parties as are parties thereto and whereby the vendor has agreed to sell and the company to purchase" the property in the already mentioned agreement, and " whereas the vendor and his present wife are the proprietors of a petrol and oil filling station at liis said address and the company are proposing to carry on the business of char-a-banc and garage proprietors on the said adjoining land and it has been agreed that the vendor shall supply to the company and the company will take from the vendor all petrol as shall be required by the company as hereinafter mentioned. Now it is hereby agreed as follows :-- " 1. The vendor shall sell to the company and the company shall purchase from the vendor all petrol which shall be required by the company for the running of their said business at a price to be agreed by the parties in writing and from time to time. " 2. The vendor shall deliver the said petrol to the company from the vendor's pumps now or hereafter on his said land. " 3. This agreement shall remain in force during the life of the vendor and his pint wife if she survives him." Clause 4 dealt with the contingency of a strike or look-out. " 5. In the event of the comnpany being wound up . . . . the vendor may determine this agreement at any time after the commencement of such winding-up by giving one week's notice in writing of his intention so to do . . . . and upon the expiration of such notice this agreement shall cease....but without prejudice to the right of action of the vendor in respect of any breach of the company's agreements herein contained. " 6. The company shall not purchase any petrol from any other person or corporation so long as the vendor is able to supply them with sufficient petrol to satisfy their daily require- ments but nothing herein contained shall prevent the vendor from selling petrol and/or oil to any other person or or corporation to be used for any purposes whatever provided that the company and their servants shall be at liberty to purchase such petrol as may be found necessary to complete the particular journey when engaged on journeys over a distance necessi- tating the re-fueling of their vehicles. "7. The vendor shall supply the said petrol of a standard and quality at present supplied by the vendor or of such other standard and quality as the company may reasonably approve. " 8. If any dispute or difference shall arise on the subject matter or construction of this agreement the same shall be submitted to arbitration in the usual way in accordance with the provisions of the Arbitration Act, 1889." The land, the subject of the first agreement, was duly con- veyed to the company, and from April 26, 1930, till October 7, 1933, the defendante bought petrol from the plaintiff in pursuance of the agreement at prices charged by the plaintiff in accounts delivered by him to the defendants each week. Disputes then arose between the parties as to the price and quality of the petrol, and eventually the defendants' solicitor wrote this letter to the plaintiff dated September 29, 1933 : " It appears that although you have supplied petrol to my clients as and when they have required it no agreement in writing as to price has ever been made, nor any agreement of any sort thereunder. My clients have from time to time sent you their cheque in payment of statements of account rendered by you. Having considered this alleged agreement and the aforesaid facts, I have advised my clients that this document is of no force or effect, and therefore, acting on their behalf, I hereby give you notice that my clients do not intend to be bound by any of the provisions contained in this alleged agreement. As from October 8, 1933, my clients will be purchasing their petrol supplies elsewhere." The plaintiff thereupon issued a writ claiming (1.) a declaration that the petrol agreement was valid and binding upon the parties ; (2.) an injunction to restrain the defendants from purchasing any petrol required by them for the carrying on of their said business from any persons other than the plaintiff ; (3.) an account of all petrol bought by the defendants in breach of the said petrol agreement from any person other than the plaintiff ; and (4.) damages for breach of contract. The defendants pleaded that no price at which petrol should be sold to them by the plaintiff had been agreed; that the provision relating to the supply of petrol did not constitute a binding and/or complete agreement ; that clause 6 of the agreement was an unreasonable and unneccssary restraint of the defendants' trade and was contrary to public policy and illegal ; and further, or in the alternative, that that provision was applicable when, and only so long as, the parties agreed the price at which petrol was to be supplied. The Lord Chief Justice, in the course of his judgment, said : It was contended on behalf of the defendants that I am bound, by virtue of a decision of the House of Lords in Hay & Butcher v. The King (1), to hold that the agreement with reference to petrol is not a contract at all, because the price to be paid for the petrol is to be agreed by the parties in writing from time to time. I should very much regret to be compelled to come to such a decision. There is no doubt that the parties intended to make a binding contract and thought that they had done so, and that is a circumstance which, according to the judgments of Lord Tomlin, Lord Thankerton, and Lord Wright in Hillag & Co. v. Arcos (2) ought to be taken into consideration in deciding whether there is a concluded contract or not. The fact that the agreement is part of the consideration for the land which has been conveyed to the defendants and is still in their possesion distinguishes the case, in my opinion, from that of May & Butcher v. The King (1), and on the whole I think there is a valid and binding contract for the purchase and sale of petrol in accordance with the terms of clauses 1 and 7. In The Moorcock (3) Bowen L.J., in reference to implied terms in contracts, said : " The implication which the law draws from what must obviously have been the intention of the parties, the law draws with the object of giving efficacy to the trans- action and preventing such a failure of consideration as cannot have been within the contemplation of either side. . . . . In business transactions such as this, wluat the law desires to (1) See post, p. 17. (2) 147 L. T. 503. (3) (1889) 14 P. D. 64, 68. effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men." The Lord Chief Justice accordingly held that there was a valid and binding contract for the purchase and sale of petrol in accordance with the terms of clauses 1 and 7. If nothing had been said, or if the parties failed to agree the price of the petrol the law would imply that a reasonable price should be paid; and if any dispute arose as to what was a reasonable price that was to be determined by arbitration pursuant to clause 8. It had further been argued that clause 6 was contrary to public policy and illegal as being an unreasonable and unnecessary restraint of the defendants' trade. As the clause was intended to secure to the plaintiff the benefit of the agreement as a whole, it was not unreasonable or invalid as being in restraint of trade. His Lordship therefore granted an injunction restraining the defendants their agents and servants from any breach of clause 6 and awarded an amount of damages to be ascertained. The defendants appealed. The appeal was heard on March 15 and 16, 1934. van den Berg K.C. and Astell Burt for the appellants. The petrol agreement in this case is on all fours with that which was considered by the House of Lords in May & Butcher v. The King (1), where it was held that there was no binding contract. It was there said that an agreement for sale from which the essential term of price is absent is no contract. Here there was no agreement as to the price of the petrol. No doubt it will be said that the price is to be determined by arbitration under clause 8; but as to that, the answer is that there was a similar clause in May & Butcher v. The King(1), and as was there pointed out, the clause could not oome into operation if there was no concluded contract. Hillas & Co. v. Arcos (2) is distinguishable on the terms of the bargain there entered into. Secondly, clause 6 of the agreement is much too wide, and is therefore unenforceable. It involves an obligation on the (1) See post, p. 17. (2) 147 L. T. 503. appellants to purchase all their petrol supplies from the respondent, not only that required for the business carried on at the preniises adjoining the respondent's land, but wherever they may in the future carry on business, however distant from the respondent&s land. That is obviously an oppreesive obligation. Moreover the agreement, including clause 6, is to be operative during the lifetime of the respondent and of his present wife, should she survive hiin, but the wife is under no obligation to supply petrol to customers. Glyn-Jones for the respondent. The petrol agreement was supplemental to the agreement for the sale of the land, the two together constituting one contract. The parties clearly intended to enter into a binding agreement, and that is a circumstance to be considered. In construing the petrol agreement and to give it business efficacy there must be implied a term that the petrol to be supplied shall be sold at a reasonable price, and any dispute as to that falls within the arbitration clause. The facts here are quite different from those being considered in May & Butcher v. The King (l), and the decision in that case has no bearing. van den Berg K.C. in reply. The argument for the respondent involves reading in a clause to this effect " and failing agree- ment as to price the price shall be settled by arbitration." That amounts to making a contract for the parties. SCRUTTON L.J. In this appeal I think that the Lord Chief Justice's decision was right, and I am glad to come to that conclusion, because I do not regard the appellants' contention as an honest one. The nature of the case is this : the respondent, the plaintiff in the action, had some land, part of which was occupied by petrol pumps. Adjoining that land was some vacant land belonging to him which the appellants wanted to use as the headquarters for their char-a\-bancs, and they approached the respondent, who was willing to sell on the terms that the appellants obtained all their petrol from him. It is quite clear that unless the appellants had agreed to this they would (1) See post, p 17. never have got the land. There was a discussion whether this term about the petrol and the agreement to purchase the land should be put in one document or in two, but ultimately it was decided to put them in two documents of even date. One relates specifically to the sale and purchase of the land, and that was to go through on condition that the appellants undertook to enter into the petrol agreement, the terms of which had been already agreed. On the same day the second agreement was signed reciting that it was supplemental to the agreement of even date, that is the agreement for the sale of the land. The petrol agreement included a clause that if any dispute or difference should arise on the subject-matter or construction " the same shall be submitted to arbitration in the usual way." It is quite clear that the parties intended to make an agreement, and for the space of three years no doubt entered the mind of the appellants that they had a business agreement, for they acted on it during that time. The petrol supplied by the respondent was non-combine petrol, but he had also combine petrol pumps. The non-combine petrol was supplied to the appellants at a price lower than that paid by the public, and an account was rendered periodically in writing and paid. In the third year some one acting for the appellants thought he could get better petrol elsewhere, and on September 29, 1933, their solicitor, thinking he saw a way out of the agreement, wrote on behalf of the appellants the letter of September 29, 1933, repudiating the agreement. Possibly the solicitor had heard something about the decision of the House of Lords in May & Butcher v. The King (1) but probably had not heard of Braithwaite v. Foreign Hardwood Co. (2), in which the Court of Appeal decided that the wrongful repudiation of a contract by one party relieves the other party from the performance of any conditions precedent. If the solicitor had known of that decision he would not have written the letter in the terms he did. Thereafter the respondent brought his action claiming damages for breach of the agreement, a declaration that the agreement is binding and an injunction to restrain the appellants ftom purchasing 1 See post, p. 17. (2) [1905] 2 K. B. 543. petrol from any other person. The Lord Chief Justice decided that the respondent was entitled to judgment, as there was a binding agreement by which the appellants got the land on condition that they should buy their petrol from the res- pondent. I observe that the appellants' solicitor in his letter made no suggestion that the land would be returned, and I suppose the appellants would have been extremely annoyed if they had been asked to return it when they repudiated the condition. A good deal of the case turns upon the effect of two decisions of the House of Lords which are not easy to fit in with each other. The first of these cases is May & Butcher v. The King (1), which related to a claim in respect of a purchase of surplus stores from a Government department. In the Court of Appeal two members of the Court took the view that inasmuch as there was a provision that the price of the stores which were to be offered from time to time was to be agreed there was no binding contract because an agreement to make an agreement does not constitute a contract, and that the language of clause 10 that any dispute as to the construction of the agreement was to be submitted to arbitration was irrevelant, because there was not an agreement, although the parties thought there was. In the second case, Hillas & Co. v. Arcos (2), there was an agreement between Hillas & Co. and the Russian authorities under which Hillas & Co. were to take in one year 22,000 standards of Russian timber, and in the same agreement they had an option to take in the next year 100,000 standards with no particulars as to the kind of timber or as to the terms of shipment or any of the other matters one expects to find dealt with on a sale of a large quantity of Russian timber over a period. The Court of Appeal, which included Greer L.J. and myself, both having a very large experience in these timber cases, came to the conclusion that as the House of Lords in May & Butcher v. The King (l) considered that where a detail had to be agreed upon there was no agreement until that detail was agreed, we were bound to follow the decision in May & Butcher v. The King (1) and hold that there was no (1)See post, p. 17. (2) 147 L.T. 503. effective agreement in respect of the option, because the terms had not been agreed. It was, however, held by the House of Lords in Hillas & Co. v. Arcas (1) that we were wrong in so deciding and that we had misunderstood the decision in May & Butcher v. The King. (2) The House took this line : it is quite true that there seems to be considerable vagueness about the agreement but the parties contrived to get through it on the contract for 22,000 standards, and so the House thought there was an agreement as to the option which the parties would be able to Bet through also despite the absence of details. It is true that in the first year the parties got through quite satisfactorily ; that was because during that year the great bulk of English buyers were boycotting the Russian sellers. In the second year the position was different. The English buyers had changed their view and were buying large quantities of Russian timber, so that different conditions were then prevailing. In Hillas & Co. v. Arcos (1) the House of Lords said that they had not laid down universal principles of construction in May & Butcher v. The King (2), and that each case must be decided on the con- struction of the particular document, while in Hillas & Co. v contract. In the present case the parties obviously believed they had a contract and they acted for three years as if they had ; they had an arbitration clause which relates to the subject- matter of the agreement as to the supply of petrol, and it seems to me that this arbitration clause applies to any failure to agree as to the price. By analogy to the case of a tied house there is to be implied in this contract a term that the petrol shall be supplied at a reasonable price and shall be of reasonable quality. For these reasons I think the Lord Chief justice was right in holding that there was an effective and enforceable contract, although as to the future no definite price had been agreed with regard to the petrol. It was said, secondly, on behalf of the appellants that the contract was bad; as para. 6 was in restraint of trade. In my view that contention is clearly untenable. The contract is an ordinary one to purchase petrol froma particular person, and as long as petrol of a reasonable price and quality is supplied--and there is an implied term that it shall be so supplied--there is no undue restraint of trade. It is suggested however, that the injunction granted to restrain a breach of clause 6 might have this result, that if the appellants moved their coaching business, say to Edinburgh, they would still be required to purchase their petrol in London from the respondent. That, no doubt, would be a ridiculous agreement if it had been made, but it is quite clear that the appellants' obligation to take their supplies of petrol from the respondent applies only to the business carried on by them on the land adjoining the respondent's petrol pumps, and has no application to a business carried on in Edinburgh or Aberdeen or any other place remote from London. The appeal therefore fails, and no alteration is required in the form of the injunction that has been granted. GREER L.J. I think the judgment of the Lord Chief justice was right and ought not to be disturbed. (The Lord justice read the passage from the Lord Chief Justice's judgment already set out and continued:] In the present case the parties intended that there should be two considerations for the purchase of the land by the appellants, (1.) the payment of 1100l., and (2.) the appellants' promise contained in the agreement of even date to purchase all their petrol from the respondent, and if that second promise does not amount to an agreement then one of the two considerations which both parties intended disappears, and the appellants get the land without implementing more than the first consideration--- namely, the payment of 1100l. I think the words of Bowen L.J. in The Moorcock (1) are clearly applicable to a case of this kind, and that in order to give effect to what both parties intended the Court is justified in implying that in the absence of agreement as to price a reasonable price must be paid, and if the parties cannot agree as to what is a reasonable price then arbitration must take place. It (1) 14 P.D. 64, 68. is quite true that one cannot add to a contract an implied term inconsistent with or which contradicts the express terms of the contract, but in a suitable case one can imply a term, and in my judgment to imply a term in this contract that the price of the petrol supplied by the respondent shall be reasonable is in no way inconsistent with the agreement. May & Butcher v. The King (1) is distin- guishable from the present case both on its facts and as to the nature of the agreement. In that case, as I understand, there was no question of anything whatever except the sale of what was called tentage, and there was a term that the purchaser should leave a deposit in the hands of the seller. There was no consideration, unless a term to agree a price in the future was a consideration. It is a common observation that a decision upon the construction of one contract is not an authority upon the construction of another contract in different words and entered into in different circumstances. The facts of this case and the nature of the contract take it out of the authority of Hay & Butcher v. The King (1), and leave us free to construe this contract as containing the implied term mentioned. When the buyers through their solicitor said that they would have nothing more to do with the contract they thereby relieved the seller from the obligation that might otherwise have been upon him to discuss in the future what should be the price of the deliveries from time to time. Having repudiated the contract when they were not entitled to do so they cannot rely on the fact that the contract might have broken down in the future because of their pcasible refusal to pay a reasonable price or their possible refusal to accept what the seller said was a reasonable quality of petrol. For these reasons I think the Lord Chief Justice's judgment was right both on the main question and also on the point as to restraint of trade. MAUGHAM L.J. The question raised in this case involves the construction of the agreeement dated April 11 1930. (1) See post, p. 17. It is indisputable that unless all the material terms of the contract are agreed there is no binding obligation. An agreement to agree in the future is not a contract; nor is there a contract if a material term is neither settled nor implied by law and the document contains no machinery for ascertaining it. Neither of these propositions was in question either in May & Butcher v. The King (1) or in Hillas & Co. v. Arcos (2), and it happens that in the first case the decision was one way and in the second case the other way on the construction of the relevant documents, but in neither was any new principle of construction laid down. In the present case the respondent, the plaintiff in the action, was the owner of land on which was a petrol-filling station. The appellants desired to buy a part of that property for the purposes of their business of motor coach proprieters. Two agreements were entered into of even date, one being supplemental to the other. The agreement provided for the purchase of the land by the appellants and for the purchase by them of the petrol required in their business. For three and a half years the appellants purchased their petrol from the respondent, but in September, 1933, they repudiated the agreement, saying that it was not binding upon them. I desire to say, first, that it is quite plain from the surrounding circumstancas that the agreement as to the sale and purchase of the petrol was intended to be a binding contract, and the old formed part of the inducement for the sale of the land. Secondly, the agreement was duly stamped and bears all the signs of a legal contact, and was not, as in May & Butcher The King (1), a mere informal letter. In the latter case, Hillas & Co. v. Arcos (2), some weight, although not too much, is to be attached to the fact that the parties conceived that they were entering into a binding contract, and the old maxim applies that the document should, if possible, be so interpreted ut res magis valeat quam pereat. As to the agreement relating to the sale of patrol, I think it is plain that the words in clause 1 that "the company shall purchase (1) See post, p. 17. (2) 147 L.T. 503. from the vendor all petrol which shall be required by the company for the running of their said business" refer to the business intended to be set up next door to the respondent. The two parties were carrying on business side by side, and one of them the respondent was to supply petrol from his pumps to the other. That appears also from clause 2, which provides that the vendor shall deliver the petrol from the pumps on his land. The petrol cannot therefore be supplied elsewhere ; it is an essential term of the agreement entered into since it is an inducement to the vendor to sell part of his land. Clause 5, which has some bearing on the question we liave to determine, says : " ln the event of the company being wound up . . . . the vendor may determine this agreement at any time after the commencement of such winding-up by giving one week's notice in writing of his intention so to do to the liquidator of the company, and upon the expiration of such notice this agreement shall osee and no claim shall be made against the company by the vendor but without prejudice to the right of action of the vendor in respect of any breach of the company's agreements herein contained." Why this provision should be irserted if the vendor was not to sell petrol to the buyers I cannot conceive. The obvious implication is that there is an obligation on the vendor which is or may be of some importance, and that in the event of the company being wound up he is entitled to determine the agreement. We now come to clause 6, which provides that " the company shall not purchase any petrol from any other person or corporation so long as the vendor is able to supply them with sufficient to satisfy their daily requirements but nothing herein contained shall prevent the vendor from selling petrol and/or oil to any other person or corporation to be used for any purpose whatever provided that the company and their servants shall be at liberty to purchase such petrol as may be found necessary to complete the particular journey when engaged on journeys over a distance necassitating the re- fuelling of their vehicles." The only condition there expressed is that the obligation is to last so long as the vendor is able to supply the company with sufficient petrol. Are we to assume that both parties were so ignorant of business that no dispute as to price could possibly arise ? Price is the very basis of this agreement, which surely does not mean that the company are not to purchase petrol from any other person or corporation if they are unable to agree in writing on the price or if the vendor chooses to fix a price above the commercial price which the company could possibly pay. If the clause were to be construed in that way it would be nonsense, and in my opinion it is necessary to imply in clause 6 a proviso that so long as the vendor is able and willing to supply the company with sufficient petrol either at a price to be agreed under clause 1 or at a fair and reasonable price if the price has not been so agreed, the company shall purchase it from him. In coming to this conclusion I am following the old-established rule in the case of tied houses laid down in Catt v. Tourle (1), and more recently in Courage & Co. v. -Carpenter. (2) In cach of these cases the publican agreed that he would not take beer from any one except the brewer. The Court thought it plain that that meant so long as the brewer was willing to supply beer of reasonable quality and at a reasonable price, and that was expressed in the form of the injunction granted in the second of these cases. The judgment of Bowen L.J. in The Moorcock (3) has been referred to, where the principle as to implications was stated in admirable terms; and the same principle involves in the tied house cases that no publican binds himself to take all his beer from a par- ticular brewer at any price the brewer likes to put upon it. There is no distinction in principle between a contract for the price of beer to be paid by the tenant of a tied house and the contract we have in this case. Two further changes in the agreement should be referred to, namely, clauses 7 and 8. Why should clause 7, which says that " the vendor shall supply the said petrol of a standard and quality at present supplied by the vendor or of such other standard and quality as the company may reasonably (1) (1869) L. R. 4 Ch. 654. (2) [1910] 1 Ch. 262. (3) 14 P.D. 64, 68. approve," be inserted unless there was a binding obligation on the company to purchase? Clause 8, the arbitration clause, is in an unusual form, providing that " if any dispute or difference shall arise on the subject matter or construction of this agreement the same shall be submitted to arbitration in the usual way in accordance with the provisions of the Arbitration Act, 1889." The reference to "subject matter" is not usual in such a clause. Returning now to clauses 1, 5 and 6, in my opinion these constrain the Court to hold that there must be implied in the obligation to sell and purchase the petrol at an agreed price words to this effect: "or, failing agreement, at a reasonable price to be determined under the arbitration clause." If the agreement had stopped short at clause 2 I should have thought that it was unenforceable, but the contract must be construed as a whole, and, construing it as a whole, I come to the conclusion I have stated. The duty of the Court is to ascertain the intention of the parties from the document as a whole. Verba intentioni, non e contra, debent inservire. On the question as to restraint of trade I agree with what Scrutton L.J. has ssid, and I can see no reason for altering the terms of the injunction that has been granted. It will of course have effect according to the construction put upon the agreement by this Court, that is, the appellants are only compelled to purchase petrol from the respondent for the purpose of their business carried on next door and so long as the respondent is willing to supply it of a reasonable quality and at a reasonable price from the pumps belonging to him on his land. Appeal dismissed. Solicitor for appellants: J.R. Cort Bathurst. Solicitor for respondent: C.J. Lewis. J. S. H. SOWLER v. POTTER. Landlord and tenant--Leae--Avoidence--Misrepresentation as to identity of tenant--Freud. On May 12, 1938, the defendant, under the name of A. M. R., which was then hers, was convicted of permitting disorderly conduct in a cafe. In June, 1938, under the name of A. P., she approached the plaintiff to negotiate a lease of premises in the same neighbourhood with a view to conducting a restaurant therein. On July 4, 1938, she assumed the name of A. P. by deed poll. On August 4, 1938, the plaintiff granted her the lease she desired. In an action by the plaintiff for a declaration that the lease was void, possession of the premises, and damages for trespass and use and occupation on the ground that she had been deceived as to the identity of the defendent:-- Held, that the consideration of the person with whom the plaintiff was entering into the lease was a vital element in that agreement so that, the plaintiff having been mistaken with regard to the identity of the defendant, the lease was void ab initio. Dictura of Viscount Heldane in Lake v. Simmons [1927] A. C. 487, 501, applied. ACTION tried by Tucker J. without a jury. The plaintiff, Helen Josephine Sowler, claimed from the defendant, Ann Potter, possession of a room in the basement of 74, Coleman Street, E.C., whereof the defendant, by a lease dated August 4, 1938, purported to become the plaintiff's tenant with a view to conducting a restaurant therein. The plaintiff also claimed a declaration that the lease was void, and damages for trespass and use and occupation and fraudulent misrepresentation. The plaintiff alleged that on May 12, 1938, the defendant, under the name of Anna May Robinson, was convicted at Guildhall Police Court of permitting disorderly conduct in the Swan Cafe/, Great Swan Alley, E.C., and that, when approaching the plaintiff to negotiate the lease in June, 1938, concealed that fact from the plaintiff, so that the p~laintiff was deceived as to her identity and was willing to let her the premises which, if she had been aware of her identity, she would not have done. By her defence the defendant admitted that she was convicted on May 12, 1938, but said that on July 4, 1938, by deed poll, she had assumed the name of Ann Potter and she denied all the allegations made by the plaintiff. Weitzman for the defendant. The plaintiff is not entitled to succeed since there was no such mistake of fact on her part or fraudulent misrepresentation on the part of the defendant as would avoid the lease. The plaintiff intended to contract with the de facto physical individual who called herelf Ann Potter and, therefore, the contract is not void : per Viscount Haldane in Lake v. Simmons. (1) There was no such error as to the de facto individual with whom the plaintiff was contracting as would avoid the contract : per Horridge J. in Phillips v. Brooks, Ld. (23 ; and on that ground this case is distingnishable from Bolton v. Jones (3), where the defendant thought that he was dealing with one individual and in fact was dealing with another. There was, moreover, no fraud committed by the defendant to induce a contract as there was in Gordon v. Street. (4) The defendant may have intended to deceive, but what she did at most amounted to a representa- tion which was collateral to the contract. Even if the defendant, when entering into the lease, intended that the premises should be used for an unlawful purpose, the lease is not thereby rendered invalid but the interest in the premises remains legally vested in her: Feret v. Hill per Jervis C.J., Maule and Cresswell JJ. (5) ; Alexander v. Rayson per curiam. (6) Granville Sharp for the plaintiff. The mistake as to the identity of the defendant was fatal to the lease. In view of the clsss of premises beng let and the purpose to which they were to be put, the character of the lease was such a fundamental element of the agreement that error with regard to it destroys the plaintiss's consent and annuls the agreement : per Viscount Haldane in (1) [1927] A. C. 487, 501. (5) (1854) 15 C. B. 207, 224 225, (2) [1919] 2 K.B. 243, 248. 226. (3) [1857] 30 L. T. (O. S.) 188. (6) [1936] 1 K. B. 169, 184, 186. (4) [1899] 2 Q. B. 641. Lake v. Simmons (1), Cundy v. Lindsay. (2) The revelation of the defendant's identity would have shown her to be suspect in the very capacity which was material--namely, that of the tenant of a restaurant. In concealing her identity to persuade the plaintiff to deal with her she was just as guilty of fraudulent misrepresentation inducing the contact as was the plaintiff in Gordon v. Street. (3) [He also referred to London Jewellers, Ld. v. Attenborough. (4)] Cur. adv. vult. 1939. Nov. 23. TUCKER J. [stated the facts and continued:] The way in which the case is put on behalf of the plaintiff is this. It is said that the plaintiff, through her agent, was mistaken with regard to the identity of the person with whom the lease was made. It is furthermore said, though this would not be essential to that part of the case, that in fact that mistake was brought about by the fraud of the defendant, Potter, in concealing her identity and representing that she was a different person from that which she was. Accordingly, it is said that the lease is void ab initio and that everything which has been done under it is also void, so that the defendant was at all times a trespasser and must be dealt with as such. That part of the case raises considerations which are not free from difficulty. I think that the law on the subject is to be found set out in Viscount Haldane's speech in Lake v. Simmons (5) where he said: "Jurists have laid down, as "I think rightly, the test to be applied as to whether there is "such a mistake as to the party as is fatal to there being "any contract at all, or as to whether there is an intention "to contract with a de facto physical individual, which "constitutes a contract that may be induced by misrepresenta- "tion so as to be voidable but not void. It depends on a "distinction to be looked for in what has really happened. " Pothier (Traite/ des Obligations; s. 19) lays down the (1) [1927] A.C. 501. (4) [1934] 2 K.B 206. (2) (1878) 3 App. Cas. 459. (5) [1927] A.C. 487, 501, (3) (1899) 2 Q.B. 641. "principle thus, in a passage adopted by Fry J. in Smith v. "Wheatcroft (1) : 'Does error in regard to the person with " 'whom I contract destroy the consent and annul the " 'agreement ? I think that this question ought to be " 'decided by a distinction. Whenever the consideration " 'of the person with whom I am willing to contract entcrs " 'as an element into the contract which I am willing to " 'make, error with regard to the person destroys my consent " 'and consequently annuls the contract. . . . On the " 'contrary, when the consideration of the person with " 'whom I thought I was contracting does not enter at all " 'into the contract, and I should have been equally willing " 'to make the contract with any person whatever as with " 'him with whom I thought I was contracting, the contract " 'ought to stand." Then he went on: "In the careful "judgment delivered by him in Phillips v. Brooks (2), "Horridge J. decided that the alternative view secondly stated "by Pothier applied to the case he was dealing with. A "fraudulent person had entered a jeweller's shop and looked "at and selected certain jewels which the jeweller was "prepared to sell to him individually as a casual customer "who had entered the shop. All that remained to be sub- "sequently arranged was payment of the price. The unknown "customer, who drew a cheque pretending to be some one "else, and signed it in a well-known name, was allowed in "exchange for the cheque to take away one of the jewels, "of which he disposed subsequently. Horridge J. found "as a fact, that though the jeweller believed that person to "whom he handed the jewel was the person he pretended "to be, yet he intended to sell to the person, whoever he was "who came into the shop and paid the price, and that the "misrepresentation was only as to payment. There was "therefore consensus with the person identified by sight "and hearing, although the title to delivery was voidable "having been induced by misrepresentation. In the other "type of case referred to by Pothier, where the belief of the "contracting seller depends wholly on identity of character (1) (1878) 9 Ch. D. 223, 230. (2) [1919] 2 K.B. 243. "or capacity, there is, as Mr. Justice Holmes says at the "beginning of the Ninth lecture in his book on The Common "Law, no contract, because there is really only one party." I think that it is clear that the present case is one where, in the words quoted by Lord Haldane, "thc consideration of "the person with whom I am willing to contract enters as an "element into the contract which I am willing to make," and that it is to be distinguished from the type of case with which Horridge J. was dealing in Phillips v. Brooks (1), where those considerations did not arise. I think that this case of landlord and tenant is clearly one where the consideration of the person with whom the contract was made was a vital element in the contract, and that, therefore, if there was any mistake on the part of the plaintiff with regard to the identity of thc person with whom she was contracting, the contract is void ab initio. Here, I think, there was mistake on the part of the plaintiff with regard to the identity of the person with whom she was contrasting. The agent, Mr. Tong, who acted on behalf of the plaintiff, said in his evidence that he remembered the case of Mrs. Robinson having been reported in the newspapers. Therefore, he was aware that therc was in existence a Mrs. Ann Robinson, a convicted person, and he thought when he entered into this contract with thc defendant that he was entering into a contract with some person other than the Mrs. Ann Robinson who had been convicted. I think it is quite immaterial to embark on speculation whether or not, if the defendant had called herself Mrs. Robinson, he would have discovered who she was. That is another matter altogether. He believed that, whoever he was contracting with, it was not the Mrs. Ann Robinson who had been convicted of this offence a short time beforehand. The facts are, therefore, very similar to those in Gordon v. Street. (2) It is quite true that the decision of the three members of the Court in that case was that the fraudulent concealment by the plaintiff of his identity with a person whose reputation in business was such that the defendant would not have (1) [1919] 2 K. B. 243. (2) [1899] 2 Q. B. 641. dealt with him was material to the inducement which brought about the contract so that the defendant was entitled to repudiate that contract within a reasonable time after the discovery of the fraud, but A. L. Smith L.J. said (1) after quoting the passage from Smith v. Wheatcroft (2) which was referred to by Lord Haldane in Lake v. Simmons (3) " Now, the " advertisement above mentioned points out that George "James Addison, with whom the defendant thought he was "contracting, was not as ordinary loan offices were, and that " he traded at one-tenth of the interest charged elsewhere, "and this appears to me to afford evidence that with a man "trading as Addison said he did the defendant was willing to "contract, and that the consideration of the persen did enter "into the contract, and upon this ground, apart from fraud, "the contract ought not to stand." It is to be observed that in that case the defendant was aware of the existence of a notorious moneylender named Gordon, and when he made the contract with the plaintiff in the name of Addison he did not think he was contracting with that Gordon. In those cir- cumstances A. L. Smith L.J. base his decision on the ground that the contract could not stand because, apart from fraud, there was this element of mistake with regard to the identity of the person with who the defendant was contracting. That was a very similar position to that in the present case, and therefore, in my view, there was here such a mistake as to render this lease void ab initio. I furthermore hold, although it is not essential to this part of the case, that the mistake was in fact brought about by the fraud of the defendant. It is perfectly true that everyone in this country is permitted for innocent reasons to change his name, but it must depend on the circumstances. I am satisfied here that this was a mere device on the part of the defendant to deceive the landlord with whom she was proposing to enter into a contract, and that she in fact fraudulently misrepresented her identity both before and after the making of the contract. That is sufficient the decision on the claim with regard (1) [1809] 2 Q. B. 647. (3) [1927] A. C. 487, 501. (2) 9 Ch. D. 223, 230. to the lease. The plaintiff is entitled to a declaration that this lease of August 4, 1938, of the premises at 74, Coleman Street, was void ab initio. (His Lordship then assessed the damages for trespass at 8l.] Judgment for the plaintiff. Solicitors for plaintiff: Pinsent & Co. Solicitors for defendant: Bernard Simmonds & Co. G. F. L. B. CHAPELTON v. BARRY URBAN DISTRICT COUNCIL Contract--Hire of deck chair--Notice containing no limitation of liability --Ticket--Condition on ticket purporting a limit liability of owners> of chair--Hirer of chair ignorant of condition--Terms upon which chair hired--Defective chair--Liability of owners of chair for accident to hirer. The plaintiff, who wished to hire a deck chair on a beach went to a pile of deck chairs belonging to the defendant council near to which was displayed a notice in the following terms : "Barryr "Urban District Council. Cold Knap. Hire of chairs 2d. per "session of 3 hours." The notice went on to state that the public were requested to obtain tickets for their chairs from the chair attendants and that those tickets should be retained for inspection. There was nothing on the notice relieving the defendant council from liability for any accident or damage arising out of the hire of a chair. The plaintiff obtained two chairs from the attendant for which he paid 4d. and received two tickets therefor. The plaintiff glanced at the tickets and slipped them into his pocket and had no idea that they contained any conditions. On one side of the tickets were the words: "Barry " Urban District Council. Cold Knap. Chair Ticket 2d. Not " transferable," with half hours printed on the side of the tickets. On the other side of the tickets were the words: "Available for " three hours. Time expires where indicated by out-off and "should be retained and shown on request. The council will " not be liable for any accident or damage arising from the hire " of the chair." The plaintiff put the chairs up in the ordinary way on a flat part of the beach, and them sat down on a chair which gave way, the oanvas having come away from the top of the chair. In an action against the defendants the county court judge found that the accident was due to the negligence of the defendants, but that the defendants were exempted from liability as the plaintiff had sufficient notice of the special contract printed on the ticket. On appeal:-- Held, that the ticket was a mere voucher or receipt for the money paid for the hire of the chair, and that the conditions upon which the local authority offered to hire out the chairs were those contained in the notice put up near the pile of chairs, and that as that notice contained no limitation of liability for any accident or damage arising from the hire of the chairs, the local authority were liable to the plaintiff. APPEAL from a decision of the judge of the Cardiff and Barry County Court. The facts are fully set out in the judgment of Slesser L.J. In an action by the plaintiff against the Barry Urban District Council the county court judge found as a fact that the accident to the plaintiff was due to negligence on the part of the defendants, but he held, relying on Thompson v. London, Midland and Scottish Ry. Co. (1), that the defendants were exempted from liability by reason of the fact that the plaintiff had sufficient notice of the special contract printed on the ticket. The plaintiff appealed. Carey Evans for the appellant. The county court judge was wrong in holding that the plaintiff had sufficient notice of the conditions printed on the ticket and was therefore bound by the same. Henderson v. Stevenson (2) is directly in point in the present case. The defendants in the county court relied upon the decision of the Court of Appeal in Thompson v. London, Midland & Scottish Ry. Co. (3), especially the judgment of Sankey L.J. In that case it was held, following Watkins v. Rymill. (4), that the plaintiff was bound by the special contract made on the excursion ticket on the acceptance of that ticket. That case is distinguishable from the present case because here there was nothing on the face of the ticket to call attention to the fact that there were conditions printed on the back of the ticket. The remarks of Mellish L.J. in Parker v. South Eastern Ry. Co. (5) apply directly to the present case. The ticket in the present case was like a receipt for a toll paid at a toll gate. [Nunan v. Southern Ry. Co. (6) was also referred to.] Ryder Richardson (for Griffith Williams on war service) for the respondents. It was a question of fact for the county court judge to say whether there was a written conftract, concluded between the parties, and whether it contained terms which were brought to the notice of the plaintiff, and he has held that the terms were brought to the notice of the plaintiff. That finding is binding on the plaintiff. A (1) [1930] 1 K.B. 41. (5) (1877) 2 C.P.D. 416, 422. (2) (1875) L.R. 2 H.L. (Sc.) 470. (6) [1923] 2 K.B. 703; [1924] (3) [1930] 1 K.B. 41,54. 1 K. B. 223. (4) (1883) 10 Q.B.D. 178. person is not entitled to the use of a chair without first obtaining a chair ticket from the attendant. The notice that was exhibited was no more than an offer by the defendants to treat. The ticket that was issued to the plaintiff constituted a contract between the parties the terms of which were binding on the plaintiff ; it was not merely a receipt for the 2d. paid for the hire of the chair. It was said by Stephen J. in Watkins v. Rymill (1) that the facts in Henderson V. Stevenson were so peculiar that that case could hardly form a precedent for any other. This case falls within the observations of Sankey L.J. in Thompson v. London, Midland and Scottish Ry. Co. (3) The county court judge has held, and he was entitled so to hold, that the defendants had taken reasonable steps to bring the conditions on which the chair tickets were issued to the notice of the plaintiff who is accordingly bound by the same. SLESSER L.J. This appeal arises out of an action brought by Mr. David Chapelton against the Barry Urban District Council, and it raises a question of some importance to the very large number of people who are in the habit of using deck chairs to sit by the seaside at holiday resorts. On June 3, 1939, Mr. Chapelton went on to the beach at a place called Cold Knap, which is within the area of the Barry Urban District Council, and wished to sit down in a deck Chair. On the beach, by the side of a cafe, was a pile of deck chairs belonging to the defendats, and by the side of the deck chairs there was a notice put up in these terms: "Barry Urban District Council. Cold Knap. Hire of chairs, "2d. per session of 3 hours." Then followed words which said that the public were respectfully requested to obtain tickets for their chairs from the chair attendants, and that those tickets must be retained for inspection. Mr. Chapelton, having taken two chairs from the attendant, one for himself and one for a Miss Andrews, who was with him, received two tickets from the attendant, glanced at them, (1) 10 Q. B. D. 182. (3) [1930] 1 K. B. 41, 56. (2) L. R. 2 H. L. (Sc) 470. and slipped them into his pocket. He said in the court below that he had no idea that there were any conditions on those tickets and that he did not know anything about what was on the back of them. He took the chairs to the beach and put them up in the ordinary way, setting them up firmly on a flat part of the beach, but when he sat down he had the misfortune to go through the canvas, and, unfortunately, had a bad jar, the result of which was that he suffered injury and had to see a doctor, and in respect of that he brought his action. The learned county court judge has found that if he had been satisfied that the plaintiff had had a valid legal claim, he would have awarded him the sum of 50l. in addition to the special damages claimed. The learned county court judge also found that the accident to the plaintiff was due to the negligence on the part of the defendants in providing a chair for him which was unfit for its use which gave way in the manner which I have stated. But he nevertheless found in favour of the defendants by reason of the fact that on the ticket which was handed to Mr. Chapelton when he took the chair appeared these words: "Available for 3 hours. Time expires where indicated by "cut-off and should be retained and shown on request. "The Council will not be liable for any accident or damage "arising from hire of chair." As I read the learned county court judge's judgment (and we have had the advantage of a note taken by Mr. Carey Evans in addition to the summary reasons which the learned county court judge gives for his decision, he said that the plaintiff had sufficient notice of the special contract printed on the ticket and was, accordingly, bound thereby--that is to say, as I understand it, that the learned county court judge has treated this case as a case similar to the many cases which have been tried in reference to conditions printed on tickets; and more particularly, on railway tickets--and he came to the conclusion that the local authority made an offer to hire out this chair to Mr. Chapelton only on certain conditions; which appear on the ticket, namely, that they, the council, would not be responsible for any accident which arose from the use of the chair, and they say that Mr. Chapelton hired the chair on the basis that that was one of the terms of the contract between him and themselves, the local authority. Questions of this sort are always questions of difficulty and are very often largely questions of fact. In the class of case where it is said that there is a term in the contract freeing railway companies, or other providers of facilities, from liabilities which they would otherwise incur at common law, it is a question as to how far that condition has been made a term of the contract and whether it has been sufficiently brought to the notice of the person entering into the contract with the railway company, or other body, and there is a large number of authorities on that point. In my view, however, the present case does not come within that category at all. I think that the contract here, as appears from a consideration of all the circumstances, was this : The local authority offered to hire chairs to persons to sit down on the beach, and there was a pile of chairs there standing ready for use by any one who wished to use them, and the conditions which they offered persons the use of hire of a chair was 2d. per session of three hours. I think that was the whole of the offer which the local authority made in this case. They said, in effect : "We offer to provide you " with a chair, and if you accept that offer and sit in the "chair, you will have to pay for that privilege 2d. per session "of three hours." I think that Mr. Chapelton, in common with other persons who used the chairs, when he took the chair from the pile (which happened to be handed to him by an attendant, but which, I suppose, he might have taken from the pile of chairs himself if the attendant had been going on his rounds collecting money, or was otherwise away) simply thought that he was liable to pay 2d. for the use of the chair. No suggestion of any restriction of the council's liability appeared in the notice which was near the pile of chairs. That, I think, is the proper view to take of the nature of the contract in this case. Then the notice contained these further words: "The public are respectfully requested to obtain "tickets properly issued from the automatic punch in " their presence from the Chair Attendants." The very language of that "respectful request" shows clearly, to my mind, that for the conveniencc of the local authority the public were asked to obtain from the chair attendants tickets, which were mere vouchers or receipts showing how long a person hiring a chair is entitled to use that chair. It is wrong, I think, to look at the circumstances that the plaintiff obtained his receipt at the same time as he took his chair as being in any way a modification of the contract which I have indicated. This was a general offer to the general public, and I think it is right to say that one must take into account here that there was no reason why anybody taking one of these chairs should necessarily obtain a receipt at the moment he took his chair---and, indeed, the notice is inconsistant with that, because it "respectfully requests" the public to obtain receipts for their money. It may be that somebody might sit in one of these chairs for one hour, or two hours, or, if the holiday resort was a very popular one for a longer time, before the attendant came round for his money, or it may be that the attendant would not come to him at all for payment for the chair, in which case I take it there would be an obligation upon the person who used the chair to search out the attendant, like a debtor searching for his creditor, in order to pay him the sum of 2d. for the use of the chair and to obtain a receipt for the 2d. paid. I think the learned county court judge has misunder- stood the nature of this agreement. I do not think that the notice excluding liability was a term of the contract at all, and I find it unnecessary to refer to the different authorities which were cited to us, save that I would mention a passage in the judgment of Mellish L. J. in Parker v. South Eastern Ry. Co. (1), where he points out that it may be (1) 2 C.P.D. 416, 422. that a receipt or ticket may not contain terms of the contract at all, but may be a mere voucher, where he says: "For instance, "if a person driving through a turnpike-gate received a ticket "upon paying the toll, he might reasonably same that the "object of the ticket was that by producing it he might be "free from paying toll at some other turnpike-gate, and might "put it in his pocket unread." I think the object of the giving and the taking of this ticket was that the person taking it might have evidence at hand by which he could show that the obligation he was under to pay 2d. for the use of the chair for three hours had been duly discharged, and I think it is altogether inconsistent, in the absence of any qualification of liability in the notice put up near the pile of chairs, to attempt to read into it the qualification contended for. In my opinion, this ticket is no more than a receipt, and is quite different from a railway ticket which contains upon it the terms upon which a railway company agrees to carry the passenger. This, therefore, is not, I think, as Mr. Ryder Richardson has argued, a question of fact for the learned county court judge. I think the learned county court judge as a matter of law has miconstrued this contract, and looking at all the circumstances of the case, has assumed that this condition on the ticket, or the terms upon which the ticket was issued, has disentitled the plaintiff to recover. The class of case which Sankey L.J. dealt with in Thompson v. London, Midland and Scottish Ry. Co. (1), which seems to have influenced the learned county court judge in his decision, is entirely different from that which we have to consider in the present appeal. MAcKINNON L.J. I agree that this appeal should be allowed The Learned county court judge decided this case relying upon a dictum of Sankey L.J. when he was speaking of a transaction which was totally different to this one. If a man does an act which constitutes the making of a contract, such as taking a railway ticket, or depositing his bag in a cloak-room, he will be (1) [1930] 1 K. B. 41, 53. bound by the terms of the document handed to him by the servant of the carriers or bailees: but if he merely pays money for something and receives a receipt for it, or does something which clearly only amounts to that, he cannot be deemed to have entered into a contract in the terms of the words that his creditor has chosen to print on the back of the receipt, unless, of course, the creditor has taken reasonable steps to bring the terms of the proposed contract to the mind of the man. In this case there was no evidence upon which the learned county court judge could find that the defendants had taken any steps to bring the terms of their proposed contract to the mind of the plaintiff. In these circumstances, I am satisfied that the defendants could not rely upon the words on the back of the ticket issued to the plaintiff, and, having admittedly been negligent in regard to the condition of the chair, they had no defence to the plaintiff's cause of action GODDARD L.J. I agree. In my view the cases which deal with railway tickets, cloak-room tickets, or documents issued by bailees when they take charge of goods, have no analogy to this case. In this case the appellant paid 2d. in order to have the right to sit on a chair on the beach, and he was asked to take a ticket in the form of a receipt for that purpose, and was given a document which shows nothing on the face of it, except that the man had the right to sit in the chair until 7.3O P.M. on the day when the accident occurred and the fact that the ticket was not transferable. I cannot imagine that anybody paying 2d. under those circumstances for the privilege of sitting in a chair on the beach would think for one moment that some conditions were being imposed upon him which would limit his ordinary rights, or that the document he received when paying his 2d. was a contractual document in any shape or form. I think the ticket he received was nothing but a receipt for his 2d.--a receipt which showed him how long he might use the chair. I think the learned judge below was wrong in thinking that the case of Thompson v. London, Midland and Scottish Ry. Co. (1) upon which he (1) [1930] 1 K.B. 41. seems to have relied, had any bearing on the present case. One must have regard to the facts of the case and the general circumstances of the case. In my opinion, Thompson v. London, Midland and Scottish Ry. Co. (1) has no bearing at all on this case. I agree that there was no evidence upon which the learned judge below could find that the plaintiff was bound by this condition on the ticket, and, therefore, this appeal must succeed. Appeal allowed. Solicitors for appellant : Kingsley Wood, Williams & Murphy, for Edward T. Davies & Son, Cardiff. Solicitors for respondents: Wrentmore & Son, for Thomas John & Co., Cardiff. (1) [1930] 1 K. B. 41. R. F. S. [HOUSE OF LORDS.] G SCAMMELL AND NEPHEW, LIMITED APPELLANTS; AND H. C. AND J. G. OUSTON . . . . . RESPONDENTS. Sale of goods--Stipulation that Part of price to be " on hire purchase " terms "--Term too vague to constitute a concluded contract. The respondents agreed to purchase from the appellants a new motor van but stipulated that " this order is given on the " understanding that the balance of purchase price can be had " on hire-purchase terms over a period of two years " :-- Held, that this clause as to hire-purchase terms was so vague that no precise meaning could be attributed to it, and consequently there was no enforceable contract between the parties. Decision of the Court of Appeal reversed APPEAL from a decision of the Court of Appeal dismissing an appeal from Tucker J. In November, 1937, the respondents, H. C. and J. G. Ouston, were desirous of acquiring a new motor-van on hire-purchase terms, giving in part payment a Bedford motor-van which they then had. At an interview on November 23, 1937 between Mr. Cook, a representative of the appellants, and Mr. J. G. Ouston, on behalf of the respondents, Mr. Ouston mentioned that the respondents would require the new vehicule "on hire-purchase." A new vehicle having been provisionally selected by the respondents, the appellants wrote a few days later, giving a quotation of 268l., and stating that they were prepared to allow 100l. for the Bedford van. At a later interview Mr. H. C. Ouston stated that the respondents intended to have one of the appellants' vans on the under- standing that the appellants allowed the respondents 100l. for the old van. Following this interview the appellants wrote, expressing thanks for the order. The respondents replied to the last mentioned letter in the following terms: "We beg to acknowledge receipt of your acceptance of our * Present: VISCOUNT SIMON L.C., VISCOUNT MAUGHAM, LORD RUSSELL OF KILLOWEN, and LORD WRIGHT. " order for :--One Commer 15-cwt. chassis, complete with " body. . . . This order is given on the understanding that "the balance of purchase price can be had on hire-purchase "terms over a period of two years." Later, the appellants wrote to the respondents as follows: "Further to our conver- " sation, we have now received advice from the United "Dominions Trust Co. Ld. of their acceptance of the hire- "purchase in connection with the vehicle we are supplying, "and we will, in due course, forward the documents to you." Before any hire-purchase agreement was entered into or any agreement reached as to the provisions it should contain the appellants refused to proceed further, whereupon the respondents brought an action claiming damages for breach of contract to "supply" the vehicle. To that the appellants pleaded that until a hire-purchase agreement was effected neither party was bound and that the alleged agreement was void for uncertainty. Tucker J., who tried the action, held that the respondents were absolved from performance by the wrongful repudiation of the contract, which he found to have been constituted in spite of the general nature of the reference to hire-purchase, and he accordingly awarded damages. From that judgment Scammell & Nephew, Ld., appealed to the Court of Appeal, but that court dismissed the appeared. Slesser L.J. considered that the agreement meant that what is commonly understood by business men to be one of the methods of hire-purchase should be the method of discharging the payment for the car. To read it otherwise would be to nullify the intention of the parties who, in his opinion, quite clearly intended such an agreement. MacKinnon L.J. thought the contract was a perfectly simple and ordinary business agreement, the essential stipulation implied being that it should be in a reasonable form. Goddard L.J. also agreed, adding that it was a matter for the choice of the defendants how the hire-purchase term of the alleged contract was to be carried out. The defendants appealed to this House. A. T. Miller K.C. and Constantine Gallop for the appellants. The question is whether there was between the parties a concluded contract, and in particular whether the expression "on hire-purchase terms " can be said to have a defined legal signification. We submit that it has not, being too vague, and on that account cannot be enforced. G. H. Beyfus K.C. and W. A. L. Raeburn for the respondents. In considering whether there was a concluded contract there is one matter to which the House can look, namely, whether the parties themselves thought that they had arrived at that result. Applying that test we say that there was a concluded contract. There was clearly a contractual intention on both sides by which Scammells agreed to make the car available for the respondents on the terms stated, the latter agreeing to take delivery. The parties were thus ad idem. The House took time for consideration. 1940. Dec. 16. VISCOUNT SIMON L.C My Lords, during much of the argument I remained unconvinced that the result reached in the courts below (various as is the reasoning by which the different judges reached that result) could not be sustained by taking the view that this was a contract for the sale and purchase of a motor-car, subject to the condition that the contract ceased to be binding if the finance for the purchase could not be provided for the respondents within a reasonable time, and in a reasonable manner, by the method of hire-purchase through a third party. If this view of the bargain were justified, then the appellants wrongfully repudi- ated their prospective obligations out and out, without waiting to see whether the conditicn was or was not complied with; in that situation the respondents could sue for damages for anticipatory breach without the necessity of the condition being fulfilled ; Frost v. Knight (1), where the engagement to marry was conditional on the defendant's father first dying, and where the repudiation of the promise occurred in the father's lifetime, is a familiar example of the principle which I should have been glad to apply. (1) (1872) L. R. 7 Ex. III. But, on further reflection, and in the light of the opinions prepared by some of your Lordships which I have had the advantage of reading, I do not think this view is tenable. Apart from the objection that if the contract is treated as a contract of sale in the terms suggested above, there is no signature by the appellants, as the party to be charged, accept- ing the condition, it appears to me that the crucial sentence "This order is given on the understanding that the balance "of purchase price can be had on hire-purchase terms over a "peried of two years " is so vaguely expressed that it cannot, standing by itself, be given a definite meaning--that is to say, it requires further agreement to be reachcd between the parties before there would be a complete consensus ad idem. If so, there was no contract and therefore no breach. I move that the appeal be allowed with costs here and below. VISCOUNT MAUGHAM. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Russell of Killown. I entirely agree with it and with his statement of the relevant facts. No less, however, than four judges have come to a different conclusion, and they think that the respondents have exceeded in establishing a contract in this case. I should always be slow to differ from views of those for whom I entertain a very genuine respect, if I could entertain any real doubt about the matter. I am constrained therefore to add some remarks of my own to explain why I am led to an opinion which coincides with that of my noble friend. It is a regrettable fact that there are few, if any topics on which there seems to be a greater difference of judicial opinion than these which relate to the question whether as the result of informal letters or like documents a binding contract has been arrived at. Many well known instanses are to be found in the books, the last being that of Hillas & Co. v. Arcos, Ld. (1) The reason for these different conclusions is that laymen unassisted by persons with a legal training are not always (1) (1932) 147 L.T. 503. accustomed to use words or phrases with a precise or definite meaning. In order to constitute a valid contract the parties must so express themselves that their meaning can be deter- mined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention ; in other words the consensus ad idem would be a matter of mere conjecture. This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the court is very willing, if satisfied that the parties thought that they made a binding contract, to imply terms and in particular terms as to the method of carrying out the contract which it would be impossible to supply in other kinds of contract : see Hillas & Co. v. Arcos, Ld. (1). My Lords, it is beyond dispute that if an alleged contract is partly oral and partly in writing it is necessary to take the whole of the negotiations into consideration for the purpose of seeing whether the parties are truly agreed on all material points, for if they are not there is no binding contract. Nor is it right to construe a letter or other document forming a part of the negotiations in such a case without regard to the oral statements which also form a part of them. To construe the language of such letter, so to speak, in vacuo might easily result in giving to the words of it a meaning which as used by the writer, in the circumstanccs of the case, he did not intend the words to bear or one which the recipient of the letter did not attribute to them. Accordingly, the words in the letter, "This order is given on the understanding that the balance "of purchase price can be had on hire-purchase terms over a " period of two years," must be read together with the parol evidence of Mr. J. G. Ouston in order to give those words their true meaning. So read, I cannot myself doubt, they are not an attempt to impose a new condition, whether precedent or subsequent, but are merely a reminder of the common intention of the parties from the start, though perhaps--and even (1) 147 L. T. 503, 511, 512, 514. of that I am not certain--the reference to the period of two years was something which had not previously been agreed. We come then to the question as to the effect of the (so- called) purchase being on "hire-purchase terms," and here we are confronted with a strange and confusing circumstance. The term "hire-purchase" for a gocd many years past has been understood to mean a contract of hire by the owner of a chattel conferring on the hirer an option to purchase on the performance of certain conditions : Helby v. Matthews (1). There is in these contracts--and this is from a business stand- point a most important matter---no agreement to buy within the Factors Act, 1889, or the Sale of goods Act, 1893; there is only am option and the hirer can confer on a purchaser from him no better title than he himself has, except in the case of sale in market overt. It is inaccurate and misleading to add to an order for goods, as if given by a purchaser, a clause that hire-purchase terms are to apply, without something to explain the apparent contradiction. Moreover a hifre-purchase agree- ment may assume many forms and some of the variations in those forms are of the most important character, e.g., those which relate to tenrmination of the agreement; warranty of fitness, duties as to repair, interest, and so forth. Bearing these facts in mind, what do the words as to " hire- "purchase terms " mean in the present case ? They may indicate that the hire-purchase agreement was to be granted by the appellants a on the other hand by some finance company acting in collaboration with the appellants; they may con- template that the appellants were to receive by instalmernts a sum of 168l: spread over a period of two years upon delivering the new van and receiving the old car, or, on the other hand, that the appellants were to receive from a third party a lump sum of 168l. and that the third party, presumably a finance company, was to receive from the respondents a larger sum than 168l. to include interest and profit spread over a period of two years. Moreover, nothing is said (except as to the two year period) as to the terms of the hire-purchase (1) [1895] A. C. 471. agreement, for instance, as to the interest payable, and as to the rights of the letter whoever he may be in the event of defaulf by the respondents in payment of the instalments at the due dates. As regards the last matters there was no evidence to suggest that there are any well known "usual terms " in such a contract ; and I think it is common knowledge that in fact many letters though by no means all of them insist on terms which the legislature regards as so unfair and unconscion- able that it was recently found necessary to deal with the matter in the recent Act entitled the Hire-purchase Act, 1938. These, my Lords, arc very serious difficultics, and when we find as we do in this curious case that the trial judge and the three Lords Justices, and even the two counsel who addressed your Lordships for the respondents, were unable to agree upon the true construction of the alleged agreement, it seems to me that it is impossible to conrlude that a binding agreement has been established by the respondents. I need not state the different views entertained by the trial judge, and the Lords justices, and by counsel, for that will be done by my noble friend Lord Russell. The appeal must, I think, succeed, and the action for damages must be dismissed with costs here and below. LORD RUSSELL OF KILLOWEN. My Lords, in my opinion this appeal should be allowed. The action is brought to recover damages for brcach of a contract alleged to have been made at certain interviews and by certain letters between the parties and their representatives. In the forefront of their defence the appellants pleaded that no agreement arose out of those letters or interviews. That defence, if estsblished, is a complete answer to the action : and I feel no doubt that it has been established. Although the argument before this House took place on four separate days, the point which ultimately emerges is short, and depends upon the question whether any, and what, certain meaning can be attributed to one sentence in a letter from the respondents to the appellants : a question in the solution of which I get no help from any of the authorities which were cited during the debate. The relevant facts can be briefly stated. The respondents wished to acquire a new motor van, giving in part exchange a Bedford van which they owned. On November 23, 1937, an interview took place between a partner in the respondents' firm, one John Ouston, and a Mr. Cook, who reprerented the appellants, at which Mr. Cook recommended a Commer 15 cwt. van as suitable for the respondents' requirements, and suggested 80l. as the figure at which the Bedford van should be taken in part exchange, a figue, however, which Mr. Ouston considered too low. On the following day the appellants (by Mr. Cook) wrote to the respondents a letter giving a quotation for the proposed Commer van at 268l., and stating that they were prepared to allow the sum of 100l. for the Bedford van. On December 6, 1937, an interview took place at which John Ouston, his father and co-partner Harry Ouston, and Mr. Cook were present. At that interview the offer contained in the letter of November 24, 1937, was accepted by the respondents. On December 7, 1937, the appellants (by Mr. Cook) wrote to Mr. Ouston thanking him for the order placed with Mr. Cook, on the previous evening, and asking him to let them have the official order in order to complete their records. This request was complied with by a letter from Mr. Harry Ouston dated December 8, 1937, in the following terms : " We beg to acknow- " ledge rereipt of your acceptance of our order for : One " Commer 15-cwt. chassis complete with body as per your " specification sent us on 25th November, Number 5263. This " order is given on the understanding that the balance of " purchase price can be had on hire-purchase tip oven a "period of two years." It is upon the true meaning and effect of this last sentence that this case depends. But before considering its meaning and effect, a further relevant fact must be added namely, that throughout the negotiation between the parties it was made Wear that the respondents wanted to purchase on hiffre- purchase terms, and that there was never any question of an out-and-out purchase by the respondents. Two question and answers in Mr. John Ouston's evidence establish this beyond doubt : " Q. Anyway, this is quite clear; that from the " beginning of your discussions with Mr. Cook, you always " told him quite definitely that you wanted to purchase on " hire purchase terms ? A. That is quite clear. Q. There "was no question of an out-and-out purchase ? A. No, there " never was." In these circumstances the true construction of the agreement alleged by the statement of claim to arise out of the letters of December 7 and 8, 1937, and the interview of December 6, 1937, is a matter open to endless doubt and speculation. At least five different versions have been presented for your Lordships' consideration. The trial judge was of opinion that there existed a contract for the sale by the appellants to the respondents of a Commer van for the sum of 268l., to be paid and satisfied as to 168l. in cash and as to the balance by the delivery to the appellants of the Bedford van ; that the ooncluding sentence of the letter of December 8, 1937; "was merely a condition precedent " to the contract becoming an effective contract " ; and that "as in his opinion the appellants repudiated the contract on " wrong grounds, they cannot rely upon the necessity for "the respondents showing that that condition has been " fulfilled " The Court of Appeal took a different view. The Lords Justices all treated the sentence in question as a term of the contract between the parties, and not as a condition precedent to that contmct ; but they differed (inter se) as to the con- struction of that contract. Slesser L.J. thought that the alleged contract might be carried out in any one of several specified ways but that it lay on the respondents within a reasonable time, in a reasonable way, to produce some method Whereby they could under the conditions of a hire-purchase agreement satisfy their under- taking by one way or another through a hire-purchase agree- ment to pay the appellants. Notwithstanding this lack of certainty the Lord Justice considered that a complete agreement had been concluded, on the ground that--as he put it--" You may very well agree that a certain part of the "contract, such as the particular conditions on which the hire- "purchase agreement was to be made, was to be settled in "conjunction with a third party." MacKinnon L.J. took the view that by the alleged contract the appellants undertook to procure a finance company to purchase the van from them, and to hand over its possession to the respondents under the terms of a hire-purchase agrerment pursuant to which the respondents would ultimatWy pay to the finance company 268l., reduced to 168l. by the 100l. for the Bedford van, which sum would be paid to the finance company by the appellants. Goddard L.J. was of opinion that the alleged contract was a contract by the appellants to put the respondents in possession of the Commer van for a sum of 268l., 100l. of which was to be satisfied by the delivery of the Bedford van and 168. of which was to be satisfied by instalments over two years, being 24 monthly instalments, and that it was matter for the choiee of the appellants how the hire-purchase term of the alleged contract was to be carried out. At your Lordships' bar leading councel for the respondents (agreeing in substance with the trial judge) argued that there was a simple contract of sale and purchase subject only to the condition precedent, that the balance of the purchase price could be had on reasonable hire-purchase terms. On the other hand junior counsel contended for a contact which was not a contract of sale and purchase at all, but a contract; the obligations under which he stated in elaborate detail, the whole being suject to a condition subsequent defined in negative form by reference to the concluding sentence of the letter of December 8; 1937. The existence of this fivefolf choice is embarrassing but eloquent. An alleged contract which appleals for its meaning to so many skilled minds in so many different ways, is un- doubtedly open to suspicion. For myself I feel no doubt that no contract between the parties existed al all; not- withstanding that they may have thought otherwise. The oral evidence establishis that the only acquisition by the respondents which was contemplated by the parties, was an acquisition by some form of hire-purchase, which would enable-the respondents to spread their payment of 168l. over a period of time. This could be brought about in various ways, and by documents containing a multiplicity of different terms In my opinion the concluding sentence of the letter of December 8, 1937, was not a condition precedent to any contract. It is merely a recording in writing of what had been the common intention of the parties in thcir discussions and negotiations with a stipulation, apparently for the first time, for a period of two years. But, in view of the numerous forms of hire- purchase transactions, and the multiplicity of terms and details which they involve, the respondents are faced with what appears to me to be a fatal alternative, namely, either (1.) this term of the alleged contract is quite uncertain as to its meaning, and prevents the existence of an enforceable contract, or (2.) the term leaves essential contractual provisions for further negotiation between the parties, with the same result. Accordingly, in my opinion the action for damages for breach of an alleged contract should have been dismissed, and this appeal should succeed. LORD WRIGHT. My Lords, the decision of this appeal depends on the answer to the question whether there was a- concluded contract between the appellants and respondents The respondents were plaintiffs in the action and claimed damages from the appellants for breach of contract. The appellants, who had raised other objections, limited their defence in this House to the one issue, "contract or no " contract " Tucker J., the trial judge, and the Lords Justices in the Court of Appeal have decided against the appellants, but for reasons which present an embarrassing diversity. In November, 1937, the respondents were desirous of acquiring a new motor-van for their business of house furnishers. As a result of interviews between their partners and Mr. Cook, general sales manager of the appellants, the appellants on November 24, 1937, sent to the respondents a quotation of 268l. for a Commer 15-cwt. chassis complete as per manufacturer's specification fitted with sspecial Scammell body constructed in the appellants, shops. Against the 268l. they were prepared to allow the respondents 100l. for their 1935 2-ton Bedford Luton van. A specification of the body was enclosed. At a conversation between Mr. Cook and "on hire-purchase terms that we approve temns of agreement "before supply." The next development was an inspection of the Bedford van by the appellants, which resulted in an unfavourable report on its condition and also a report that it was a 1934 vehiWe and not a 1935 vehicle. The appellants then wrote on February 14, 1938, that as the vehicle did not fulfil the contract conditions the respondents had better dispose of it locally. They added, "We assume that the hire- "purchase company will require a minimum of 25 per cent. " deposit, which would call for 67l." The respondents' solici- tors wrote denying that the complaints alleged against the van were justified and in their turn charged the appellants with default in not delivering the Commer van in time. They also threatened proceedings. The appellants replied reitera- ting their objections and added that if the respondents would deliver a 1935 Bedford van in a approved condition they would accept it. Otherwise they asked that the respondents would complete the transaction, take delivery of the new machine, and pay the sum of 268l. for it. They added that hire-purchase acquisition by some form of hire-purchase, which would enable the respondents to spread their payment of 168l. over a period of time. This could be brought about in various ways, and by documents containing a multiplicity of different terms. In my opinion the concluding sentence of the letter of December 8, 1937, was not a condition precedent to any contract. It is merely a recording in writing of what had been the common intention of the parties in thcir discussions and negotiations, with a stipulation, apparently for the first time, for a period of two years. But, in view of the numerous forms of hire- purchase transactions, and the multiplicity of terms and details which they involve, the respondents are faced with what appears to me to be a fatal alternative, namely, either (1.) this term of the alleged contract is quite uncertain as to its meaning, and prevents the existence of an enforceable contract, or (2.) the term leaves essential contractual provisions for further negotiation between the parties, with the same result. Accordingly, in my opinion the action for damages for breach of an alleged contmct should have been dismissed, and this appeal should succeed. LORD WRIGHT. My Lords, the decision of this appeal depends on the answer to the question whether there was a concluded contract between the appellants and respondents. The respondents were plaintiffs in the action and claimed damages from the appellants for breach of contract. The appellants, who had raised other objections, limited their defence in this House to the one issue, "contract or no " contract." Tucker J., the trial judge, and the Lords Justices in the Court of Appeal have decided against the appellants, but for reasons which present an embarrasing diversity. In November, 1937, the respondents were desirous of acquiring a new motor-van for their business of house furnishers. As a result of interviews between their partners and Mr. Cook, general sales manager of the appellants, the appellants on November 24, 1937, sent to the respondents a quotation of 268l. for a Commer 15-cwt: chassis complete as per manufacturer's specification fitted with special Scammell body constructed in the appellants' shops. Against the 268l. they were prepared to allow the respondents 100l. for their 1935 2-ton Bedford Luton van. A specification of the body was enclosed. At a conversation between Mr. Cook and Mr. H. C. Ouston, the latter placed the order with the appel- lants. This was confirmed by letter of December 7, 1937, which stated that the appellants could deliver the van before February, 1938, and asked to have the respondents' official order. On December 8, 1937, the respondents replied in the following terms : " We beg to acknowledge receipt of your "acceptance of our order for one Commer 15-cwt. chassis "complete with body as per your specification sent us on "November 25, Number 5263. This order is given on the " understanding that the balance of purchase price can be had "on hire purchase terms over a period of two years." At the oral conversations the respondents had clearly insisted that a hire-purchase agreement was essential. No terms, however, of such an agreement had been settled, nor indeed had it been discussed with whom the agreement would be made. Mr. H. C. Ouston, when asked in cross-examination " The hire-purchase agreement, of course, you did not expect, " I suppose, to be with Messr. Scammells, did you ?" replied, " I knew very well it would not have been. To the best of " my knowledge, anyhow, I thought it would be, as it turned " out to be, with United Dominions." Mr. J. G. Ouston said in evidence that he always told Mr. Cook quite definitely that they wanted to purchase on hire-purchase terms and that there never was any question of an out-and-out purchase. The appellants were obviously content that the deal should be on a hire-purchase basis, and proceeded with the completion of the van. On January 27, 1938, they wrote to the respon- dents that they had received- advice from the United Dominions. Trust Co., Ld., of their acceptance of hire-purchase in connection with the vehicle and would forward the documents in due course. On February 10, 1938, they reported that the van would be ready for collection in a few days, " subject to mutual acceptance of the hire-purchase agreement." They added, " We make it a condition of the supply of vehicles terms could no doubt be arranged to suit the convenience of the respondents, but that, of course, did not affect the business. On February 26, 1938, the appellants wrote to the respondents in the following terms : " In order to assist you in placing with the hire-purchase company your new Commer lorry which we " have ready to your order, we are attaching hereto a list "showing the complete cost of this vehicle." This, with extras, came to 298l. 6s. 2d. The correspondence proceeded until on May 18, 1938, the respondents issued their writ against the appellants claiming damages for breach of contract to supply a Commer 15-cwt. chassis complete with body and accept a 2-ton Bedford Luton van in part exchange therefor. This was repeated in the statement of claim which added that the price was 268l. The defence denied that there was any contract, by para. 2 pleaded that by the express terms of the letter of December 8, 1937, the alleged agreement was subject to a condition as to hire-purchase terms as there in set out and claimed that "Accordingly unless and until a hire-purchase "agreement in terms mutually approved by the plaintiffs and "the defendants was effected neither party was bound. No "such hire-purchase agreement was ever effected." It was also pleaded that the said condition was too vague to be capable of any effect in law, and that therefore the agreement was void for uncertainty. The defence further relied on s. 4 of the Sale of Goods Act, 1893, and set up that the complaint in regard to the condition and age of the Bedford van constituted breaches of condition excusing the appellants from performance. These latter defences were abandoned before the learned judge and need not be further considered. There was also a counterclaim not now material. At the trial Tucker J. found that the appellants' letter of February 14, 1938, was a complete repudiation of ay contract, and awarded damages in favour of the respondents against the appellants for breach of contract, having decided against their contention that there was no contract. He said that Mr. Beyfus had argued on behalf of the respondents that the contract was that the respondents should provide 168l. for the balance of the price, and that it was immaterial to the appellants where the respondents got the money from and what arrangements they made with the finance company. He further stated that Mr. Beyfus had also argued that the stipulation as to hire-purchase was merely a condition precedent to the contract becoming an effective contract. The learned judge held that Mr. Beyfus was right in his argument, by which I think he meant the second of these arguments, and held that the appellants by wrongly repudiating the contract had relieved the respondents from showing that the condition precedent had taken effec or that the purchase price on hire- purchase terms over a period of years had, in fact, been obtained or could have been obtained. He held that s: 4 of the Sale of Goods act had been complied with. In the Court of Appeal Slesser L.J. affirmed the judgment. The ground on which he held that there was a concluded agreement was that though there were many methods of hire- purchase finance that might be adopted, what was meant was in his opinion that the purchasers must in a reasonable time, in reasonable way, satisfying the words "hire purchase "agreement," produce some method whereby they could satisfy their undertaking by one way or another through a hire-purchase agreement to pay the sellers. The particular conditions under which the hire-purchase agreement was to be made were, he said, to be settled in conjunction with a third party. Like Tucker J. he placed the obligation to procure the hire-purchase agreement on the respondents but held that the repudiation by the appellants relieved the respondents from showing fulfilment of the condition. MacKinnon L.J. on the other hand placed the obligation as regards the hire-purchase argument on the appellants. In his opinion the parties knew perfectly well the sort of agreement with the finance company that both contemplated. "It is "quite true," he said, "that the form of agreement might have "been in one or other of two or three forms. The essential " stipulation implied was that it should be in a reasonable "form. Either one of two variable forms, if in a reasonable "form, would have sufficed for the satisfaction of the defend- ants' obligation." He held that it was not a contract for the sale of goods but a contract to procure the finance company topurchase for the appellants a car and let it on hire-purchase terms to the respondents. He found among the papers the draft of an agreement that he regarded as carrying out the transaction. It was, however, not of that type at all. The appellants were, according to that draft, to be the letters and the respondents the hirers. The United Dominions Trust Co., Ld., were to finance the transaction by discounting 24 promissory notes made by the respondents payable to the appellants and by them to be endorsed to the Trust Company fo- a total sum of 194l., representing the balance of the purchase price of 168l., with bank charges added. The draft hiring agreement itself contained eleven clauses, dealing with the hirers' obligation to repair, to insure, and giving the letters a right of retaking the van in the event of the hirers' default, and finally giving the hirer when all payments were discharged and terms fulfilled the option to purchase the van for one shilling. The draft agreement, to which the appellants, respondents and the Trust Company were to be parties, was never signed. It was not in evidence and, with great respect, I do not think that the Lord justice was entitled to refer to it. But I have thought it necessary to look at it in order to understand the opinion of the Lord justice. If such an agree- ment was necessary to complete the bargain involved in the letter of December 8, 1937, it clearly in my opinion could not have been arrived at until the parties had settled many doubtful points on which they might have differed, and as to which the court would not be able or entitled to say what was reasonable as between them. Goddard L.J. seems to agree with MacKinnon L.J. that it was for the appellants to procure the agreement with the finance company but he agreed only in that respect. They were, it seems, in his opinion, to submit to the respondents a hire-purchase agreement which gave the respondents two years' credit for the 168l. "It seems to me," he said, "that it is a "matter of entire indifference to the plaintiff whether or not "the defendants procured a finance company to buy direct " from them and let to the plaintiff or whether the defendants " procured a finance company to discount bills given under a "the defendants could choose for themselves. But the "plaintiffs would have to take the vehicle, and have to enter "into the agreement, provided an agreement was submitted "to them which gave them two years' credit for the 168l." As to matters like rate of interest and bank charges, terms of hiring and other essentials affecting the respondent's obligations and rights, the respondents, if I understand the view of the Lord Justice, would have no say at all. To complete a statement of the variant readings submitted for your Lordships to choose the one which may seem to represent the true meaning of the parties, it is necessary very briefly to summarize the contentions of Mr. Beyfus and his junior, Mr. Raeburn, before this House. The former put his contentions in the alternative. First he argued that the phrase in the letter of December 8, 1937, meant that the bargain was subject to a condition precedent that a certain state of affairs for the benefit of the respondents should exist between the date of the contract and the date of delivery of the vehicle, namely, the availability of a fund on hire-purchase terms, and that the appellants having repudiated the contract, the respondents were absolved from proving that the condition had been fulfilled. He meant, I think, by the condition precedent a stipulation in the contract, not an extrinsic condition without the fulfilment of which there could be no contract. His alternative submission was based on the view that "can" was equivalent to "shall." On this alternative he read the term as meaning that the appellants were either personally to enter into a hire-purchase agreement or procure another person to enter into a hire-purchase agreement over a period of two years, containing reasonable terms having regard to the usual practice of hire-purchase finance. The personality of the hirer, he said, was left to the option of the appellants. He further submitted that if the courts could not give a defined meaning to the condition, they should disregard it. Mr. Raeburm argued that the agreement was defeasible if the respondents could not obtain suitable financial assistance on hire-purchase terms, subject, however, to this, that the appellants could compel the respondents to take delivery if they could show the availability of hire-purchase finance. Thus, he contended, the agreement was binding unless it was shown that reasonable businesslike hire-purchase facilities were not available. All that hire-purchase here meant, he contended, was a system under which the vehicle was hired with an option to purchase. Agreement between the parties as to terms was immaterial. Such are the conflicting views which are placed before your Lordships as requiring a decision in favour of the respondant But in my opinion the correct view is that put forward by Mr. Miller on behalf of the appellants, namely, that there never was a concluded contract between the parties. It is true that when the appellants broke off the affair they gave reasons for doing so which they could not justify. But when they were sued for breach of contract they were entitled to resist the claim on any good ground that was available, regardless of reasons which they had previously given. As Lord Summer pointed out in British & Benningtons, Ld. v. N. W. Cachar (1), if a party repudiated a contract giving mo reaaona at all, all reasons and all defences in the action, partial or complete, would be open to him. Equally would this be so, I think if he gave reasons which he could not substantiate. If there never was a contract, they could not be made liable for breach of contract. There are in my opinion two grounds on which the court ought to hold that there was never a contract. The first is that the language used was so obscure and so incapable of any definite or precise meaning that thc court is unable to attribute to the parties any particular contractual intention. The object of the court is to do justice between the parties, and the court will do its beat, if satisfied that there was an ascertainable ad determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the twst of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choicc but to say that there is no contract. Such a position is not often found. But I think that it is found in this case. My reason for so thinking is not only based on the actual vagueness and unintelligibility of the words used, but is confirmed by the startling diversity of explanations, tendered by those who think there was a bargain, of what the bargain was. I do not think it would be right to hold the appellants to any particular version. It was all left too vague. There are many cases in the books of what are called illusory contracts, that is, where the parties may have thought they were making a contract but failed to arrive at a definite bargain. It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms (1) [1923] A. C. 48, 71. must be so definite, or capable of being made definite without further agreement of the parties, that the promises and perfomances to be rendered by each party are reasonablY certain. In my opinion that requirement was not satisfied in this case. But I think the other reason, which is that the parties never an intention nor even in appearance reached an agreement, is a still sounder reason against enforcing the claim. In truth, in my opinion, their agreement was inchoate and never got beyond negotiations. They did, indeed, accept the position that there should be some form of hire-purchase agreement, but they never went on to complete their agreement by settling between them what the terms of the hire-purchase agreement were to be. The furthest point they reached was an under- standing or agreement to agree upon hire-purchase terms. But as Lord Dunedin said in May & Butcher v. The King (1), reported in a note to Foley v. Classique Coaches, Ld. (2), " To be "a good contract there must be a concluded bargain and "a concluded contract is one which settles everything " that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it "may leave something which has still to be determined but "then that determination must be a determination which does "not depend upon the agreement between the parties." MacKinnon L.J. thought that in this case the agreement of the parties was complete and nothing was left for them to agree. Whatever was lacking in their agreement could and should, he thought, be supplied by the court by invoking the standard of reasonableness, on the principles laid down by this House in Hillag & Co. v. Arcos, a decision which has not found a place in the Law Reports, even in a Note, but is reported in 147 L. T. 503, and in 36 Com. Cas. 353 and 38 Com. Cas. 23. The Lord Justice's view, as I have already indicated, was, if I have understood correctly, that there was a contract for a hire-purchase agreement and that no further agreement of the parties was necessary because the court could determine For the parties what was a reasonable hire-purchase agreement (1) [1934] 2 K. B. 17. 21n. (2) Ibid. 1. and thus the contract would be complete. I am unable to concur in this conclusion. In the first place the appellants at least in their letter of February 10, 1938, expressly stated that the transaction was subject to mutual acceptance of the hire-purchase agreement. This was not demurred to by the respondents. The letter was written before any difficulty had arisen about the condition or description of the Bedford van. It seems to me that this attitude was sensible both from the point of view of business and of law. It is here necessary to remember what a hire-purchase agreement is. It is not a contract of sale, but of bailment. The owner of the chattel lets it out on hire on a periodic rent on the terms that on completion of the agreed number of payments, and on due compliance with the various terms of the agreement, the hirer is to have the option to buy the chattel on payment of one shilling or some nominal sum. The condition that the hirer is not to become owner automatically on completion of the agreed payments but merely has an option to purchase was adopted to avoid difficulties under the Factors Act or the Bills of Sale Act, as explained by this House in Helby v. Matthews (1), and McEntire v. Crossley Brothers, Ld. (2). While the bailment continues the property remains in the letter. Such a transaction, though not a contract of sale, is used in practice to carry out a sale transaction, with the advantage to the buyer of credit facilities. Though the property in the chattel does not pass while the agreement is current, the hirer gets the use of it. What would be the price if it were a con- tract of sale has to be increased by whatever sum is necessary for interest and bank charges until the periodic instalments have been discharged. Terms must accordingly be arranged in respect of the period of the bailment as to user, repairs, insurance, rights of retaking possession on the hirer's default and various other matters. A hire-purchase agreement is therefore in practice a complex arangement. Thus when in the letter of December 8, 1937, the condition of hire-purchase was introduced into what had seemed on the letters to be proceeding as a contract of sale, there was a complete change (1) [1895] A. C. 471. (2) [1895] A. C. 457. in the character of the transaction and a complex arrangement had necessarily to be substituted for a simple agreement to sell. It was not even clear who were to be parties to the hire- purchase agreement or what their respective roles were to be. The respondents it is clear were necessary parties. The appellants also were necessary parties because it was their chattel which was being dealt with. The finance company was also a necessary party. But there were at least two possible ways of carrying out the deal. The hire-purchase agreement might be in such terms that the appellants were the letters and the respondents the hirers, and the purchase price was to be discharged by periodic instalments in the form of negotiable instruments, payable to the appellants, thus enabling the appellants to discount the bills with the finance company, who on the security of the bills drawn by the respondents and endorsed by the appellants, would pay the appellants the purchase price at once, keeping as their eventual profit the extra amount which was added to the price for interest and bank charges. Such an arrangement must obviously involve the making of a special tripartite agreement. Another possible method would be for the appellants to agree with the respondents to sell the van to the finance company on the stipulation that the latter should agree to let the van to the respondents under a hire-purchase agreement. Clearly in that case also a special tripartite agreement would be necessary. There was, perhaps, a third possible mode under which the appellants sold the van for cash (at least as transferred the van to the finance company on a hire-purchase agreement in consideration of the company advancing the price. Even in such a case the appellants would, I think, in practice be a necessary party because the finance company would require the undertaking of the appellants to transfer the van direct to them and the respondents' concurrence in that undertaking. Otherwise the finance company would be paying cash without at once obtaining their security in the form of the van. Thus a tripartite agreement would be necessary. But I need not consider that case because it was clearly not contemplated by the parties. The corres- pondence shows that the terms of the hire-purchase agreement were to be matters of joint concern to the three parties who were to agree upon them. What is clear is that while a hire- purchase agreement was being demanded, its exact form and its exact terms were left for future agreement. The true view may be that the letter of December 8, 1937, amounts to nothing more than an announcement that the deal is only to proceed upon a hire-purchase basis, the parties anticipating that the terms of such an agreement would be settled between them in due course. What I have said will sufficiently explain why I do not feel able to agree with MacKinnon L.J. that there was a complete and enforceable agreement concluded between the parties. He cited Hillas & Co. v. Arcos (1) in support of his view, but that was a quite different case. There was in that case a contract for the supply of Russian timber in 1930, which also gave an option to the buyers to purchase a further supply of 100,000 standards in the ensuing year. The option clause was extremely bare and meagre, but it was held as a matter of construction that the 100,000 standards were to be soft wood goods of fair specification for delivery during 1931. It was decided by this House, reversing the judgment of the Court of Appeal and restoring the judgment of MacKinnon J., as he then was, that no further agreement was necessary or contemplated. The court could not, indeed, make a contract for the parties or go outside the words they had used except in so far as there were appropriate implications of law, as, for instance, the implication of what was just and reasonable where the contractual intention was clear but the contract was silent in some detail which the court could thus fill in. Thus the condition of "fair specification over the season " 1931 enabled the court with the help of expert evidence to idetify what a fair and reasonable specification and a fair and reasonable distribution by way of instalment deliveries of the contract quantity. Certain other matters were similarly dealt with. (1) 147 L.T. 503; 36 Com. Cas. 353; 38 Com. Cas. 23. In the same way the court has in proper circumstances found itself able to determine what is a reasonable price when the price is not specified in the contract as was done in Foley' s csse (1), rightly, as I think, distinguishing May & Butcher's case (2), or to determine what is a reasonable time, or what are reasonable instalments. Many other examples of this principle might be given. And in addition the court may import terms on the proof of custom or by implication. But it is in my opinion a very different matter to make an entire contract for the parties as the court would be doing if the course suggested by MacKinnon L.J. was adopted. That is simply making a contract for the parties. The analogy he cited of a c.i.f. contract is in my opinion no true analogy. These initial letters have a definite and complete meaning under the law merchant, just as much as the meaning of a bill of exchange, or the general effect of a marine insurance contract, is deter- mined by the law merchant. The law has not defined and cannot of itself define what are the normal and reasonable terms of a hire-purchase agreement. Though the general character of such an agreement is familiar, it is necessary for the parties in each case to agree upon the particular terms. It may, perhaps, be that this might be done in particular circumstances by general words of reference. For instance, if it were stipulated that there should be "a usual " hire- purchase agreement, the court might be able if supplied with appropriate evidence to define what are the terms of such an agreement. But there was nothing of the sort in this case. I think this appeal should be allowed because I am of opinion upon either of the main grounds which I have explained, or on both of them, that there was no concluded contract between the appellants and respondents. Appeal allowed. Solicitors for appellants: A. P. Browne & Co. Solicitors for respondents: George L. Barnett & Co. (1) [1934] 2 K. B. 1. (2) Ibid. 17n. BISHOP & BAXTER, LD. v. ANGLO-EASTERN TRADING & INDUSTRIAL COMPANY, LD. Contract--Consensus ad idem--Acceptance "subject to war clause." Sellers of goods accepted an order from intending buyers " subject to war clause." In fact, war clauses took many forms:-- Held, that as there wes no evidence that the parties had any particular form of clause in mind there was no oonsensus ad idem, and therefore no completed contract. Love & Stewart, Ld. v. S. Instone, Ld. (1917) 33 T. L. R. 475, followed. APPEAL from Atkinson J. By letter, dated May 27, 1942, the defendants ordered fnom the plaintiffs 20,000 woollen cardigans at 61s. 6d. per dozen, minimum delivery at the rate of 2,500 per month, stating that the order had been accepted by the Board of Trade and that the defendants had applied for the free quota coupons and export licence which they hoped to receive within a fortnight. To this letter the plaintiff replied by letter dated June 2, as follows: "We thank you for your order dated May 27. . . . "which we are accepting subject to the necessary licences, etc., "being in order and subject to government restrctions as to "sales and war clause." The plaintiffs delivered 3,000 cardigans, for 1,872 of which the price was paid, but failed to deliver the remaining 17,000. In an action by the plaintiffs for the price of the remaining 1,128 cardigans delivered the defendants counterclaimed for damages for breach of contact, in answer to which the plaintiffs contended that the words "subject to war clause" did not refer to any specific war clause and the counter-offer made by them in their letter of June 2 was incapable of acceptance and consequently the two letters did not constitute a contract. Atkinson J. gave judgment for the plaintiffs on the claim and for the defendants on the counter-claim. The plaintiffs appealed. Quass for the plaintifs. The two letters of May 27 and June 2 did not constitute a contract because of the qualification contained in the words "subject to war clause." There was never a consensus ad idem in the minds of the parties. The evidence showed that there was no such thing as a recognized or standard war clause, that there were many kinds of war clause in use, and that no particular war clause was in the minds of the parties. The case is covered by Love & Stewart, Ld. v. S. Ingstone & Co., Ld. (1), the words in the alleged contract in that case being " subject to strike and lock-out clauses", and the House of Lords held that, there being a variety of strike clauses, the parties had not bound themselves to anything certain. Devlin for the defendants. The court is considering a commercial contract under which deliveries were made. It is plain that both parties considered that they had made an enforceable contract, and the court will struggle to give a mean- ing to the contract ut magis valeat quam pereat. The words " subject to war clause" mean " subject to war," that is " subject to causes beyond our control in the way of war." They are analogous to " subject to the restraint of princes," or " subject to foorce majeure." If they are so vague as to be unintelligible, the words should be ignored. Cur. adv. vult. Oct. 25. The judgment of the court (Scott, MacKinnon and Goddard L.JJ.) was read by Scott L.J., who stated the facts and continued: Mr. Quass in a clear and concise argument submitted to us that the learned judge had mis- construed the counter-offer contained in the plaintiffs' letter of June 2. The error he complained of was that the learned judge had misconstrued the plaintiffs' stipulation that their acceptancc of the defendants' order should be "subject," not only to " the necessary licences, etc., being in order and " subject to government restrictions as to sales," but also to " war clause." The two first stipulations might, he conceded, be sufficiently clear to be susceptible of tacit acceptance by conduct, but the added words "and war clause," he contended, made the plaintiffs' counter-offer incapable of acceptance and required an express consensus on the content of some specific war clause, since that was what the plaintiffs had asked for in their counter-offer. We agree with Mr. Quass's argument. Mr. Devlin was alive to its force and was driven into submitting that the word "clause" should be disregarded as mere surplusage and that the plaintiffs' thirf stipulation should be construed as if it had read "and war conditions" or "war " contingences." We can see no justification for disregarding (1) (1917) 33 T. L. R. 475. cardigans necessarily imported sales and every sales imports an agreement of sale either express or to be implied from conduct, but no agreement could be inferred in the terms of the plaintiffs' counter-offer to sell "subject to war clause," since ex hypothesi the very words precluded the possibility of consensus ad idem until the parties had discussed and agreed on some particular clause. The parties may, both of them, after June 2 have erroneously supposed that a contract in writing was already in existence, but if they did, it was because they did not realize that the plaintiffs' counter-offer required a further consensual step before the law could recognize the formation of a completed contract, and their bad law could not make a contract. Mr. Devlin was fully alive to this difficulty, and saw that there was no way out of it but to contend, first, that the words "and war clause" in the plaintiffs' letter of June 2 only had the effect of introducing an exception of war, and, secondly, that such a vague exception would not give the plaintiffs any exemption from liability on the facts of the case. This was, we think, the view taken by the learned judge, and it may well be that the conclusion would, if the word " clause " had been omitted from the letter, have been unassailable. The word, however, was there. It was quite unambiguous, and it introduced as unambiguous a condition as would have been introduced by the phrase " strike clause," but the condition was equally undefined and equally demanded consensual definition to make it an effective term of the agreement between the parties. Viewed in this last aspect the question of interpretation on which the appeal turns, is, in our opinion, covered by the decision of the House of Lords in Love & Stewart, Ld. v. S. Instone, Ld. (1), where letters, otherwise constituting a complete and enforceable contract of sale of coal, bore a printed endorsement " subject to strike and lock-out clauses." The House of Lords there held that, as such clauses differed in their content, there could be no consensus ad idem, and, therefore, no completed contract resulting, until the parties had come to some further agreement on the content of some particular clause. It is not necessary to cite that case at length, but the reasoning of their Lordships is, in our opinion, directly apposite to the present case. The only other case to which it is necessary to refer is that of Scammell v. Ouston (2), and there the House of Lords held that the addition to a written contract, (1) 33 T.L.R. 475. (2) (1941) A.C. 251. which without the addition would have been a contract of sale of a motor-lorry, of a provision for finance by means of a hire-purchase agreement, was fatal to the existence of any enforceable contract at all. Their grounds were both that the condition was too vague to carry contractual force and that " the parties never in intention nor even in appearancc reach~ " an agreement " on it ; per Lord Wright (1). Both decisions are relevant and both are binding on this court. In deference to Mr. Devlin's argumuent we would add one further observation. Abbreviated references in a commercial instrument are, in spite of brevity, often self-explanatory or susceptible of definite application in the light of the circum- stances, as, for instance, where the reference is to a term, clause, or document of a well-known import like c.i.f. or which prevails in common use in a particular place of performance as may be indicated by the addition of the epithet " usual " : see Shamrock .S.S. Co. v. Storey (2), where " usual colliery " guarantee " was referred to in a charter-party in order to define loading obligations. But in the case before us the phrase in controversy gave no clue of any sort to indicate what par- ticular war contingencies affecting performance were intended to apply. The stipulation necessarily remaine'd wholly vague till the parties could agree on some particular war clause; and no implication from the plaintiffs' deliveries or the defendants' payment can take the place of such a furhter agreement in fact. The appeal must be allowed with costs here and below. Solicitors for plaintiffs : Dehn & Lauderdale. Solicitors for defendants : Abbot, Anderson, Braithwaite & Whittaker. W. L. L. B. (1) [1941] A.C. 269. (2) (1899) 5 Com.Cas.21. DENNANT v. SKINNER AND COLLOM. Sale of goods--Sale at auction--Passing of property--Misrepresentations by purchaser as to his identity--Sale of Goods Act, 1893 (56 & 57 Vict., c. 71), ss. 18, 28, 39. At an auction sale motor vehicles were sold to a man who was the highest bidder. During the sale, the purchaser made mis- representations as to his identity to the auctioneer. Believing these misrepresentations the auctioneer allowed the purchaser to take delivery of the vehicles and accopted in payment a cheque accompanied by the purchaser's certificate to the effect that the property in the vehicles would not pass to him until his cheque had been honoured. The purchaser sold one of the motor vehicles to the third party who in turn sold it to the defendant. The purchaser's cheque wes dishonoured. The auctioneer brought this action to recover from the defendant the motor vehicle or its value. Held (1.) That this was not a case of larceny by a trick so as to prevent the property from passing to the purchaser; (2.) That the property so passed on the fall of the hammer and there was no effective condition that it should not so pass until the cheque had been honoured; (3.) That the property having passed on the fall of the hammer, it was not possible for the purchaser, merely by signing such a certificate, to divest himself of the property and to revest it in the vendor. The plaintiff, George Edward Kenneth Dennant, carried on business as the South London Motor Auctions, he being a certificated auctioneer. On November 8, 1946, he held an auction sale at which there were some thirty-five motor vehicles for sale and some one hundred and fifty people present as prospective buyers. Amongst the vehicles dealt with at that sale was a Standard Saloon motor-car and that car was knocked down by the plain- tiff to a man calling himself George Albert King who had bid 345l. for it and was the highest bidder. After the sale the plaintiff was induced by certain misrepresentations made to him by King to deliver the car to him in exchange for a cheque for 1,190l. which represented the price of the car in question together with the price of five other vehicles which had also been knocked down to King by the plaintiff at that plaintiff obtained his signature to a certificate in the following [Reported by K. B. CAMPBELL, Esq., Barrister-at-Law.] terms: "I certify that my cheque No. 11B 287164 value 1,190l. "will be met on presentation to my Bank and furthermore '- I agree that the owmership of the vehicles will not pass to v- "me until such time as the proceeds of my cheque have been "credited to South London Motor Auctions' account at "Lloyds Bank, Ld." The cheque was dishonoured on presentation and King was later convicted of obtaining the six motor vehicles from the plaintiff by false pretences with intent to defraud. Subse- quently the plaintiff discovered that the Standard motor car was in the possession of the defendant, Leslie Cecil Skinner, and the plaintiff, by his solicitor, demanded delivery up to him of the car. The defendant having refused, this action was started for the return of the car or its value. The defendant, upon whose good faith in the matter there was no reflection, had in fact bought the car from one Collom, and upon that purchase there was admittedly an implied warranty of good title by virtue of the Sale of Goods Act, 1893. The defendant accordingly brought in Collom as a third party. W. G. Wingate and D. F. Brundrit for the plaintiff. F. Mattar and P. Boydell for the defendant. H. G. Garland and F. M. Landau for the third party. The arguments sufficiently appear from the judgment. HALLETT J. Mr. Dennant having knocked this car down to the man King and subsequently delivered the car to King and allowed King to take it away, the onus is clearly upon him to establish to the satisfaction of the court that, notwith- standing what he did on November 8, 1946, he was still entitled to possession of this car at the time when he demanded such possession from the defendant, and he seeks to discharge that burden in two, or possibly three, ways. In the first place he says that the transaction which led to King having possession of the car amounted to larceny by a trick. King has been convicted of obtaining that car and five others by false pre- tences but, of course, the view that was taken in the criminal proceedings is not in any way binding upon me or even helpful to me for various reasons. King ultimately pleaded guilty, and in any case, as is pointed out in Archbold's Criminal Pleading, Evidence and Practice, any difficulty in distinguish- ing larceny by a trick on the one hand from obtaining by false pretences on the other, has now, for the purpose of criminal cases, become of little importsnce, because of the provision of s. 44 of the Larceny Act, 1916. In this case, however, the distinction is of vital importance and in some cases no doubt the distinction is difficult to draw. At P. 503 of Archbold it is suggested that the most intelligible distinction is as follows : " In larceny the owner of the thing stolen has no intention to part with his property therein to " the person taking it, although he may intend to part with " the possession ; in false pretences the owner does intend " to part with his property in the money or chattel, but it is obtained from him by Fraud." Certain other tests have, however, becn suggested. For instance in Lake v. Simmons (1), Lord Haldane in his speech cites the passage which was adopted by Fry J. in Smith v. Wheatcroft (2) and which reads as follows : -- Does error in " regard to the person with whom I contract destroy the consent " and annul the agreement ? I think that this question ought " to be decided by a distinction. Whenever the consideration " of the person with whom I am willing to contract enters as an " element into the contract which I am willing to make " error with regard to the person destroys my consent and " consequently anouls the contract . . . . On the contrary, " when the consideration of the person with whom I thought " I was contracting does not enter at sill into the contract, and " I should have been equally willing to make the contract with " any person whatever as with him with whom I thought I was " contracting, the contract ought to stand." Along the many passages I might select in this case, I select that one. There is really no dispute about the facts of this case. Apart from one witness from Kings' Motors of Oxford who, I hasten to emphasize, was no relation at all of George Albert King to whom I have previously referred, the only witness was the plaintiff, Mr. Dennant, who was a completely candid and frank witness and I want to say without the slightest hesitation that I accept every word he said as being absolutely true. There was no catalogue of this auction but certain printed terms or conditioms of sale are ssid to be exhibited in the auction room and I have been furnished with a copy of that document. I fed considerable doubt as to how far it is satisfactorily proved that those conditions of sale were brought to the notice of the bidders so as to render it right to incorporate (1) [1927] A. C. 487, 501. (2) (1878) 9 Ch. D. 223, 230. them in the contract of sale, but I do not propose to allow that doubt to influence me in my decision which proceeds upon other grounds. Whilst the sale was going on Mr. Dennant offered for sale a vehicle called a Commer van. The man who made the highest bid for the van was this man George Albert King. Mr. Dennant had never seen him before and did not know in the least who he was. He was simply a man there who had made the highest bid. "Then," said Mr. Dennant, " I sold " the van to him. When I knocked it down I asked his name." Now it is agreed by Mr. Brundrit and Mr. Wingate that upon a sale by auction a contract is completed on the fall of the hammer, and it is agreed also that prima facie the property in the lot knocked down then passes to the bidder. In so far as the printed conditions have any relevance at all, it is to be observed that cond. 3 provides that on the fall of the hammer the lot, with all errors of description, is to be at the risk and cost of the buyer. Up to that time Mr. Dennant had not inquired the name of the bidder. He had not concerned himself in any way with the identity of the bidder: he had knocked down that Commer van to that man who had bid whatever the top bid was, irrespective of the identity of that particular man. Then after he had knocked it down, as is usual at auctions, he asked the name of this man, and this man then said his name was King, and he was ffom Kings' Motors of Oxford, and in fact the son of the proprietor of that firm. Now Kings' Motors of Oxford are and were known to Mr. Den- nant as a well-known and highly reputable firm in the motor vehicle trade, and Mr. Dennant accepted the statements thus made by George Albert King. It may be convenient to say at once that they were untrue. Mr. King, the real head of that reputable firm, has been called before me, and it turns out that George Albert King has no connexion with the well- known firm and is not in fact Mr. King's son. After that Mr. Dennant knocked down five more vehicles to George Albert King, including the Standard motor car with which I am concerned, and when the sale was over King went to Mr. Dennant's office, again in the usual way, to arrange for payment and removal. Now at this time, subject to the second aspect of the matter which I shall discuss presently, the property in the Standard car to my mind had passed to King. The contract of sale had been made with King, and there seems to me to be no ground whatsoever upon which I could properly hold that the consideration of the person with whom Mr. Deimant was willing to contract entered as an element in the contract which Mr. Dennant was willing to make. At an auction sale, apart from any question of the reserve price, the lot is knocked down to the highest bidder, whoever he may be. When it comes to the question whether he shall br allowed to remove the lot without paying cash for it other questions arise, but as far as the contract is concerned, and the passing of the property in the object sold, the identity of the buyer does not usually enter into the question. I do not think it enters into the question amy more than it ordinarily does on the sale of an article in a retail shop. In normal times a shopkeeper is not usually concerned with the identity of the customer when deciding whether he is willing to sell his goods to him, although he may be concerned with that matter when deciding whether, having effected the sale, he should give the purchaser credit. When King went to Mr. Dennant's office, Mr. Dennant asked him how he meant to pay, and King replied that he would like to pay by cheque, to which Mr. Dennant rejoined that it was not his normal practice to accept cheques from people he did not kncw. King who appear to be in possession of trade plates, which would suggest he was in the business, and had some drivers there to drive away the cars, repeated that he was of Kings' of Oxford, was running the Portsmouth branch, and that he was the son of the proprietor, and he showed Mr. Dennant the counterfoils in his cheque book, according to which he had been paying away large amounts to other well- known auctioneers, whereupon Mr. Dennant believed those representations and accepted from King a cheque for 1,190l. Now I read two sentences from Mr. Dennant's evidence, which, as I regard them, seem to be crucial : " When I took the " cheque from King I believed him to be Kings' of Oxford; " if I had not so believed, I should not have accepted the was induced to sell the car to King in the belief that King was connected in the manner which he had described with this highly reputable firm. That seems to have been entirely immaterial from the point of view of selling the car. The Commer van had been sold before King's identity was mentioned at all, and the mention of his identity was only made in the ordinary way, as I interpret the evidence, for the purpose of Mr. Dennant completing the auctioneer's memorandum. The effect which the misrepresentation had upon Mr. Dennant's mind was to induce him to accept the cheque instead of requiring cash to be paid before the vehicle was delivered. The conditions again, if they are of any relevance, which I doubt, say that the entire purchase money is to be paid before the lots are removed on the day of the sale, and then conds. 10 and 11 deal with cheques being tendered in payment, it being stated that "Cheques tendered in payment will not be accepted "unless satisfactory references are given." When Mr. Dennant, persuaded by those lies, consented to take the cheque for 1,190l., he procured the signature by this man King to a form which is before me: "I certify that my cheque No. 11B "287164 value 1,190l. will be met on presentation to my Bank "and furthermore I agree that the ownership of the vehicles "will not pass to me until such time as the proceeds of my "cheque have been credited to South London Motor Auctions' "account at Lloyds Bank, Ld." I have now covered all I need to say about the facts, and I can express my judgment at once upon the first point, namely, whether this transaction by which this car passed into the possession of King amounted to larceny by a trick. To my mind the case of Phillips v. Brooks, Ld. (1) is in principle indistinguishable, and so far as I am aware, the correctness of that decision has never been judicially questioned. There have, of course, been many cases since then where questions as to the distinction between larceny by a trick and obtaining by false pretences have been considered, but my attention has not been called to any case which is as much in point as the case of Phillips v. Brooks, Ld. (1). I have said that the correctness of the decision of Phillips v. Brooks, Ld. (1) has not been judiciously questioned so far as I know. The case was mentioned in Lake v. Simmons (2), and in his speech at p. 501, immediately after the passage of Fry J. which I have already quoted, Lord Haldane deals with Phillips v. Brooks, Ld. (1) and I can see nothing there to suggest that Lord Haldane doubted the correctness of the earlier decision. Mr. Brundrit and Mr. Wingate, however, have drawn my attention to what is said in the well-known text- book, Anson on the Law of Contracts. In the seventeenth edition published in 1929 given to me in the first instance, at pp. 158 and 159, the learned authors of that edition, Sir John Miles and Professor Brierley, deal with Phillips v. Brooks, Ld. (1), and in a footnote say: "This case does not appear (1) (1919) 2 K.B. 243. (2) [1927] A.C. 487. " to be affected by the decision in Lake v. Simmons (1), for in that case when the jeweller handed the goods to the swindler he did so merely to enable her to show them to a supposed intending purchaser. He intended to make her his bailee, " and not to enter into a contract of sale with her." I respect- fully agree with that note. But in the nineteenth edition of the same work, published in 1945, where Professor Brierley is the sole editor, at p. 158 he appears to have taken a different view about Phillips v. Brooks, Ld. (2). I need not read what he says, but he clearly suggests that Phillips v. Brooks, Ld. (2) is a wrong decision, and that Lord Haldane in Lake v. Simmons (1) came to a right decision on the wrong grounds. Of course, I am not bound in any way by the opinion of the text-book writers, however eminent they may be, and, indeed, I prefer to decide this case not upon authority so much as upon principle. I think if one looks at some of the cases upon which the plaintiff here might seek to rely, the distinction between them and the present case is obvious. For instance, in Heap v. Motorists' Advisory Agency, Ld. (3), the plaintiff never gave any real consent to the fraudulent person having or passing the property in the motor car in question at all. The car was put into the possession of the fraudulent person and Lush J. had to consider, as I have to consider, the difference between larceny by a trick and obtaining goods by false pretences. At p. 583 I think my brother Lush came to the gist of the whole matter in three sentences: " It is said by counsel for the " defendants that it is a case of obtaining a car by false pre- " tences, and not by larceny by a trick. In order to make that " out he has to establish that the plaintiff intended to part with " the property in the car to North. If he can establish that " then he is right, but if he cannot he is wrong." The learned judge held on the facts of that case that the plaintiff never intended to part with the property in the car to North, but merely intended to let North have the custody of the car in order that he might drive it to Uxbridge, show it to the entirely imaginary person named Hargreaves, and if possible sell it to Hargreaves for 210l. There never was a Hargreaves. There was no question of passing the property, according to the intention of the plaintiff, to a person called Hargreaves who just did not exist, and to whom the car was going to be shown (1) [1927] A. C. 487. (3) [1923] 1 K. B. 577. (2) [1919] 2 K. B. 243. by the fraudulent person North. Such a case seems to me to be very easy to explain. There are two more cases I will mention in passing. They are Folkes v. King (1) and London Jewellers, Ld. v. Atten borough (2). To my mind, whilst those cases deal with other points which do not arise here, upon the essential points they seem to me to indicate where I should be if I relied solely on Phillips v. Brooks, Ld. (3). In London Jewllers, Ld. v. Attenborough (2) Scrutton L.j. refers to Phillips v. Brooks, Ld. (3), but without expressing any opinion about the decision and saying merely that the point as to what is the effect of the statement between the parties may have to be considered at some future time. In the present case I am of the opinion, upon the evidencc, that there wss no mistake as to the contracting parties at the time the contract of sale was made; in this sense, that there was no mistake affecting Mr. Dennant's assent to the sale and the passing of the property. Accordingly the plaintiff's case, as far as it depends on the contention that this was larceny by a trick, in my judgment fails. I come now to consider the second point on which the plaintiff relies, which I understand is this; that the property in the circumstances of this case did not pass until the price was paid by the cheque being in order or cash substituted for it. The circumstances in regard to that I have already stated, and it remains only to consider the law. In the first place, as I have said, I think that a contract of sale is concluded at an auction ssle on the fall of the hammer. The Sale of Goods Act, 1893, s. 18, r. 1, provides: "Where there is an un- "conditional contract for the sale of specific goods, in a "deliverable state, the property in the goods passes to the "buyer when the contract is made, ad it is immaterial whether "the time of payment or the time of delivery, or both, be "postponed." Accordingly, upon the fall of the hammer the property of this car passed to King unless that prima facie rule is excluded from applying because of a different intention appearing or because there was some condition in the contract which prevented the rule from applying. In my view, this was clearly an unconditional contract of sale, and I can see nothing whatever to make a different intention appear. The only evidence upon which it was ever suggested to exist was the printed conditions, but I can see nothing in those conditions (1) (1923) 1 K.B. 282. (3) (1919) 2 K.B. 243. (2) (1934) 2 K.B. 206, 217. to negative an intention that the property should pass on the fall of the hammer. I think the conditions are entirely consistent with such an intention. By the Sale of Goods Act, s. 28: "Unless otherwise agreed, delivery of the goods and pay- "ment of the price are concurrent conditions," and finally, by yet another section of the Act, namely, s. 39 (1.) (a), an unpaid seller of goods has a lien on the goods or right to retain them for the price while he is in possession of them, and he also has a right of re-sale as limited by the Act. Passing of the property and right to possession are two different things: here the property had passed upon the fall of the hammer, but still Mr. Dennant had a right to retain possession of the goods until payment was made. If, when he was ready to deliver the goods, payment was not made, he could have sued for the price, or he could have exercised powers of re-sale, and he could have secured himself by way of lien on the goods for the price, but once he chose, for reasons good, bad, or indifferent as a result of statements fraudulent or honest, to part with the possession of the vehicle by giving delivery of it, he then lost his seller's lien and no longer had a right to possession of the vehicle. In my view, therefore, the second contention for the plaintiff also fails. However, there was a third aspect of the matter and that arises out of the document which I have already read. Now the document in its terms contemplates that the ownership of the vehicle has not passed to the bidder, but, as I have already said, in my judgment it had passed upon the fall of the hammer, and if subsequently the bidder executed the document acknowledging that ownership of the vehicle would not pass to him, that could not have any effect on that had already taken place. Can it be said that this document and the transaction it records as regards payment had the effect of divesting the property from King and re-vesting it in Mr. Dennant, the seller? That is the only way in which Mr. Brundrit has been able to suggest it that the document assists the plaintiff. I have considered that aspect of the matter, but I do not think that such a view of the document is sound. In my view the propety has passed on the fall of the hammer; the right to possession had passed when Mr Dennant persuaded and misled by King's lies, parted with his seller's lien, and there was nothing left upon which Mr. Dennant could found a claim in detinue against some third person, in this case Mr. Skinner, who was thus in possession of the vehicle. The result seems to me to be that here the sufferer from the lies of King and from the reliance which Mr. Demnant un- fortunately placed on him must be Mr. Dennant himself and not the innocent parties who are represented by the defendant and the third party in this action. Accordingly there must be judgment for the defendant and the third party. Judgment for the defendant and for the third Party. Solicitors for the plaintiff : W. F. Hollands & Son. Solicitors for the defendant : Amery-Parkes & Co. Solicitors for the third party : Simon, Haynes, Barlas & Cassels. KOFI SUNKERSETTE OBU . . . APPELLANT - J. C.* A. STRAUSS & CO. LD. . . . . RESPONDENTS. Jan. 29. ON APPEAL FROM THE WEST AFRICAN COURT OF APPEAL. Principal and agent--Agency contract--Commission--Basis and rate left to discretion of principal--Claim for account and payment of commission--Court incompetent to grant relief claimed. By an agreement signed by the appellant, who was the agent in West Africa of the respondent company for the purchase and ship- ment of rubber to the company in London, it was provided, inter alia, that " the company has agreed to remunerate my services with " a monthly sum of fifty pounds "--subsequently reduced to 20l.-- " to cover my personal and travelling expenses. . . . A commission "is also to be paid to me by the company which I have agreed to " leave to the discretion of the company "- The respondents, after the termination of the appellant's employment, having instituted proceedings against him claiming money alleged to he due from him as their agent he entered a counterclaim for an account to be taken between them of all rubber shipped by him between specified dates and for commission on all the rubber purchased by him for the respondents. On appeal against the dismissal of his counterclaim :-- claim was beyond the competence of any court to grant. The court could not determine the basis and rate of commission. To do so would involve not only making a new agreement for the parties, but varying the existing agreement by transferring to the court the exercise of a discretion vested in the respondents. Way v. Latila, [1937] 3 All E. R. 759, considered. Judgment of the West African Court of Appeal affirmed. APPEAL (No. 49 of 1948) from a judgment of the West African Court of Appeal (Gold Coast Session) (December 13, 1947) which had affirmed a judgment of Smith, J., sitting as a Divisional Court at Kumasi (October 28, 1945). In 1942, after letters and cab;es between the respondents, A. Strauss & Co. Ld., and the appellant, Kofi Sunkersette Obu, the latter was engaged to collect and ship rubber on the respon- dents' behalf. On April 19, 1943, a formal agreement was signed by the appellant, cl. 1 of which provided that he agreed to serve the respondents in the capacity of agent in the business of pur- chasing, manufacturing and exporting rubber in and from the Gold Coast for the account and to the order of the respondents. * Present: LORD RADCLIFFE, LORD TUCKER, SIR JOHN BEAUMONT and SIR LIONEL LEACH. Clause 6 provided that " the company has agreed to remunerate " my services with a monthly sum of fifty pounds to cover my " personal and travelling expenses for the time being which I " have accepted. A commission is also to be paid to me by the " company which I have agreed to leave to the discretion of " the company ". Subsequently the sum of 50l. a month was reduced to 20l. a month. The employment of the appellant was terminated as from May 31, 1945. " In June, 1945, the respondents instituted the suit out of which this appeal arose, claiming, inter alia, 365l. 8s. 4d. as the balance due by the appellant to them in respect of moneys drawn by him for his personal account. In July, 1945, the appellant put in a counterclaim for an account to be taken between them of all rubber shipped by him to them from August, 1942, to January, 1945, inclusive, and for commision on all the rubber purchased by him for them. Smith, J., held that the respondents were entitled to recover the 3651. 8s. 4d. claimed on the personal account, and he dis- missed the appellant's counterclaim. That decision was affirmed by the West African Court of Appeal (Verity, C.J., Nigeria; M'Carthy, J., Gold Coast; Coussey, J., Gold Coast). The appellant now appealed. 1950. Nov. 27, 28. Dingle Root and T. 0. Kellock for the appellant. The issue arises entirely out of the appellant's two matters, first, whether he is entitled to an account of the rubber which was collected and shipped by him between August, 1942, and January, 1945, inclusive, and, secondly, whether he is entitled to a commission. If he is entitled to commission he must be entitled to an account to ascertain the amount of the commission. There are a number of reported case where the amount of the commission has not been set out in the contract, but left to be determined. There are two lines of cases: (a) those where it is left to the discretion of the principal to decide whether he should pay any commission at all ; (b) cases where quite clearly the principal is under an obligation to pay something, but where the amount is left open, and it has been held that the principal must pay a reasonable amount of commission. On ths documents this case falls within the second category. Although the amount of the commission was never specified, nevertheless the appellant is entitled to a reasonable sum. He was an agent, not a servant, of the respondents, but it makes little difference what his status was because the question whether he is entitled to an account really turns on whether on the construction of the documents he is entitled to receive a commission or some share of the profit, whatever that might be, over and above the amount which was paid to him, 50l. a month at first, and 20l. later. The principle is set out in Halsbury's Laws of England (2nd ed.), vol. 22, at p. 132, where it is said ". . . but when a contract of service, which leaves the question "of remuneration to the employer, is capable of being construed "as an agreement to pay a reasonable sum for the service in "question, the servant is entitled to something in the way of "payment". The court below has not applied its mind to that at all. It has been held in a number of cases that where provi- sion is made for commission, but the amount is not specified, a reasonable amount should be paid: Peacock v. Peocock (1); Taylor v. Brewer (2); Bryant v. Flight (3); Bird v. M'Gaheg (4); Roberts v. Smith (5); Loftus v. Roberts (6); Broome v. Speak (7) and Way v. Latilla (8). lt was said in the last-cited case that the services were not to be rendered gratuitously, and that is precisely the position here. For what is meant by "expenses", see Reg. v. Holy Trinity and St. Mary's, Hull, Governors and Guardians (9). Although the distinction is not easy to draw in some of the above-cited cases, there is a distinction between cases where something has to be paid, no matter what, and the cases where payment depends on the will of the employer. The strongest case against the appellant is Taylor v. Brewer (2). Loftus v. Roberts (6) was relied on in the appeal court below, but it is submitted that it is not really against him, and can be distinguished from the present case. Bryant v. Flight, (3) comes very near to the present case, and the facts in Broome v. Speak (7), which also supports the appellant here, are rather close to that of this case. Not until after the agreement of April 19, 1943--in 1944-- was it suggested to the appellant that the monthly sum which he was receiving was intended to cover his remuneration. It was quite clearly intended that he should receive some reward for his services over and above the amount which was paid for expenses. There is nothing in any documents which passed between the parties to show that the 50l. was intended to cover remuneration as well as expenses--all the documents point to the opposite conclusion. "Expenses " means just what it says, and it cannot have been the intention of the parties that the appellant should work from August, 1942, till the end of May, 1945, without receiving any reward whatsoever. He is entitled (1) (1809) 2 Camp. 44. (6) 18 T.L.R. 532. (2) (1813) 1 M.& S. 290. (7) [1903] 1 Ch. 586. (3) (1839) 5 M.& W. 114. (8) [1937] 3 All E.R. 759, 763. (4) (1849) 2 Car. & Kir. 707. (9) (1827) 7 B.& C. 611. (5) (1859) 4 H.& N. 315, 320. to receive something, whatever it may be, by way of commission and it is something which will have to be decided by the trial court, and something to which the trial judge ought to have applied his mind. Fearnley-Whittingstall, K C., and Patrick Easton for the respondents. The appellant has conceded that if his claim for commission fails he hs no claim for an account. It is submitted, however, that in any event, whatever may be his right to com- mission, he has no right to an account. An agent is only entitled to an account if the object of the account is to render clear some- thing which is obscure : Dinwiddie v. Bailey (10); Padwick v. Stanley (11). There is nothing in the agreement to indicate on what basis commission is to be paid, and an account is not a remedy which the appellant is entitled to pursue. On the main point--whether he is entitled to commission-- the authorities are gathered together in Broome v. Speak (12). [Reference was also made to Halsbury's Laws of England (2nd ed.) vol. 1, p. 257, para. 432, and to Pollock on Contracts (13th ed.), p. 38 et seq.] There is a complete reservation of the right not to pay any commission at all on the part of the respondent company in this case. The only right which the appellant here might extract from this contract is a right to sue the employers for damages if they failed to exercise their discretion. He was paid a salary of 501. a month for his services, which was to cover such personal and travelling expenses as he might incur. The word " remuneration " was used, and the payments made to him were salary and always so regarded. Further relief cannot be given here by way of quantum meruit when there is already provision for payment. In Martin v. Tucker (13) it was said that they could not claim on a quantum meruit, because they " had chosen to tie themselves down by the express terms of " the agreement "; and see also Lott v. Othwaite (14). In Way v. Latilla (15) Lord Atkin said that " if the parties had " proceeded on the terms of a written contract, with a material " clause that the remuneration was to be a percentage of the " gross returns, but with the figure left blank, the court could " not supply the figure ". Summing up: (i) there is no right here for an account in any circumstances. The agent knew of the matter for which he asked for the account, namely, the amount of rubber shipped, and to ask for an account of that when it was within his knowledge is a relief to which he is not entitled; (ii) so far as the account is concerned, there ars so many things which could be looked to (10) (1801) 6 Ves. 136, 141. (13) (1885) 1 T. L. R. 655. (111 (1852) 9 Hare 627. (14) (1893) 10 T. L. R. 76. (12) [1903] 1 Ch. 586. (15) [1937] 3 All E. R. 759, 763. for an account on this claim that it is quite impossible to say what matters should be accounted for; (iii) an agent in any event is not entitled to an account as of right: it is only a relief to which he is entitled if it is going to clarify something which is otherwise obscure; (iv) in any event he is not entitled to com- mission if the employers do not think that he has earned it; (v) in any event the monthly payment was remuneration for sevices ; (vi) as there is an express contract here there is no room for any quantum meruit. Dingle Foot, in reply. In the cases cited the agents were asking for an account of matters within their own knowledge. But here, first, these proceedings were brought after the appel- lant had ceased to be employed by the respondents and no longer had the custody of the company's records in the Gold Coast; and, secondly, the sales of rubber in London, on which the profit was made, are something which could not be within his know- ledge. The general rule is stated in Halsbury's Laws of England (2nd ed.), vol. 1, p. 268, para. 446. If these services were not intended to lie gratuitous something must be payable. " Remuneration " is an elastic word, and has a wider connotation than " salary " : Reg. v. Postmaster- General (16). It was used in Reg. v. Holy Trinity and St. Mary's, Hull, Gouernors and Guardians (17), as covering only expenses. Jan. 29. The judgment of their Lordships was delivered by SIR JOHN BEAUMONT. This is an appeal from the judgment of the West African Court of Appeal (Gold Coast Session), dated December 13, 1947, dismissing, with costa, the appsllant's appeal from the judgment of the Supreme Court of the Gold Coast, dated October 23, 1945, whereby the trial judge gsve judgment for the plaintiffs (the present respondents) for 1,104l. 19s. 4d. [which included the 365l. 8s. 4d. claimed in respect of the personal account] and dismissed the appellant's counterclaim for accounts and commission. At the dates material to this appeal the appellant was the agent of the respondents in West Africa for the purchase and shipment of rubber to the respondents in London. The suit out of which this appeal arises was commenced on June 19, 1945, in the Supreme Court of the Gold Coast, Ashanti, by the respon- dents as plaintiffs against the appellant as defendant claiming money alleged to be due from the appellant as such agent. On July 20, 1945, the appellant put in a counterclaim in the suit, (16) (1976) 1 Q. B. D. 658, 663. (17) 7 B. & C. 611. " the trial of the above-named case the defendant will counter- " claim and he hereby counterclaims against the plaintiffs for " an account to be taken between them of all rubber shipped by " the defendant to the plaintiff company in Europe from August, " 1942 to January 1945 inclusive, and for the court to order " payment of what is found due to the defendant on the taking of " the said account; and the defendant further claims commission " on all the rubber purchased by him for the plaintiff company ". Why the appellant claimed an account on all rubber shipped (which would be after it had been processed) and a commission on all rubber purchased is not apparent. At the trial oral and documentary evidence was given on behalf of both parties. A Mr. Lewis, who was a member of the firm of accountants employed by the respondents in the Gold Coast, gave evidence that he had a statement of accounts from the respondents showing a profit in London on sales of rubber shipped by the appellant of 1,553l. 16s. 0d., but that the 1ocal account showed a loss of 4,9541. 17s. lld., showing a total loss of over 3,000l. This evidence was not challenged by the appellant when he gave evidence, though the result of the local trading was within his special knowledge. The trial judge on October 23, 1945, gave judgment for the respondents for part of the sum claimed by them and dismissed the counterclaim of the appellant. The appellant appealed from that judgment to the West African Court of Appeal, and on December 13, 1947, the appeal was dismissed. This appeal is brought from the judgment of the West African Court of Appeal. The only part of the judgment of the West African Court of Appeal which was challenged before the Board was the dismissal of the appellant's counterclaim. The facts therefore which are relevant are those relating to the counterclaim for an account and payment of commission. Business relations between the parties commenced in August, 1942, and at first such relations were governed by certain cables and letters. It is not necessary to refer in detail to these docu- ments; suffice it to say that under them the appellant was to receive a payment of 50l. per month, and it was contemplated that he would also receive a commission to be fixed by the respondents. Subsequently it was thought desirable that the relations between the parties should be embodied in a formal agreement, and on April 19, 1943, an agreement was signed by the appellant. By cl. 1 of that agreement the appellant agreed faithfully to serve the respondents in the capacity of agent in the business of pur- chasing, manufacturing and exporting rubber in and from the Gold Coast fcr the account and to the order of the respondents, and during the continuance of the agreement to give his time and attention to the management, conduct and superintendence of the business. Clause 6 of the agreement dealt with the remuneration of the appellant and was in the following terms: " The company has agreed to remunerate my services with a " monthly sum of fifty pounds to cover my personal and travelling " expenses for the time being which I have accepted. A com- " mission is also to be paid to me by the company which I have " agreed to leave to the discretion of the company", subse- quently the sum of 50l. per month was reduced to 20l. per month, but nothing turns on this. The employment of the appellant was terminated as from May 31, 1945. The question in this appeal is as to the right of the appellant to commission. The appellant points out that cl. 6 of the agree- ment contemplates that he is to get some remuneration by way of commission in addition to the 50l. psr month, aid he contends that as the respondents have refused to pay any commission he is entitled to a reasonable commission by way of quantum meruit such cases as Bryant v. Flight (18) aid a decision of the House of Lords in Way v. Latilla (19). Only the latter case dealt with remuneration by way of a share in business introduced, aid in their Lordships' opinion the earlier cases are of no assistance to the appellant. In Way v. Latila (19) the agent claimed that there was an agreement to give him an interest in a concession obtained by him which by custom, or on a reasonable basis, the court was asked to define as one-third. The House of Lords rejected this claim on the ground that there was no concluded contract between the parties as to the amount of the share which the agent was to receive and it was impossible for the court to complete the contract for the parties. The House, however, held that whilst there was no concluded contract as to the amount of remuneration, it was plain that there existed between the parties a contract of employment under which the agent was engaged to do work for the plaintiff in circumstances which clearly indicated that the work was not to be gratuitous, and that the agent there- fore was entitled to a reasonable remuneration on the implied contract to pay him quantum meruit, aid the House fixed the amount to be paid. This case again, in their Lordships' view, does not help the appellant, and, indeed, is rather against him. The right of the appellant to remuneration is governed by cl: 6 of the agreement. The sum of 50l. per month wes to remunerate the services the appellant though it wes to cover his personal and travelling expenses; there is therefore no question, as in Way v. Latilla (19), of the services of the appellant being rendered gratuitously (18) M. & W.114. (19) [1937] 3 All E. R. 759. Clause 6 does not provide for the payment of any further sum by way of additional remuneration for the services of the appellant on which a claim of quantum meruit might be founded. The only additional remuneration was to be a commission in the dis- cretion of the respondents. The appellant claims a commission on rubber purchased or rubber shipped, but it is clear that the respondents would have to fix, not only the rate but the basis, of the commission, and such basis might be a share of profits. The correspondence between the parties before the date of the agreement shows that it must have been in the mind of the appellant that his commission might be based on profits. In a letter from the respondents to the appellant, dated October 7, 1942, the respondents said: " . . . your interests will be fully " protected and your share of the total net profits of the entire " enterprise will be made retrospective ". Again, in a letter written by the solicitors for the respondents to the appellant, dated February 2, 1943, when the solicitors were seeking from the appellant material on which to base the formal agreement which they were about to prepare, they said this: " You further " informed us that you receive a monthly remittance of 50l. for " expenses and that it was agreed you should share in the profits " arising from the sale of rubber but that no percentage had been " fixed ; this percentage was in the company's discretion ". " A commission based on profits would be rendered nugatory by the absence of profits. In their Lordships' opinion the relief which the appellant claims, namely, an account and payment of commission based on rubber purchased or shipped, is beyond the competence of any court to grant. The court cannot determine the basis and rate of the commission. To do so would involve not only making a new agreement for the parties but varying the existing agreement by transferring to the court the exercise of a discretion vested in the respondents. If the appellant is not Their Lordships will therefore humbly advise His Majesty that this appeal be dismissed. The appellant must pay the costs of the respondents. Solicitors: A. L. Bryden & Williams; Wm. Easton & Sons. PHARMACEUTIcAL SOCIETY OF GREAT BRITAIN v. BOOTS CASH CHEMISTS (SOUTHERN) LD. [1951 P. No. 1413.] Poisons--Sale of poisons--Self-service system--Selection of artocles by customer from shelves--Payment in presence of qualified pharmacist --Pharmacy and Poisons Act, 1933 (23 & 24 Geo. 5, c. 25), s. 18 (1) (a) (iii). Contract--Offer and acceptance--Sale of goods--Self-service--Time of sale. The defendants' shop at Edgware consisted of a single room adapted to the " self-service " system. In that room was a " chemist's department," under the control of a registered pharma- cist, in which various drugs and proprietary medicines, included or containing substances included, in Part I of the Poisons List compiled under acction 17 (1) of the Pharmacy and Poisons Act, 1933, but not in Schedule I to the Poisons Rules, 1949, were displayed on shelves in packages or other coatainers with the price marked on each. A customer on entering the room was given a basket and than selected the articles that he wished to buy from the shelves, put them in the basket and took them to the cashiers desk at one of the two exits. The cashier scrutinized the articles, stated the total price and received the money: and the pharmacist in the control of the department supervised that part of every transaction involving the sale of a drug which took place at the cash desk and was authorized to prevent the removal of any drug from the premises. In an action brought by the plaintiffs alleging that the provi- sions of section 18 of the Act requiring the sale of poisons included in Part I of the Poisons List to be effected by or under the super- vision of a registered pharmacist were infringed by the defendants: -- Held, that the display of the articles on the shelves, though coupled with an invitation to the customer to select and take any that he wished to buy from the shelves, do not amount to an offer by the defendants to sell, but merely to aa invitation to the customer to make an offer to buy: and that offer was made and accepted at the cashier's desk and the sale was therefore effected under the supervision of a pharmacist, as ffrequired by the Act. Semble, that even if it could be said that the sale was effected by the customer taking the article from the self, as the pharma- cist could prevent its removal from the premises, the sale was still effected under his supervsion. SPECIAL case stated by the parties under R.S.C. Ord. 34, r. 1. The defendants carried on a business comprising the retail sale of drugs at their premises at Edgware, which were entered in the register of premises kept pursuant to section 12 of the Pharmacy and Poisons Act, 1933, from which they regularly sold drugs by retail. The premises comprised a single room so adapted that customers might serve themselves and the business there was described by a printed notice at the entrance as " Boot's " Self-Service." On entry each customer passes a barrier where a wire basket was obtained. Beyond the barrier the principal part of the room, which contained accommodation for 60 cus- tomers, contained shelves around the wall and on an island fixture in the centre, on which articles were displayed. One part of the room was described by a printed notice as the "Toilet Dept.," and another part as the " Chemists' Dept." On the shelves in the chemists' department drugs, including proprietary medicines, were severally displayed in individual packages or containers with a conspicuous indication of the retail price of each. The drugs and proprietary medicines covered a wide range and one section of the shelves in the chemists' department was devoted exclusively to drugs which were included in or which contained substances included in Part I of the Poisons List referred to in section 17 (1) of the Pharmacy and Poisons Act, 1933; no such drugs were displayed on any shelves outside the section to which a shutter was fitted so that at any time all the articles in that section could be securely inclosed and excluded from display. None of the drugs in that section came within the First Schedule to the Poisons Rules, 1949 (S.I. 1949, No. 539). The staff employed by the defendants at the premises com- prised a manager, a registered pharmacist, three assistants and two cashiers, and during the time that the premises were open for the sale of drugs the manager, the registered pharmacist, and one or more of the assistants were present in the room. Each customer selected from the shelves the article that he wished to buy and placed it in the wire basket; in order to leave the premises the customer had to pass by one of two exits at each of which was a cash desk where a cashier was stationed who scrutinized the articles selected by the customer, assessed the value and accepted payment. The chemists' department was under the personal control of the registered pharmacist, who carried out all his duties at the premises subject to the directions of a super- intendent appointed by the defendants in accordance with the provisions of section 9 of the Act. The pharmacist was stationed near the poisons section, where his certificate of registration was conspicuously displayed and was in view of the cash desks. In every case involving the sale of a drug the pharmacist supervised that part of the transaction which took place at the cash desk and was authorized by the defendants to prevent at that stage of the transaction, if he thought fit, any customer from removing any drug from the premises. No steps were taken by the defen- dants to inform customers before they selected any article which they wished to purchase of the pharmacist's authorization. On April 13, 1951, at the defendants' premises, two customers, following the procedure outlined above, respectively purchase a bottle containing a medicine known as compound syrup of hypo- phosphites, containing 0.01 % W/V strychnine, and a bottle containing medicine known as famel syrup, containing 0.023 % W/V codeine, both of which substances are poisons included in Part I of the Poisons List, but, owing to the small percentages of strychnine and codeine respectively, hypophosphites and famel syrup do not come within the First Schedule to the Poisons Rules, 1949. The question for the opinion of the court was whether the sales instanced on April 13, 1951, were effected by or under the supervision of a registered pharmacist in accordance with the provisions of section 18 (1) (a) (iii) of the Pharmacy and Poisons Act 1933. H. V. Lloyd-Jones Q.C. and T. Dewar for the Pharmaceutical Society. This case turns on the construction of section 18 (I) question at issue is whether under the self-service system of takes from the shelves the article that he wishes to buy or whether it takes place at the point where the money is paid and the pharmacist is stationed. The self-service system of trading inherently invites the customer to purchase; the price is fully displayed on the articles which are offered for sale and the taking of an article by a customer is an acceptance of the offer. Even if it be the law that a customer has no right to demand goods merely because they are displayed in a shop window the position is different where goods are displayed for sale inside a self-service shop. There are indications to that effect in Wiles v. Maddison., It is submitted that the contract is made aid the property passes at the moment a customer takes an article. [Cheshire and Fifoot's Law of Contracts, 1st ed., p. 21, and Timothy v. Simpsons referred to.] The sales in question, therefore, were not contracts or sales made under the supervision of the pharmacist. [LORD GODDARD C.J. referred to Carlill v. Carbolic Smoke Ball Co.] What takes place under the self-service system is an innova- tion; it is a completely new system of trading and is a variant of an automatic sale. Regard must be had to section 22 of the Pharmacy and Poisons Act, 1933 ; the legislature thought proper to make provisions for the supervision of sales of poison, to which 1 Pharmacy and Poisons Act, 1933, 2 [1943] 1 All E.R. 315. 18: "(1)...it shall not be lawful 3 (1834) 6 C. & P. 499. "--(a) for a person to sell any poison 4 [1893] 1 Q.B. 256. "included in Part I of the Poisons 5 Pharmacy and Poisons Act, 1933. "List, ounless--(i) he is an authorized s. 22: "It shall not be lawful for a "seller of poisons; and (ii) the sale is "poison to be exposed for sale in, or "effected on premises duly registered "to be offered for sale by means of, "under Part I of this Act; and (iii) "an automatic machine." "the sale is effected by, or under the "supervision of, a registered phar- "macist." importance was plainly attached, and it was intended that poisons should not be sold without supervision. What is important is whether or not the pharmacist can intervene at the crucial moment. [LORD GODDARD C.J. referred to the Sale of Goods Act, 1893.] By section 17 (2) of the Sale of Goods Act, 1893, the property passes when it is intended to pass. The circumstance in this case plainly point to an intention that the sale should take place at the particular spot where the customer takes the article. [LORD GODDARD C.J. In a bookshop, where books are lying about, people often look at the books and a customer will frequently pick up a book he wants to buy and take it to the bookseller. ] The legislature intended to interpose the possibility of guidance or veto on the part of the pharmacist when a customer is selecting poisons, and in this case, even though the time of payment is postponed until the cashier is reached so that payment takes place in the presence of the pharmacist, it is submitted that the sales in question were not effected in accordance with the provisions of the section. Glyn-Jones Q. C. and G. D. Everington for the defendants. The other statutory provisions with regard to poisons are proper material to assist in the construction of section 18 of the Pharmacy and Poisons Act, 1933. There are elaborate rules for the packing and sale of poisons and the regulations impose on different classes of poisons precautions of varying degrees of stringency. Poisons such as those in question are subject to very little control apart from that contained in section 18, and when it is remembered that they are of great variety and of very little danger it can be appreciated that the legislature relaxed the precautions. The construction of section 18, therefore, should not be considered in relation to poisons generally. The statement that the self-service method of trading is an innovation is challenged. It may be a novelty of a kind, but for the last 50 years at least shopkeepers--particularly ironmongers and shopkeepers in market towns--have been in the habit of displaying goods, clearly marked with the price, in their shops and even in the street outside, and it has been the custom for a purchaser to pick up the article he wished to buy, take it to the assistant inside the shop and pay the money, but the purchase was not complete until the money was paid. To display goods marked with their price has been a method of shopkeeping ever since shops first existed. Under the self-service system the principle is the same; the mere fact that the customer picks up the article himself off a shelf instead of it being, perhaps, fetched by an assistant, makes no difference. The only difference is that the shopkeeper economises by not providing assistants to take the goods off the shelves. It is submitted that it would have made no difference if the dress in Timothy v. Simpson had been hanging on a nail outside the shop. In essence the display of goods marked with their price is no more than an invitation; if it were otherwise their display in a position out of the customer's reach would amount to an invitation, whereas if they were within the customer's reach and he could and did take them, that would be a contract. An invitation to a customer to select the goods he wishes to buy cannot have the legal effect of a transaction of sale merely because the customer takes them; if so a customer might not, if he wished, be able to put the article back, or he could take it and leave the shop with cut paying for it, saying that the property had passed to him when he picked it up. " Sale" in the statute must mean the transaction whereby the physical property passes; the transaction in the present case is not unconditional and it is not completed, nor does the property pass, until payment. In Sutton and Shannon on Contracts, 4th ed., at p. 24, it is said: " Generally speakng, a trader's price list is not an offer to " sell the goods comprised in it at the stated prices nor does the " mere placing of priced goods in a shop windoe amount to an " offer to sell at the named price, or to sell at all. In both cases " it is the intending purchaser who makes the offer." That statement is adopted and, it is submitted, supplies the real answerd in the present case. H. V. Lloyd-Jones Q.C. replied. LORD GODDARD C.J. This is a special case stated under Ord. 84, r. 1, by agreement between the parties concerning the application of section 18 of the Pharmacy and Poisons Act, 1933. [His Lordship stated the facts substantially as set out above and continued : ] The question which I have to decide is whether he sale is completed before or after the intending purchaser has passed the scrutiny of the pharmacist and paid his money, or, to put it in another way, whether the offer which initiates the negotiations is an offer by the shopkeeper or an offer by the buyer. In the well-known case of Carlill v. Carbolic Smoke Ball Co. the company offered compensation to anybody who, having used 6 C. & P. 499. [1893] 1 Q.B. 256. a carbolic smoke ball for a certain length of time in a prescribed manner, contracred influenza. One of the inducements held out to people to buy the carbolic smoke ball was the representation that it was a specific against influenza. The plaintiff, who used it according to the prescription which was given, nevertheless, as might have been expected, contracted influenza. She then sued the Carbolic Smoke Ball Co. for, and recovered, the compensa- tion. In the Court of Appeal Bowen L.J. said 8: " There can be " no doubt that where a person in an offer made by him to another " person, expressly or impliedly intimates a particular mode of " acceptance as sufficient to make the bargain binding, it is only " necessary for the other person to whom such offer is made to " follow the indicated method of acceptance; and if the person " making the offer, expressly or impliedly intimates in his offer " that it will be sufficient to act on the proposal without com- " municating acceptance of it to himself, performance of the " condition is a sufficient acceptance without notification." Mr. Lloyd-Jones has said that in this case the defendants invite the public to come into their shop and say: " Help yourself " to any of these articles, all of which are priced" and that that is an offer by the defendants to sell to any person who comes into the shop any of the articles so priced, which is accepted by any person who helps himself to any one of those articles. Mr. Glyn- Jones, on the other hand, contends that there is nothing revolu- tionary in this kind of trading aid that it amounts to no more than the exposure of goods which a shopkeeper sometimes makes either outside or inside his premises, while at the same time he leaves some goods behind the counter. I think that it is a well- established principle that the mere exposure of goods for sale by a shopkeeper indicates to the public that he is willing to treat but does not amount to an offer to sell. I do not think I ought to hold that that principle is completely reid merely because there is a self-service scheme, such as this, in operation. In my opinion it comes to no more than that the customer is informed that he may himself pick up an article and bring it to the shop- keeper with view to buying it, and if, but only if, the shopkeeper then expresses his willingness to sell, the contract for sale is complete. In fact, the offer is an offer to buy, and there is no offer to sell; the customer brings the goods to the shopkeeper to see whether he will sell or not. In 99 cases out of a 100 he will sell and, if so, he accepts the customer's offer, but he need not 8 [1893] 1 Q.B. 256, 269. do so. The very fact that the supervising pharmacist is at the place where the money has to be paid is an indication to the purchaser that the shopkeeper may not be willing to complete a contract with anyway who may bring the goods to him. Ordinary principles of common sens and of commerce mud be applied in this matter, and to hold that in the case of self- service shops the exposure of an article is an offer to sell, and that a person can accept the offer by picking up the article, would be contrary to those principles and might entail serious results. On the customer picking up the article the property would forthwith pass to him and he would be able to insist upon the shopkeeper allowing him to take it away, though in some particular cases the shopkeeper might think that very undesirable. On the other hand, if a customer had picked up an article, he would never bs able to change his mind and to put it back; the shopkeeper could say, " Oh no, the property has passed and you must pay the " price. " It seems to me, therefore, that the transaction is no way different from the normal transaction in a shop in which no self-service scheme. I am quite satisfied it would be wrong to say that the shopkeeper is making an offer to sell every article in the shop to any person who might come in and that that person can insist on buying any article by saying " I accept your offer" I agree with the illustration put forward during the case of a person who might go into a shop where books are displayed. In most book-shops customers are invited to go in and pick up books and look at them even if they do not actually buy them. There is no contract by the shopkeeper to sell until the customer has taken the book to the shopkeeper or his assistant and said "I " want to buy this book " and the shopkeeper says " Yes." That would not prevent the shopkeeper, seeing the book picked up, saying: " I am sorry I cannot let you have that book; it is the " only copy I have got and I have already promised it to another " customer." Therefore, in my opinion, the mere fact that a customer picks up a bottle of medicine from the shelves in this case does not amount to an acceptance of an offer to sell. It is an offer by the customer to buy and there is no sale effected until the buyer's offer to buy is accepted by the acceptance of the price. The offer, the acceptance of the price, and therefore the sale, take place under the supervision of the pharmacist. That is sufficient to satisfy the requirements of the section, for by using the words " the sale is effected by, or under the supervision of, a registered " pharmacist" the Act envisages that the sale may be effected by someone not a pharmacist. I think, too, that the sale is effected under his supervision if he is in a position to say " You " must not have that ; that contains poison," so that in any case, even if I were wrong in the view that I have taken on the question as to when the sale was completed, and it was completed when the customer took the article from the shelf, it would still be effected under the supervision of the pharmacist within the meaning of section 18. There must therefore be judgment for the defendants. Judgment for the defendants. Solicitors : A. C. Castle ; Masons. J. F. L. * BRITISH ELECTRICAL AND ASSOCIATED INDUSTRIES (CARDIFF) LD. v. PATLEY PRESSINGS LD., REID BROS. (GLASGOW) LD., THIRD PARTY, DOUGLAS SCOTT LD., FOURTH PARTY. [1951 B. 1639. ] Contract--Uncertainty--Agreement " subject to force majeure condi- tions-"--Variety of force majeure conditions in trade--Conditions applicable not agreed--No consensus ad idem--Agreement not enforceable--Sale of Goods--String contract--Repudiation by first and second sellers--Sub-buyer's acceptance of second seller's repudia- tion--Second seller's subsequent acceptance of first seller's repudiation--Damages. The terms of a contract note in relation to a sale of steel contained the following clause: "Subject to force majeure condi- "tions that the government restricts the export of the material at "the time of delivery." There was a variety of force majeure conditions in the trade, and no evidence that any particular ones had been agreed on. The buyers relied on that note as evidencing a contract:-- Held, that the buyers were unable to prove a contract (1), applying G. Scammell and Nephew Ld. v. Ouston (1941] A.C. 251; 57 T.L.R. 280; [1941] 1 All E.R. 14, because the words of the force majeure clause in the note were too obscure to be capable of any definite or precise meaning; and (2) because "conditions" in the phrase "force majeure conditions" meant "clauses" or "stipula- "tions" and not "contingencies" or "circumstances," and that it not being agreed which conditions applied, there was no consensus ad idem, and therefore no completed contract, on the principle of Love & Stewart Ld. v. S. Instohe & Co. Ld. (1917) 33 T.L.R. 475, and Bishop & Baxter Ld. v. Anglo-Eastern Trading and Industrial Co. Ld. [1944] K.B. 12; 60 T.L.R. 37; [1943] 2 All E.R. 598; although (3), had the word "conditions" in the clause meant "contingencies" or "circumstances," it would not have been too vague to have contractual effect. Where A agrees to sell goods to B who agrees to sell them to C, and A refuses to give delivery to B, and B refuses to give delivery to C, who accepts that refusal as a repudiation, A may be held liable for B's breach of his obligations to C, notwithstanding that B only accepted A's refusal as a repudiation after C accepted B's refusal as a repudiation. Howard v. Pickford Tool Co. [1951] 1 K.B. 417 considered. ACTION. The plaintiffs, the British Electrical and Associated Industries (Cardiff) Ld., claimed damages from the defendants, Patley Pressings Ld., for repudiation of an agreement to sell to them some 200 tons of mild steel angles. They also claimed a declara- tion that they were entitled to be indemnified by the defendants, whom they alleged entered into the agreement of sale with knowledge that the plaintiffs intended to re-sell at a profit to an American firm, against any claim which might be made against them by their sub-buyers by reason of their inability to deliver under a similar agreement to sell through the defendants defaulting in their agreement. The defendants in turn brought in as third parties Reid Brothers (Glasgow) Ld., from whom they had purchased on similar terms, claiming against them a declaration of indemnity in respect of damages which they might be held liable to pay to the plaintiffs, and also damages in their own right. The third parties brought in as fourth parties, Douglas Scott & Sons Ld., from whom they had purchased, again on similar terms, claiming against them an indemnity in respect of any damages which they might be held liable to pay, and also damages. By paragraph 1 of their statement of claim against the defen- dants the plaintiffs alleged: "By an agreement made orally "between the plaintiffs and the defendants on or about December 11, 1950, or alternatively by a contract in writing signed on "behalf of the defendants dated December 11, 1950, and a letter "from the plaintiffs to the defendants dated December 12, 1950, "the defendants agreed to sell to the plaintiffs 200 tons of mild "steel angles at the price of #32 15s. per ton F.O.B. London/ " Liverpool and to deliver the same in mid-March, 1951." The two documents relied upon by the plaintiffs as consti- tuting the agreement in writing were, first, a contract note dated December 11, 1950, signed by the director of the defendants, which was in the following terms: "We confirm having sold you the following material: "Description, mild steel angles." (The specification was then set out] ; " Quantity, 200 tons; price, #32 15s. per ton, F.O.B. London/ "Liverpool; delivery, in mid-March; "Terms, nett cash against wharfingers' receipt and weigh- "bridge ticket; "Conditions, prime quality bars to B.S.S. 15 specification. "Bundled in one ton lots and subject to force majeure conditions "that the government restricts the export of the material at the "time of delivery." The second document was a letter dated December 12 from the plaintiffs to the defendants accepting the offer made in the following terms: "We received your contract No. 1634A dated "December 11, according to which we have bought from you the "following materials." The terms as set out by the plaintiffs were substantially the same as those set out in the contract note. In answer to the plaintiffs' claim the defendants alleged that the clause, "subject to force majeure conditions that the govern- "ment restricts the export of material at the time of delivery," were so uncertain as to render the contract unenforceable, since there was, in connexion with the trade, a variety of force majeure conditions and no agreement had been reached between the parties as to which of such conditions should apply. In the correspondence between the third parties and the defendants, and the fourth parties and the third parties, the suppliers stated in each case that they confirmed the orders given "subject to the appropriate Ministry of Supply orders . . . and "the materials will be charged at the prices ruling under such "orders at the date of dispatch." The fourth parties, and in turn the third parties, refused to deliver the goods ordered except at a price above the contract price. That refusal was accepted by the defendants in a letter of March 9, 1951, as a repudiation by the third parties. As between the third and fourth parties the refusal by the fourth parties to deliver was not accepted by the third parties as a repudiation by the fourth parties until July 5, 1951. It was accordingly contended by the fourth parties that, in those circumstances, they could not be liable for the third parties' breach of their contractual obligations to the defendants, since the final breach between the third parties and the defendants occurred on March 9, 1951, and could not, therefore, have been caused by the fourth parties' breach on July 5. Phillip Goodenday for the plaintiffs. Montague Waters for the defendants. Lord Hailsham for the third parties. J. F. Donaldson for the fourth parties. The following cases were cited in argument:--Lebeaupin v. R. Crispin & Co. (1); Bishop & Baxter Ld. v. Anglo-Eastern Trading and Industrial Co. Ld. (2); Love & Stewart Ld. v. S. Instone & Co. Ld. (3); Trans Trust S.P.R.L. v. Danubian Trading Co. Ld. (4); T. D. Bailey, Son & Co. v. Ross T. Smyth & Co. Ld. (5); Howard v. Pickford Tool Co. (6); G. Scammell & Nephew Ld. v. Ouston (7); Zinc Corporation v. Hirsch (8); Podar Trading Co. Ld., Bombay v. Francois Tagher, Barcelona.(9) December 12, 1952. McNAIR J., after stating the facts, said that, in his opinion, the contract note of December 11, 1950, and the plaintiffs' letter of acceptance of the following day did not puport to be an offer and acceptance constituting a written contract, but merely purported to confirm an oral contract which had been already made between the plaintiffs and the defendants. [His lordship continued:] Accepting for a moment that the contract note constitutes an admission by the defendsnts of the terms of the oral agreement, the first question which I have to 1 [1920] 2 K.B. 714; 36 T.L.R. 6 [1951] 1 K.B. 417. 739. 7 [1941] A.C. 251; 57 T.L.R. 280; 2 [1944] K.B. 12; 60 T.L.R. 37; [1941] 1 All. E.R. 14. [1943] 2 All. E.R. 598. 8 [1916] 1 K.B. 541; 32 T.L.R. 3 (1917) 33 T.L.R. 475. 232. 4 [1952] 2 Q.B. 297; [1952] 1 9 [1949] 2 K.B. 277; 65 T.L.B. T.L.R. 1066; [1952] 1 All. E.R. 970. 433; [1949] 2 All. E.R. 62. 5 45 Com. Cas 292; 56 T.L.R. 825; [1940] 3 All. E.R. 60. determine is whether or not the words "subject to force majeure "conditions, that the government restricts the export of material "at the time of delivery," are words which prevent the court from holding that any enforceabIe contract was made. In my judgment, they are. In the first place, I consider that whether the word "condi- "tions" means "stipulations" or "clauses" on the one hand; or "contingencies" or "circumstances" on the other hand, the whole sentence is so vague and uncertain as to be incapable of any precise meaning and so brings the case within the principles stated in the House of Lords in G. Scammell & Nephew Ld. v. Ouston. (1) The passages which, in my judgment, are particularly relevant on this matter occur in the speech of Lord Maugham, where he said (2): " In order to constitute a valid contract the "parties must so express themselves that their meaning can be "determined with a reasonable degree of certainty," and in the speech of Lord Wright,(3) where he said that the first ground on which the court ought to hold on the facts of that case that there was no contract was "that the language used was so "obscure and so incapable of any definite or precise meaning that "the court is unable to attribute to the parties any particular "contractual intention." In the second place, however, I consider that the word "conditions" in this context, as a matter of construction, quite clearly means "clauses" or "stipulations " and not "contingencies" or "circumstances." If "conditions" means "contingencies" or "circumstances" the word adds nothing to the phrase "force majeure." Furthermore, such a construc- tion would involve giving a different meaning to the word "conditions" where it appears in the phrase under construc- tion from that which it bears in the sidenote to that particular paragraph. If, accordingly, as I hold, the word "conditions " means "clauses" or "stipulations," then, there being evidence given in the action before me that there was in the trade a variety of force majeure conditions, this case falls quite mainly within the line of authority of such cases as Love & Stewart Ld. v. S. Instone & Co. Ld.,(4) in which the House of Lords had to consider the effect of a contract containing the words "subject to strike and lock-out clauses," and within the principle stated in G. Scammell & Nephew Ld. v. Ouston,(5) to which I have already referred (where the phrase was "on "hire-purchase terms"), and Bishop & Baxter Ld. v. Anglo- Eastern Trading and Industrial Co. Ld.,(6) where the Court of Appeal, in considering a purported agreement (which contained the phrase "subject to war clause ") held that, as the war clause 1 [1941] A.C. 251; 57 T.L.R. 280; 5 [1941] A.C. 251; 57 T.L.R. 280: [1941] All E.R. 14. [1941] All E.R. 14. 2 [1941] A.C. 251, 255. 6 [1944] K.B. 12; 60 T.L.R. 37; 3 Ibid. 268. [1943] 2 All E.R. 598. 4 (1917) 33 T.L.R. 475. took many forms, and as there was no evidence that the parties had any particular form of clause in mind, there was no consensus ad idem and, therefore, no completed contract. Those cases seem to me to establish that, notwithstanding that the parties may have thought and acted on the basis thst a contract existed between them, no consensus ad idem will be held to exist where there still remains to be negotiated and agreed the exact form of the clauses or conditions referred to by the parties. So far, I have considered the matter solely On the basis of this contract note; but the matter was msde even clearer by the evidence given on behalf of the defendsnts by their director, which established to my satisfaction that in the negotiations the parties must be taken to have used the term " conditions " in the sense which I have indicated. Accordingly, the plaintiffs' claim against the defendants breaks down in limine on account of their failure to prove any concluded contract. If I had been satisfied that the parties had reached contractual certainty in the terms pleaded and, further- more, that there was a sufficient note or memorandum of their agreement to satisfy section 4 of the Sale of Goods Act, 1883, I should have had no hesitation at all in holding (1) that the defen- dants knew that the plaintiffs required the goods and entered into the agreement for the purpose of re-selling at a profit, and (2) that the defendsnts, by refusing to deliver the goods of the description called for by the contract, except against payment of an increased price, repudiated their contractusl obligations, which repudiation the plaintiffs, by the issue of the writ herein on April 5, 1951, treated as a final breach entitling them to damages. I would have assessed those damages at the sum of $250, being the difference between the contract price of $32 15s. per ton and the market price of $34 per ton (for which the plaintiffs contended, and which wss agreed between these parties for this purpose). On the other hand, I should not, as at presenf advised, have allowed the plaintiffs' claim for a declaration of indemnity as prayed for, and this for two reasons: first, because I am not satisfied that the plaintiffs' liability, if any, under their sub-sale to their American buyers arose from the defendants' default and, secondly, because 1 think that the decision of the Court of Apeal in Trans Trust S.P.R.L. v. Danubian Trading Co., Ld.(7) would have precluded me from making the declaration in the form asked for. I confess humbly, with respect, to some difficulty in understanding fully the limitations imposed by that judg- ment upon a judge of first instance in making declarations of this nature which, so far as my experience goes, have been granted more or less as a matter of form in the case of this sort of contract: but the Court of Appeal have tsken the view that, at any rate on the facts of the Trans Trust case,7 which, on this 7 [1952] 2 Q.B. 297; [1952] 1 T.L.R. 1066 ; [1952] 1 All E.R. 970 accepted breach, namely, July 5, 1951, was not less than #39 5s. Od. per ton. The result of that is that each of the proceedings along the line fails. Judgment for the defendants against the plaintiffs; for the third parties against the defendants; and for the fourth parties against the third Parties, Solicitors: Alexander Fine & Co.; Sylvester, Amiel & Co.; Berrymans, for Borland, King and Stewart, Glasgow; Ernest W. Long & Co. P. B. D PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v. BOOTS CASE CHEMISTS (SOUTHERN) LD. [1951 P. No. 1413] Poisons--Sale of--Self-service system--Selecton of articles by customer from shelves Payment at cash desk in presence of qualified phar- macist--Legality--Pharmacy and Poisons Act, 1933 (23 & 24 Geo. 5, c. 25), s. 18 (1) (a) (iii). Contract--Offer and acceptance--Sale of goods--Self-service--Time of sale. The defendants, branch shop, consisting of a single room, was adapted to the " self-service " system. The room contained a chemist's department, under the control of a registered pharmacist. in which various drugs and proprietary medicines, including or containing substances included in Part I of the Poisons List com- piled under section 17 (1) of the Pharmacy and Poisons Act, 1933. (but not in Schedule I to the Poisons Rules, 1949) were displayed on shelves in packages or other containers, with the price marked on each. A customer, on entering the shop, was provided with a wire basket, and having selected from the shelves the articles which he wished to buy, he put them in the basket and took them to the cashier's deck at one or other of the two exits. where the cashier stated the total price and received payment. That latter stage of every transaction involving the sale of a drug was supervised by the pharmacist in control of the department, who was authorized to prevent the removal of any drug from the premises. In an action brought by the plaintiffs alleging an infringement by the defendants of section 18 (1) (a) (iii) of the Pharmacy and Poisons Act, 1933, which requires the sale of poisons included in Part I of the Poisons List to be effected by or under the supervision of a registered pharmacist : -- Hild, that the self-service system did not amount to an offer by the defendants to sell, but merely to an invitation to the customer to offer to buy ; that such an offer was accepted at the cashier's desk under the supervision of the registered pharmacist; and that there was therefore no infringement of the section. Decision of Lord Goddard C.J. [1952] 2 Q.B. 795 ; [1952] 2 T.L.R. 340 ; [1952] 2 .411 E.R. 455 affirmed. APPEAL from Lord Goddard C.J. Special case stated by the parties under R.S.C., Ord. 34, r. 1. The defendants carried on a business comprising the retail sale of drugs at premises at Edgware, which were entered in the register of premises kept pursuant to section 12 of the Pharmacy and Poisons Act, 1933, and from which they regularly sold drugs be retai1. The premises comprised a single room, so adapted that customers might serve themselves, and the business there was described by a printed notice at the entrance as "Boot's Self- "Service." On entry each customer passed a barrier where a wire basket was obtained. Beyond the barrier the principal part of the room, which contained accomodation for 60 customers, the centre, on which articles were displayed. One part of the room was described by a printed notice as the "Toilet Dept.," and another part as the "Chemists' Dept." On the shelves in the chemists' department drugs, including proprietary medicines, were severally displayed in individual packages or containers with a conspicuous indication of the retail price of each. The drugs and proprietary medicines covered a wide range, and one, section of the shelves in the chemists' department was devoted exclusively to drugs which were included in, or which contained, substances included in, Part 1 of the Poisons List referred to in section 17 (1) of the Pharmacy and Poisons Act, 1933; no such drugs were displayed on any shelves outside the section, to which a shutter was fitted so that at any time all the articles in that section could be securely inclosed and excluded from display. None of the drugs in that section came within the First Schedule ; to the Poisons Rules, 1949 (S.I. 1949, No. 539). The staff employed by the defendants at the premises com- prised a manager, a registered pharmacist, three assistants and two cashiers, and during the time when the premises were open for the sale of drugs the manager, the registered pharmacist, and one or more of the assistants were present in the room. Each customer selected from the shelves the article which he wished to buy and placed it in the wire basket; in order to leave the premises the customer had to pass by one of two exits, at each of which was a cash desk where a cashier was stationed who scrutinized the articles selected by the customer, assessed the value and accepted payment. The chemists' department was under the personal control of the registered pharmacist, who carried out all his duties at the premises subject to the directions of a superintendent appointed by the defendants in accordance with the provisions of section 9 of the Act. The pharmacist was stationed near the poisons section, where his certificate of registration was conspicuously displayed, and was in view of the cash desks. In every case involving the sale of a drug the pharmacist supervised that part of the transaction which took place at the cash desk and was authorized by the defendants to prevent at that stage of the transaction, if he thought fit, any customer from removing any drug from the premises. No steps were taken by the defendants to inform the customers, before they selected any article which they wished to purchase, of the pharmacist's authorization. On April 13,, 1951, at the defendants' premises, two customers following the procedure outlined above, respectively purchased a bottle containing a medicine known as compound syrup of hypo- phosphites, containing 0.01% W/V strychnine, and a bottle con- taining medicine known as famel syrup, containing 0.23% W/V codeine, both of which substances are poisons included in Part I of the Poisons List, but, owing to the small percentages of strychnine and codeine respectively, hypophosphites and famel syrup do not come within the First Schedule to the Poisons Rules, 1949. The question for the opinion of the court was whether the sales instanced on April 13, 1951, were effected by or under the supervision of a registered pharmacist, in accordance with the provisions of section (18) (a) (iii) of the Pharmacy and Poisons Act, 1933. (1) The Lord Chief Justice answered the question in the affirmative. The Pharmaceutical Society appealed. H. V. Lloyd-Jones Q.C. and T. Dewar for the Pharmaceutical Society G. G. Baker Q.C. and G. D. Everington for the defendants. SOMERVELL L.J. This is an appeal from a decision of the Lord Chief justice on an agreed statement of facts, raising a question under section 18 (1) (a) (iii) of the Pharmacy and Poisons Act, 1933. The plaintiffs are the Pharmaceutical Society, incorporated by Royal charter. One of their duties is to take all reasonable steps to enforce the provisions of the Act. The provision in question is contained in section 18. [His Lord- ship read the section and stated the facts, and continued:] It is not disputed that in a chemist's shop where this self-service system does not prevail a customer may go in and ask a young woman assistant, who will not herself be a registered pharmacist, for one of these articles on the list, and the transaction may be completed and the article paid for, although the registered pharmacist, who will no doubt be on the premises, will not know anything himself of the transaction, unless the assistant serving the customer. or the customer, requires to put a question to him. It is right that I should emphasize, as did the Lord Chief justice, that these are not dangerous drugs. They are substances which contain very small proportions of poison, and I imagine that many of them are the type of drug which has a warning as to what doses are to be taken. They are drugs which can be obtained, under the law without a doctor's prescription. The point taken by the plaintiffs is this: it is said that the purchase is complete if and when a customer going round the shelves takes an article and puts it in the receptacle which he or she is carrying, and that therefore, if that is right, when the customer comes to the pay desk, having completed the tour of the premises, the registered pharmacist, if so minded, has no 1 Pharmacy and Poisons Act, "the sale is effected on premises duly 1933, s. 18: "(1) ...it shall not be "registered under Part I of this Act; "lawful--(a) for a person to sell and "and (iii) the sale is effected by, or "poison included in Part I of the "under the supervision of, a regis- "Poisons List, unless--(i) he is an "tered pharmacist." "authorized seller of poisons; and (ii) power to say: " This drug ought not to be sold to this costumer." Whether and in what circumstances he would have that power we need not inquire, but one can, of course, see that there is a difference if supervision can only be exercised at a time when the contract is completed. I agree with the Lord Chief Justice in everything that he said, but I will put the matter shortly in my own words. Whether the view contended for by the plaintiffs is a right view depends on what are the legal implications of this layout--the invitation to the customer. Is a contract to be regarded as being completed, by which both sides are bound, when the article is put into the receptacle, or is this to be regarded as a more organized way of doing what is done already in many types of shops--and a bookseller is perhaps the best example--namely, enabling customers to have free access to what is in the shop, to look at the different articles, and then, ultimately, having got the ones which they wish to buy, to come up to the assistant saying " I want this "? The assistant in 999 times out of 1,000 says " That is all right," and the money passes and the trans- action is completed. I agree entirely with whit the Lord Chief Justice has said, and with the reasons which he has given for his conclusion, that in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shop- keeper, or someone on his behalf, accepts that oger. Then the contract is completed. I can see no reason at all, that being clearly the normal position, for drawing any digerent implication as a result of this layout. The Lord Chief Justice, I think, expressed one of the most formidable difficulties in the way of the plaintigs' contention when he pointed out that, if the plaintiffs are right, once an article has been placed in the receptacle the customer himself is bound and would have no right, without paying for the first article, to substitute an article which he saw later of the similar kind and which he perhaps preferred. I can see no reason for implying from this self-service arrangement any implication other than that which the Lord Chief Justice found in it, namely, that it is a convenient method of enabling customers to see what there is and choose, and possibly put back and substitute, articles which they wish to have, and then to go up to the cashier and offer to buy what they have so far chosen. On that conclusion the case fails, because it is admitted that then there was super- vision in the sense required by the Act and at the appropriate moment of time. For these reasons, in my opinion, the appeal should be dismissed. BIRKETT L.J. I am of the same opinion The facta are clearly stated in the agreed statement of facts, and the argument on them has been very clearly stated by Mr. Lloyd-Jones. think that clearest of all was the judgment of the Lord Chief Justice, with which I agree. In view of an observation which I made during the argument, I should like to add that under section 25 of the Pharmacy and Poisons Act, 1933, it is the duty of the Pharmaceutical Society of Great Britain, by means of inspection and otherwise, " to take all reasonable steps to "enforce the provisions of Part I of this Act"--that really deals with the status of the registered pharmacist "and to secure "compliance by registered pharmacists and authorized sellers of "poisons with the provisions of Part II of this Act." This action has been brought by the Pharmaceutical Society in pursuance of that duty which is laid upon them by statute, and the short point of the case is, at what point of time did the sale in this particular shop at Edgware take place? My Lord has explained the system which had been introduced into that shop in March of 1951. The two women customers in this case each took a particular package containing poison from the particular shelf, put it into her basket, came to the exit and there paid. It is said, on the one hand, that when the customer takes the package from the poison section and puts it into her basket the sale there and then takes place. On the other hand, it is said the sale does not take place until that customer, who has placed that package in the basket, comes to the exit. The Lord Chief justice dealt with the matter in this way, and I would like to adopt his words (1): " It seems to me, there- "fore, that the transaction is in no way different from the "normal transaction in a shop in which there is no self-service "scheme. I am quite satisfied it would be wrong to aay the "shopkeeper is making an offer to sell every article in the shop "to any person who might come in and that that person can "insist on buying any article by saying 'I accept your offer.' " Then he went on to deal with the illustration of the bookshop, and continued: "Therefore, in my opinion, the mere fact that "a customer picks up a bottle of medicine from the shelves in "this case does not amount to an acceptance of an offer to sell. "It is an offer by the customer to buy. I daresay this case is "one of great importance, it is quite a proper caae for the "Pharmaceutical Society to bring, but I think I am bound to "say in this case that the sale was made under the supervision "of a pharmacist. By using the words ' The sale is effected " 'by, or under the supervision of, a registered pharmacist,' it "seems to me the sale might be effected by somebody not a "pharmacist. If it be under the supervision of a pharmacist, "the pharmacist can say 'You cannot have that. That contains " 'poison.' In this case I decide, first, that there is no sale "effected merely by the purchaser taking up the article. There "is no sale until the buyer's offer to buy is accepted by the 1 [1952] 2 Q.B. 795, 802; [1952] 2 T.L.R. 340; [1952] 2 All E.R. 456. " acceptance of the money, and that takes place under the " supervision of a pharmacist. And in any case, I think, even " I am wrong in the view I have taken of when the offer is " accepted, the sale is by or under the supervision of a pharmacist. " I agree with that, and I agree that this appeal ought to be dismissed. ROMER L.J. I also agree. The Lord Chief justice observed that, on the footing of the plaintiff society's contention, if a person picked up an article, once having picked it up, he would never be able to put it back and say that he had changed his mind. The shopkeeper would say - " No, the property has " passed and you will have to pay." If that were the position in this and similar shops, and that position was known to the general public, I should imagine that the popularity of those shops would wane a good deal. In fact, I am satisfied that that is not the position, and that the articles, even though they are priced and put in shops like this, do not represent an oger by the shopkeeper which can be accepted merely by the picking up of the article in question. I quite agree with the reasons on which the Lord Chief Justice arrived at that conclusion and which Birkett L.J. has just referred to, and to those observations I can add nothing of my own. I agree that the appeal fails. Appeal dismissed. Leave to appeal to House of Lords refused. Solicitors . A. C. Castle ; Masons. A. W. G. NICOLENE LD. v. SIMMONDS. [1951 N. No. 1962.] Contract--Formation--Consensus ad idem--Meaningless terms--Whether contract concluded--Sale of goods--Agreement subject to "the usual "conditions of acceptance." A contract for the sale of a quantity of reinforcing steel bars was subject to "the usual conditions of acceptance." The seller having repudiated the contract, the buyers claimed, and were awarded by the trial judge, damages for breach of contract. On appeal, the seller contended that the contract was not concluded there being no consensus ad idem in regard to the usual conditions of acceptance:-- Held, that there being no "usual conditions of acceptance" the condition was meaningless and therefore could ho ignored, and that the contract was complete and enforceable. Per Denning L.J. A distinction must be drawm between a clause which is meaningless and a clause which is yet to be agreed. A clause which is meaningless can often be ignored, whilst 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. British Electrical and Associated Industries (Cardiff) Ld. v. Patley Pressings Ld. (1953] 1 W.L.R. 280; [1953] 1 All E.R. 94 considered. APPEAL from Sellers J. The action was brought by the plaintiffs, Nicolene Ld., against the defendant, Mr. H. B. Simmonds, for damages for breach of contract. The contract was said to be contained in the following three letters. The first, from the plaintiffs to the defendant, and dated August 10, 1951, contained the following passage: " We "enclose our detailed order and require your written confimation "of acceptance of the order." The detailed order referred to 3,000 tons of Thomas quality reinforcing steel bars of West German origin, in mixed sizes of 6/30 millimetres at $45 14s. 5d. per ton of 1,016 kilos, which the plaintiffs offered to buy from the defendant. On August 16 the defendant, writing from his private address, sent the following reply to the plaintiffs : " I " thank you for your letter and order of August 10 for 3,000 tons " of Thomas quality remforcing bars of West German origin in " mixed sizes of 6/30 mm. at $45 14s 5d. per ton of 1,016 kilos. " As you have made the order direct to me, I am unable to " confirm on my usual printed form which would have the usual " force majeure and war clauses, but I assume that we are in " agreement that the usual conditions of acceptance apply. I " am pleased to inform you that my suppliers state they are " certain they will be able to ship at least 25 p.c. of the order " before the end of the month and might even be able to ship " considerably more. . . . I thank you very much indeed for " entrusting this contract to me and assure you I will give the " matter my personal attention. . ." The bars were intended to be shipped to Pakistan On August 29 the plaintiffs' managing director wrote to the defendant : " Re 3,000 long tons reinforcing " bars, Karachi. We confirm that we have instructed United " Marine (1939) Ld. . . . who are our forwarding agents, to arrange " for shipping space. . . . I am now awaiting receiving a pro " forma invoice . . . also your instructions regarding in whose " favour the credit is to be opened. . . ." The defendant failed to make deliveries under the contract, and the plaintiffs, alleging that they had sugered loss of profit, claimed damages for breach of contract. The claim came before Sellers J., who on November 12, 1952, awarded the plaintiffs $6,900 damages. The defendant appealed, contending that, there being no consensus ad idem in regard to the conditions mentioned in the defendant's letter of August 16, there was not a concluded contract. Kenneth Diplock Q.C. and Mark Littman, for the defendant, referred to the authorities cited in the judgments. S. H. Noakes, for the plaintigs, was not called upon for argument. SINGLETON L.J., having stated the facts, said: On the appeal only one question has been raised, and that really arises on the plea in paragraph 1 of the defence: " The defendant admits the " letters referred to in paragraph 1 of the statement of claim but " denies that the same constituted a concluded contract between " the plaintiffs and the defendant." We have had authorities cited to us to help us to form a view as to whether or not, on the documents in this case, it can be said that there was a concluded contract between the parties. I do not propose to refer to them at length. The position is covered by a judgment of McNair J. in British Electrical and Associated Industries (Cardiff) Ld. v. Patley Pressings Ld.(1) In that case: " The terms of a contract "note in relation to a sale of steel contained the following clause: " 'Subject to force majeure conditions that the government " 'restricts the export of the material at the time of delivery.' "There was a variety of force majeure conditions in the trade, " and no evidence that any particular ones had been agreed on. " The buyers relied on that note as evidencing a contract "; and it was held by McNair J.: "(1) . . . Because the words of the force "majeure clause in the note were too obscure to be capable of "any definite or precise meaning; and (2) because ' conditions ' "in the phrase ' force majeure conditions ' meant ' clauses ' or " 'stipulations ' and not ' contingencies ' or ' circumstances,' "and that, it not being agreed which conditions applied, " there was no consensus ad idem, and therefore no completed contract. . . ." The judge in that case cited some words of Lord Maugham and of Lord Wright in G. Scammell & Nephew Ld. v. Ouston. (2) The words of Lord Maugham were (3): " In order to constitute a " valid contract the parties must so express themselves that " their meaning can be determined with a reasonable degree of " certainty ", and Lord Wright said (4) that the first ground on which the court ought to hold on the facts of that case that there was no contract was " that the language used was so " obscure and so incapable of any definite or precise meaning " that the court is unable to attribute to the parties any particular " contractual intention. " Mr. Diplock submitted to this court that applying those words, we ought, on the documents in this case, to hold that the parties had not entered into a contract; that there was no concluded contract between the parties ; and, again, taking a later passage from the judgment of McNair J., he drew our attention to the fact that, even though the parties thought and acted on the basis that a contract existed between them, no consensus ad idem would be held to exist where there still remained to be negotiated and agreed the exact form of a clause or of conditions. I have referred to the judgment of McNair J. because in it the judge considered the authorities over a con- siderable period, and all the questions which were relevant were considered; but the case which was before McNair J. was quite different from the one with which we have to deal. I come now to the three, or, perhaps, four, documents for our consideration, namely, the three letters and the order attached to the first of those letters. [His Lordship read the letters and continued:] It is sub- mitted by Mr. Diplock that the defendant's letter of August 16 1 [1953] 1 W.L.R. 280, 283; 3 [1941] A.C. 251, 255. [1953] 1 All E.R. 94. 2 [1941] A.C. 251; 57 T.L.R. 280; [1941] 1 All E.R. 14. was not an acceptance of the offer made by the plaintiffs' letter of August 10, that it was at the most a qualified acceptance because of the paragraph: " As you have made the order direct " to me, I am unable to confirm on my usual printed form which " would have the usual force majeure and war clauses, but I " assume that we are in agreement that the usual conditions of " acceptance apply." I regard that letter as an acceptance of the offer; I do not think that it ought to be treated as a qualified acceptance. lt was in fact accepted by the action of the parties later, and, it may be said, by the letter of August 29 from the plaintiffs. On August 29 the plaintiffs wrote to the defendant : " Re " 3,00 long tons reinforcing bars, Karachi. We confirm that " we have instructed United Marine (1939) Ld., 64 Queen " Street, London, E. C.4, who are our forwarding agents, to " arrange for shipping space to take the 3,000 tons "--they had given instructions for that to be done--" and have asked you to " get into direct communication with the director of the United " Marine who is looking after the business, who is Mr. Peachey, " in order that they get into direct communication with your " German steel mills in accordance with your instructions. I " am now awaiting receiving a pro forma invoice covering the " 3,000 tons from you or from your steel mills which should give " all the details which were embodied in my order to you. I " am also awaiting your instructions regarding in whose favour " the credit is to be opened and confirmation from you as to with " what bank the 3 per cent. performance bond is being opened in " our favour and the full wording of the performance bond which " should cover not only a guarantee of delivery, but also the " sizes will be equally divided. The markings are as follows." Then follow details of the lettering and the numbering which were to be put on the cases marking the goods which had to go to Karachi. That letter is signed by Mr. Felix, the managing director of Nicolene Ld , the plaintiff company. It is to be observed that there is not a word said in that letter of August 29 about the paragraph in the letter of August 16 to which I have referred as the important paragraph, and it may well be that Mr. Felix, acting for the plaintig company, did not think that that particular paragraph called for any answer. lt seems to me that what the defendant said in that paragraph was : " I am contracting with you direct; I am " unable to confirm on my usual printed form." He had not a usual printed form. He was referring, we are told, to a form used by some company in which he is the guiding spirit. What he is saying is: " I am not using that form; that form does not " come into the contract; I am unable to confirm on my usual " printed form which would have the usual force majeure and " war clauses ; in other words, they do not come into this " contract." He adds : " but I assume that we are in agree- " ment that the usual conditions of acceptance apply." The - plaintiffs, in answering say nothing with regard to that. There is a contract, and the defendant assumes, and the plaintiffs are content to assume, that the usual conditions of acceptance apply, whatever they are. Mr. Diplock submitted that those very words assumed that there was something to be settled between the plaintiffs and the defendant before there could be a contract. Sellers J. thought that there ought to be implied into the contract a force majeure and war clause of a kind determined rather by the conditions which the defendant used on his company's paper. I do not think that that is right, but I have reached the same conclusion as Sellers J. but by another mode of approach. In my view, the document of August 16 was an acceptance of the contract; that it was treated as such by the plaintigs is clear. That does not matter; but it was in fact an acceptance of a contract, both parties assuming that the usual conditions of acceptance applied. " The usual conditions of acceptance are to apply. " Those words may be thought by some to refer to the conditions as to the quality of the goods--an implied condition that they shall be reasonably fit for the purpose for which they are required; an implied condition that they shall be of merchantable quality; conditions arising from section 14 of the Sale of Goods Act, 1893. For all I know the defendant may have intended that; in which case, they were unnecessary. The words " I assume that we are " in agreement that the usual conditions of acceptance apply " are, to my mind, meaningless, and words which are meaningless ought to be ignored. Mr. Diplock submitted further that we must give a meaning to all the words in the documents. If parties write letters, which are sometimes long, it is not very easy from time to time to give a meaning to all that one or other writes. This defen- dant was the managing director of a company, or the head of a company--I do not know what his position was--which was called the Defiant Cycle Co. Ld., and, according to his evidence, he intended to bring in the conditions of acceptance, or some of them, which he attaches, or his company attaches, to a contract into which they enter. A document before us shows the Defiant Cycle Co. Ld.'s form of confirmation of order: " We thank you " for your esteemed instructions and have pleasure in confirming " your order in accordance with the particulars set out here- " under and subject to the conditions shown overleaf." The conditions shown overleaf are in extremely small print, so small that some considerate solicitor thought it right to let us have a typed copy of them to enable us to read them. It is not important from the point of view of this case, but I find it difficult to think that anyone considering entering into a contract with the Defiant Cycle Co. Ld. would agree to be bound by such conditions (if he read them). There are such terms and conditions as I never remember having seen before, but that is the concern of the Defiant Cycle Co Ld., and the conditions form no part of this case. The paragraph to which importance is attached--" As you " have made the order direct to me, I am unable to confirm on " my usual printed form which would have the usual force " majeure and war clauses, but I assume that we are in agree- " ment that the usual conditions of acceptance apply "--seems to me to mean just nothing. The defendant was writin;, as some people like to write, using important terms about force majeure and war clauses. He may, or may not, have known what they meant, but he put in this paragraph in order to appear as though he understood these things ; he did not intend, nor did anyone else intend, that force majeure and war clauses would apply. That is the way in which I think this paragraph ought to be regarded. In my view, this appeal fails. There Was a contract between the parties; that contract was broken by the defendant, and the judge was right in ordering the defendant to pay damages in respect of his breach of contract. DENNING L.J. This case raises a short, but important, point which can be stated quite simply: there was a contract for the sale of 3,000 tons of steel reinforcing bars, and the seller broke his contract. When the buyer claimed damages the seller set up the defence that, owing to one of the sentences in the letters which constituted the contract, there was no contract at all. The material words are : " We are in agreement that the usual " conditions of acceptance apply." There were no usual condi- tions of acceptance at all, so the words are meaningless. There is nothing to which they can apply. On that account it is said that there was never a contract at all 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, whilst 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. I take it to be clear law that if one of the parties to a contract inserts into it an exempting condition in his own favour, which the other side agrees, and it afterwards turns out that that condition is meaningless, or what comes to the same thing, that it is so ambiguous that no ascertainable meaning can be given to it, that does not mean that the whole contract is a nullity. It only means that the exempting condition is a nullity and must be rejected. It would be strange indeed if a party could escape from every one of his obligations by inserting a meaningless exception from some of them. The proposition which I have stated is supported by the numerous cases where it - has been held that if a man signs a contract expressly as agent for a named company, and it turns out that there is no such company - in existence, because it has not yet been formed, the courts do not say there is no contract; they reject the meaningless words " as agent for the company " and hold that the man himself was a party to the contract. So, also, if he signs " as agent " and has no principal, the words " as agent " are rejected and the contract held to be a good contract between the parties. The case of In re Vince ; Ex parte Baxter,5 as I read it, is an authority in support of what I have said. The contract of loan itself was good, but the vague and unintelligible clause was rejected. The other cases which were relied on are all to be explained on the ground that there was a clause yet to be agreed. In Love & Stewart Ld. v. S. Instone & Co. Ld.,6 where there was a strike clause yet to be agreed, Lord Sumner said that the case was " one of continuing negotiations broken off in medio." In G. Scammell & Nephew Ld. v. Ovston,7 where there were hire-purchase terms yet to be agreed, Lord Wright said " their " agreement was inchoate and never got beyond negotiations." In Bishop & Barter Ld. v. Anglo-Eastern Trading and Industrial Co. Ld.,8 where there was a war clause yet to be agreed, this court said: " Until the parties . . . agreed on a particular form " and content of a war clause, there . . . could be no consensus " ad idem." As I read all those cases, they were cases where there was a clause yet to be agreed, the matter was still in nego- tiation, and there was no concluded contract. I would just say a word about the recent decision of McNair J. in British Electrical and Associated Industries (Cardiff) Ld. v. Patley Pressings Ld.,9 where the contract note contained the clause " subject to force majeure conditions." If the true con- struction of the documents in that case was that an essential term had yet to be agreed, it would fall within the cases to which I have referred, but if the true view was that the exempting clause was agreed but was " so vague and uncertain " as to be incapable of any precise meaning " (which was how McNair J. described it) I should have thought that it could be ignored without impairing the validity of the contract. It was clearly severable from the rest of the contract, whereas the term in G. Scammell & Nephew Ld. v. Ouston10 was not. In the present case there was nothing yet to be agreed- There was nothing left to further negotiation. All that happened 5 [1892] 2 Q.B. 478. 8 [1944] K.B. 12, 14; 60 T.L.R. 6 (1917) 33 T.L.R. 475, 477. 37; [1943] 2 All E.R. 598. 7 [1941] A.C. 251, 269; 57 T.L.R. 9 [1953] 1 W.L.R. 280, 283. 280; [1941] 1 All E.R. 14 10 [1941] A.C. 251. was that the parties agreed that " the usual conditions of " acceptance apply." That clause was so vague and uncertain as to be incapable of any precise meaning. It is clearly severable from the rest of the contract. It can be rejected without impair- ing the sense or reasonableness of the contract as a whole, and it should be so rejected. The contract should be held good and the clause ignored. The parties themselves treated the contract as subsisting. They regarded it as creating binding obligations between them ; and it would be most unfortunate if the law should say otherwise. You would find defaulters all scanning their contracts to find some meaningless clause on which to ride free. Sellers J interpreted the sentence in the letter somewhat differently. He thought it meant that " the usual force majeure " and war clauses apply." Even so, the clause is still meaning- less, because there are no such usual clauses. It is not a case where the clauses had yet to be agreed. There was nothing left to further negotiation. On this interpretation, therefore, the same position is reached. The sentence is meaningless and must be ignored, but the contract, nevertheless, remains good. I agree that the appeal should be dismissed. HODSON L.J. I also agree. It has been contended by the defendant that this is one of those cases in which the parties have left open for future agreement a term in a contract, which is not an essential term, so that there is no contract, a term having been left open on the true construction of the letter of August 16 which has been much discussed. I am of opinion that that letter contains an unqualified acceptance by the defen- dant of the offer and does not contain a qualified acceptance amounting to a counter-offer. It is unnecessary for me to add anything further to what my Lords have said on this subject, or to re-read the passage. It is true, as Mr. Diplock points out that the language used in the paragraph is, if not a qualification of an acceptance, meaningless. I do not accept the proposition that because some meaningless words are used in a letter which contains an unqualified acceptance of an offer, that those meaningless words must, or can, be relied on by the acceptor as enabling him to obtain a judgment in his favour on the basis that there has been no acceptance at all. I agree, therefore, that the appeal should be dismissed. Appeal dismissed. Solicitors : Lucien Fior ; Gouldens. A. W. G. FREDERICK E. ROSE (LONDON) LD. v. WILLIAM H. PIM JNR. & CO. LD. [1952 F. No. 485.] Contract--Rectification--Sale of goods by description--Mutuall mistake as to nature of goods induced by innocent misrepresentation by sellers--Commodity A believed identical with commodity B--Con- cluded oral agreements for commodity B--Written contracts in like terms. The plaintiffs, London merchants, were asked by their Egyptian house for " Moroccan horsebeans described here as feveroes. " Their representative did not know what feveroles were, and asked the defendants' repreeentative, who after making inquiries, told him that feveroles were just horsebeans and that his firm could procure them. After negotiations on that basis, written contracts were concluded (1) between North African suppliers and the defendants, (2) between the defendants and the plaintiffs, and (3) between the plaintiffs and Egyptian buyers, for the sale and purchase of "horsebeans," payment to be in London by confirmed irrevocable letters of credit against shipping dociments. When the horsebeans, shipped from Tunis, were received by the Egyptian buyers, the latter found that the commodity supplied was not feveroles, but another type of bean; but as they had paid for the goods, they accepted them and claimed damages. The resulting disputes between the plaintiffs and the defendants were referred to arbitration, and awards made in favour of the defendants. The plaintiffs then started proceedings in the High Court, claiming, inter alia, rectification of the contracts by the addition of the word "feveroles" after the word " horsebeans," intending if successful to claim damages on the contracts as rectified. Pilcher J. found that both parties had made an oral agreement by which they intended to deal in " horsebeans of the feverole "type," but that owing to a mutual mistake innocently induced by the sellers' representative, all the written contracts were for horse- beans; and he allowed the rectification asked for by the plaintiffs. On appeal by the defendants :-- Held that, as the concluded oral agreement between the parties was for horsebeans, and the written contracts were in the same terms the remedy of rectification, available only where there was clear proof that a written agreement did not correspond with the contract into which the parties entered, as expressed by their outward acts, was not available to make new contracts for feveroles between the parties. Per Denning L.J.: Though both parties were under a funda- mental mistake as to the nature of the subject-matter, the contract was not a nullity, for where parties to a contract were to all out- ward appearances in full and certain agreement, neither of them could set up his own mistake, or the mistake of both of them, to make it a nullity ab initio. Decision of Pilcher J. [1953] 1 Ll.L. Rep. 84 reversed. Dictum of Simonds J. in Crane v. Hegeman-Harris Co. Inc. ([1939] 1 All E.R. 662, 664) that a continuing common intention might be sufficient ground for obtaining rectification doubted by Denning L.J. APPEAL from Pilcher J. The plaintiffs, Frederick E. Rose (London) Ld., and the defendants, William H. Pim Jnr. & Co. Ld., carried on business as merchants and middlemen in the City of London. The plain- tiffs had an associated company in Egypt--Rose (Middle East)-- and the defendants an extensive connexion with North African suppliers and shippers of local products. On October 26, 1950, Rose (Middle East) cabled to their London house : " Have inquiry Egypt up to five hundred tons " Moroccan horsebeans described here feveroles. Please offer " c.i.f. Port Said. . . . " The plaintiffs' market representative, Hampson, did not know what the French term " feveroles " meant, and telephoned to the defendants' representative, Brooks, whom he had known for some 25 years. According to the plain- tiffs' evidence, Hampson read the whole cable to Brooks, and asked him what " feveroles " were. Brooks said he did not know, but would find out, and shortly after he told Hampson that feveroles meant horsebeans and that these could be obtained from Algeria, Tunisia, or Morocco. On October 31, the plaintiffs cabled to their Egyptian house a firm offer to supply " horsebeans," stating in the cable : " Understand horsebeans exact translation feveroles." There followed various offers and counter-offers between the parties and on November 2, 1950, three contracts were signed, as follows : (1) sale by an Algerian company to the defendants of 50 tons Tunisian horsebeans, fair average quality; (2) sale by the defen- dants to the plaintiffs of the like quantity and quality of Tunisian horsebeans; and (3) sale by the plaintiffs to a firm in Port Said of the same quantity of Tunisian horsebeans. On November 7, 1950, three similar contracts for a further 20 tons of Algerian horsebeans were concluded, the buyers in this case being an Egyptian firm in Alexandria. Each contract was on form 62 of the London Corn Trade Association, and included an arbitration clause; and attached to each was a slip containing provisions as to payment, and pro- viding that the certificate of cargo superintendents at shipment was to be final as to weight, quality, condition, and admixture. Payment was to be made by net cash against shipping documents by confirmed irrevocable letters of credit to be opened by buyers with a London bank. In pursuance of these contracts, 50 tons of horsebeans were shipped at Tunis for dispatch to Egypt in December, 1950. The certificate of the cargo superintendents at Tunis at first described them as " feves de Tunisie," whereupon the plaintiffs told the bank not to honour the credit, as they could not accept " feves " as equivalent to horsebeans. The cargo superintendents, there- fore, with the approval of both plaintiffs and defendants, altered the certificate so as to describe the goods as horsebeans--which they in fact were--and the bank paid the price in exchange for the shipping documents. When the Egyptian buyer took delivery of the goods he at once made a complaint that the goods were not " feveroles " but " feves "; but as he had already paid for them by means of the irrevocable credit, he accepted them and claimed damages. As a result of the misunderstanding as to what " feveroles " were, disputes arose between the plaintigs and defendants, and were referred to arbitration. The award of the arbitrators on the contracts of both November 2 and November 7 were in favour of the defendant sellers. Appeals were entered by the plaintiffs, but stood adjourned pending the present proceedings in the High Court. Meanwhile proceedings were taken in the courts of Egypt by the buyers of the 200 tons. After an incursion into the Chancery Court, the plaintiffs began the action against the defendants in the commercial list. By their statement of claim the plaintiffs claimed rectification of both contracts by the addition of the word " feveroles " after the words " Tunisian horsebeans " and " Algerian horsebeans respectively, and also damages for breach of the alleged oral warranty by Brooks, the defendants' representative, namely that he had warranted that goods described as Algerian/Tunisian Moroccan horsebeans were goods commonly known in Egypt as " feveroles " which could be resold in fulfilment of a requirement for " feveroles," and that in consideration of such warranties the plaintiffs had accepted the defendants' offers. Before Pilcher J. the plaintiffs abandoned their claim to damages for breach of warranty, the reason given being that the defendants had pleaded section 4 of the Sale of Goods Act, 1893. as a defence to the claim. During the trial and the hearing of the appeal, it was evident that there was much uncertainty as to the meaning of " feveroles "; it appeared that there were various types of bean grown in various North African countries ; a special type, denoting horsebeans of medium size, were known as " feveroles," a larger type was called " feves," and a small size " fevettes." The medium size were more valuable than the large ones; but the English word " horsebeans " appeared to cover all varieties. Pilcher J. concluded that at the time of the conversations with Hampson, the defendants' representative, Brooks, honestly believed that " North African horsebeans described in Egypt as " 'feveroles' " were in fact the same commodity as " North " African horsebeans, fair average quality," and that he had innocently misled the plaintiffs, with the result that the defen- dants had bought horsebeans which were not feveroles, and had passed this commodity on to the plaintiffs, who in their turn sold it to their Egyptian buyers. He said that though all the written contracts described the commodity as horsebeans, that was solely because of the mutual mistake originating with Brooks, which had been accepted by the plaintiffs He found that both parties made an oral agreement in which they intended to deal in " horsebeans of the feverole type," and he gave judgment for the plaintiffs, on January 23, 1953, holding that they were entitled to have the two forms of contract rectified by the addition of the word " feveroles " after the word " horsebeans." The defendants appealed. T G. Roche for the defendants. W. J. K. Diplock Q.C., Eustace Roskill Q.C., A. J. Bateson and J. H. A. Scarlett for the plaintiffs. The following cases were cited in the argument: Crane v. Hegeman-Harris Co. Inc. (1); Shipley Urban District Council v. 1 [1939] 1 All E.R. 662; [1939] 4 All E.R. 68 (C.A.). Bradford Corporation 2 ; Lovell & Christmas Ld. v. Walls3; Craddock Brothers v. Hunt4 ; United States of America v. Motor Trucks Ld.5; Bell v. Lever Brothers Ld.6; Smith v. Jeffryes 7; Henkle v. Royal Exchange Assurance Co.8 ; Caird v. Moss.9 SINGLETON L.J. stated the facts and continued:--Apart from Hampson and Brooks. I cannot say that it is clear from the evidence that the word " feveroles " has the same meaning everywhere, though it seems fairly clear that they are a type of horsebean. [His Lordship then referred to the conclusions of Pilcher J and continued : ] Innocent misrepresentation may give rise to a right of rejection; that right was not exercised in this case; and it might have been possible to establish a breach of a collateral warranty. Neither of these questions arises. The sole question is as to whether the plaintiffs are entitled to rectification of the contracts. This depends not on intention but on proof that the written contract is not the contract into which the parties entered, and the terms of the contract into which they had entered must be clearly proved. In Crane v. Hegeman-Harris Co. Inc.1 Simonds J. said 2 : " I would rather, I think, say that the court can only act if it " is satisfied beyond all reasonable doubt that the instrument " does not represent their common intention, and is further " satisfied as to what their common intention was. For let it be " clrear that it is not sufficient to show that the written instrument " does not represent their common intention unless positively " also one can show what their common intention was. It is in " the light of those principles that I must examine the facts of " this somewhat complicated case." When that case was before the Court of Appeal Sir Wilfred Greene M.R. spoke of the " high " degree of conviction which unquestionably is to be insisted " upon in rectification cases." 3 I accept without hesitation the finding of Pilcher J. that both Hampson and Brooks were under a mistaken view as to to what " feveroles " or beans described in Egypt as " feveroles " were, and that that mistake came about as the result of what rooks said. Still, it is necessary to ascertain what the contract was- The offer clearly was Tunisian horsebeans. It was so treated by 2 [1936] Ch. 375. 7 (1846) 15 M. & W. 561. 3 (1911) 104 L.T. 85; 27 T.L.R. 8 (1749) 1 Ves.Sen. 317. 236 9 (1886) 33 Ch. D. 22. 4 [1923] 2 Ch. 136. 1 [1939] 1 All E.R. 662. 5 [l924] A.C. 196; 39 T.L.R. 723. 2 Ibid. 665. 6 [1932] A.C. 161; 48 T.L.R. 133. 3 [1939] 4 All E.R. 68, 71. VOL 3 34 the plaintiffs in their cable to Rose (Middle East), who accepted it the same day. On acceptance by the plaintiffs a slip was made out in the defendants' office, and that formed the groundwork of the contract. The oral contract between the plaintiffs and the defendants was in fact for 50 tons of Tunisian horsebeans, and the written contract was in the same terms. In those circum- stances, a claim to rectify the written contract by adding the word " feveroles " could not succeed. The written contract is in the same terms as the oral contract. Whatever remedies the plaintiffs might have, or might have had, rectification is not one of them. Mr Roche, on behalf of the defendant sellers, submitted that either there was a contract for horsebeans, or there was no contract at all. That seems to me to be right. I cannot accept the submission of Mr. Diplock that, because of the conversation some days before November 2 to the effect that " feveroles " meant " horsebeans," the oral contract was a contract for the sale of " feveroles." We know that the defendants passed on to the plaintiffs an offer for the sale of horsebeans. If it had been sought to introduce the word " feveroles " into the contract, it is almost certain that inquiries would have been made in North Africa, and some information might have been forthcoming as to the varieties of horsebeans, in which event Hampson and Brooks might not have agreed on terins, or they might have agreed on terms other than those at which they arrived. The same considerations apply to the second contract as to the first. I do not regard this as a case in which rectification can be granted. I am in favour of allowing the appeal. DENNING L.J. stated the facts and continued :--It is quite plain that neither the Egyptian buyer nor the plaintiffs could claim damages under the written contracts, because those contracts were contracts for horsebeans, and the goods delivered were in fact horsebeans ; and that has been so found by arbitrators in London. In those circumstances the plaintiffs seek in this action to have their contract with the defendants rectified so as to make it refer to " feveroles " instead of horsebeans. If they get the contract rectified they will claim damages for failure to deliver " feveroles." Their object in so doing is, of course, to cover themselves against a claim by their Egyptisn buyers. We were told that the courts in Egypt have, on a similar parcel of 20 tons, already held the plaintigs liable for not supplying " feveroles." Hence the desire of the plaintiffs to be able to claim over against the defendants. The facts which I have stated raise nice questions on the law of mistake. It is quite clear on the evidence that the parties to the second and third contracts (though not to the first) were under a common mistake. The defendants, plaintiffs, and the Port Said firm of buyers all thought that " feveroles " meant horsebeans, and that horsebeans meant " feveroles." They thought that if they got horsebeans they would get the " feveroles " which they wanted. It was under the influence of that mistake that they entered into those contracts for horse- beans. The defendants were, of course, the cause of all the trouble. Thinking that " feveroles " just meant horsebeans, they asked their Algerian supplier to supply horsebeans, and he did so. They ought to have asked him to supply " feveroles," and then there would have been no trouble. The Algerian supplier no doubt knew the difference between horsebeans (" feves ") and " feveroles." If he had been asked for " feveroles," he would have quoted for " feveroles " and supplied " feveroles " ; but being asked only for horsebeans, he supplied horsebeans. What is the effect in law of this common mistake on the contract between the plaintiffs and defendants? Mr. Roche quoted Bell v. Lever Brothers Ld.,(4) and suggested that the contract was a nullity and void from the beginning, though he shuddered at the thought of the consequences of so holding. am clearly of opinion that the contract was not a nullity. It is true that both parties were under a mistake, and that the mistake was of a fundamental character with regard to the subject-matter The goods contracted for--horsebeans--were essentially different from what they were believed to be--" feveroles." Nevertheless, the parties to all outward appearances were agreed. They had agreed with quite sufficient certainty on a contract for the sale of goods by description, namely, horsebeans. Once they had done that, nothing in their minds could make the contract a nullity from the beginning, though it might, to be sure, be a ground in some circumstances for setting the contract aside in equity. In Ryder v. Woodley,(5) where a buyer contracted to buy a commodity described " St. Gilles Marais wheat," believing that it was wheat when it was not, the contract was held to be binding on him and not a nullity. In Harrison & Jones Ld. v. Bunten & Lancaster Ld.,(6) where parties contracted for the supply of " Calcutta kapok ' Sree ' brand," both believing it to be pure kapok containing no cotton, whereas it in fact contained 10 to 12 per cent. of cotton, Pilcher J. held that their mistake, although fundamental, did not make the contract a nullity. In McRae v. Commonwealth Disposals Commission,(7) where sellers contracted to sell a stranded oil tanker, described as lying at a specified point of Samarai, believing that there was a tanker at such a place when there was in fact no such tanker there, nor anywhere in the locality, the High Court of Australia held that the mistake, although fundamental, did not make the contract a nullity, and that the buyers were entitled to damages. The court showed convincingly that Couturier v. Hastie (8) was a case of construc- tion only. It was not a case where the contract was void for 4 [1932] A.C. 161. 7 (1951) 84 C.L.R. 377. 5 (1862) 10 W.R. 294. 8 (1856) 5 H.L.Cas. 673. 6 [1953] 1 Q.B. 646; [1953] 2 W.L.R. 840; [1953] 1 All E.R. 903. mistake The other old cases at common law can likewise be explained At the present day, since the fusion of law and equity, the position appears to be that when the parties to a contract are to all outward appearances in full and certain agree- ment, neither of them can set up his own mistake, or the mistake of both of them, so as to make the contract a nullity from the beginning. Even a common mistake as to the subject-matter does not make it a nullity Once the contract is outwardly complete, the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends or for fraud, or on some equitable ground: see Solle v Butcher.9 Could this contract, then, have been set aside? think it could, if the parties had acted in time This contract was made under a common mistake as to the meaning of " feveroles " and " horsebeans." This mistake was induced by the innocent misrepresentation of the defendants made to the buyers and passed on to the sub-buyers. As soon as the buyers and sub-buyers discovered the mistake, they could I think, have rejected the goods and asked for their money back. The fact that the contract was executed would not be a bar to rescission. But once the buyers and sub-buyers accepted the goods, and treated themselyes as the owners of them, they could no longer claim rescission. see Leaf v. International Galleries.10 The buyers now, after accepting the goods, seek to rectify the contract. Instead of it being a contract for " horsebeans " simpliciter they seek to make it a contract for " horsebeans " described in Egypt as feveroles " or, in short, a contract for " feveroles." The judge has granted their request. He has found that there was " a mutual and fundamental mistake " and that the defendants and the plaintiffs, through their respective market clerks, " intended to deal in horsebeans of the feverole " type "; and he has held that, because that was their intention --their " continuing common intention "--the court could rectify their contract to give effect to it. In this I think he was wrong. Rectification is concerned with contracts and documents, not with intentions. ln order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, one does not look into the inner minds of the parties--into their intentions--any more than one does in the formation of any other contract. One looks at their outward acts, that is, at what they said or wrote to one another in coming to their agreement, and then compares it with the document which they have signed. If one can predicate with certainty what their contract was, and that it is, by a common mistake, wrongly expressed in the document, then one rectifies the document; but nothing less 9 [1950] 1 K.B. 671, 691; 66 10 [1950] 2 K.B. 86; 66 T.L.R. T.L.R. (Pt. 1) 448; [l949] 2 All E.R (Pt. 1) 1031; [1950] 1 All E.R. 693. 1107 will suffice. It is not necessary that all the formalities of the contract should have been executed so as to make it enforceable at law (see Shipley Urban District Council v. Bradford Corpora- tion 11); but, formalities apart, there must have been a concluded contract. There is a passage in Crane v. Hegeman-Harris Co. Inc.12 which suggests that a continuing common intention alone will suffice; but I am clearly of opinion that a continuing common intention is not sufficient unless it has found expression in out- ward agreement. There could be no certainty at all in business transactions if a party who had entered into a firm contract could afterwards turn round and claim to have it rectified on the ground that the parties intended something different. He is allowed to prove, if he can, that they agreed something different: see Lovell & Christmas v. Wall, per Lord Cozens-Hardy M.R., and per Buckley L.J ,13 but not that they intended something different. The present case is a good illustration of the distinction. The parties no doubt intended that the goods should satisfy the inquiry of the Egyptian buyers, namely, " horsebeans described " in Egypt as feveroles." They assumed that they would do so, but they made no contract to that effect. Their agreement, as outwardly expressed, both orally and in writing, was for " horse- " beans." That is all that the defendants ever committed themselves to supply, and all they should be bound to. There was, no doubt, an erroneous assumption underlying the contract --an assumption for which it might have been set aside on the ground of misrepresentation or mistake--but that is very different from an erroneous expression of the contract, such as to give rise to rectification. The matter can best be tested by asking what would have been the position if the contract between the defendants and the plaintiffs had been for " feveroles." Surely, then, the defen- dants on their side would have stipulated with their Aglgerian suppliers for the delivery of " feveroles," and the plaintigs on their side would have agreed with their sub-buyers to deliver " feveroles." It would not be fair to rectify one of the contracts without rectifying all three, which is obviously impossible. There is one other matter I must mention. In the statement of claim the plaintiffs originally claiined damages for breach of a collateral warranty--a warranty that the horsebeans would be a compliance with a demand for " feveroles "--but that claim was formally abandoned at the trial. I do not myself quite see why it was abandoned. Section 4 of the Sale of Goods Act, 1893, was no bar to it. Nor was such a warranty in any way in contradic- tion of the written contract. Smith v. Jeffryes14 was not an action on a collateral warranty. The only difficulty might be whether it was a contractual warranty or merely an innocent misrepresentation. I should myself have thought that it had a 11 [1936] Ch. 375. 13 (1911) 104 L.T. 85, 88, 93. 12 [1939] 1 All E.R. 662, 664. 14 (1846) 15 M. & W. 561. better chance of success than the claim for rectification. It was put forward by the plaintiffs very forcibly in their letter of March 12, 1951, but its abandonment at the trial makes it impossible for us to consider it. We have only to consider the question of rectification; and on that I think that the plaintiffs fail. I agree that the appeal should be allowed and judgment entered for the defendants. MORRIS L J. Both plaintiffs and defendants are merchants engaged in the grain trade and dealing on the Baltic Exchange, and there can be no doubt that the plaintiffs, as buyers, would appreciate that the defendants did business for forward shipment. The plaintiffs would appreciate that the defendants bought and sold simultaneously and would buy from a shipper in order to sell to the plaintiffs. The defendants knew that the plaintiffs were buying in order to resell. These circumstances do not, however, govern the determination of the issue of rectification now raised between the parties. It seems to me clear beyond doubt that both parties proceeded on the basis that " feveroles " and " horsebeans " were the same The plaintiffs' representative expressed the matter succinctly when he said : " I had agreed to buy because feveroles were " horsebeans and horsebeans were feveroles." In that belief the parties came to agreement, and the formal written contracts were prepared and signed. The parties had throughout a clear common intention and purpose of buying and selling horsebeans, and their written agreements faithfully embodied and exactly recorded what they had agreed. In these circumstances it seems to me that no claim for rectification can succeed. Both parties thought that the result of what they clearly understood and clearly expressed would be that the plaintigs as buyers would be able to satisfy the inquiry which, as the defen- dants knew, had been received. In that they were mistaken as a result of the advice honestly given by the defendants' market clerk. But the fact that they were under a mistaken impression as to what their agreement would achieve does not disturb the clarity and the fixity of the agreement which they in fact made. The defendants intended to offer horsebeans and the plaintigs intended to accept horsebeans : the written agreements correctly reflected and incorporated what they had agreed. The judge said that " both the plaintigs and the defendants " made an oral agreement in which they intended to deal in " horsebeans of the feverole type." With respect, that was not quite the position. There was no question of contracting in reference to a " type " of horsebeans. There was a joint under- standing that they should contract in reference to " horsebeans " simpliciter which they thought were the same as " feveroles." If, as now appears to be the case, they were wrong, it appears probable that they would not have acted as they did had they been enlightened. But this does not enable one party to convert " horsebeans " it cannot be said that the parties agreed on the no knowledge. The defendants were selling " horsebeans," and in order to sell they would have to acquire " horsebesns." If " feveroles " are different, then the defendants, and equally the plaintffs, never even gave their minds at all to the question of a sale of some products which are different from " horsebesns." Appeal allowed. Leave to appeal to the House of Lords refused. Solicitors . Richards, Butler & Co. ; Thomas Cooper & Co. M. M. H. BREWER STREET 1NVESTMENTS LD. v. BARCLAYS WOOLLEN CO. LD. Landlord and Tenant--Vendor and purchaser--Negotiations subject to contract--Agreement to alter premises--Negotiations abortive-- Claim for cost of alterations--Claim implied in law--Restitution. Building--Licence--Extras--Separately ordered--Presumed within free allowance. The defendants, who were prospective tenants of certain premises, and the plaintiffs were in negotiation as to the terms of a lease. Agreement on the principal matters had been reached subject to contract. The plaintiffs undertook to make certain altera- tions in the premises desired by the defendants, who accepted responsibility for the cost. The parties were eventually unable to agree on a term of the lease concerning a possible future sale of the premises to the defendants and, as a result, the matter went off, and work on the alterations, which had progressed to a consider- able extent, was stopped. contractor in respect of the alterations, sued the defendants for the amount paid as moneys " paid by the plaintiffs to the use of " the defendants at the defendants' request in respect of the cost " of alterations " :-- Held, (i) the circumstances negatived a presumed intention of the parties that the defendants should pay the cost of the alterations only on the condition that a lease was entered into. (ii) In the circumstances, the defendants were liable to the plain- tiffs whether the matter were regarded as having gone off through the defendants' conduct or in circumstances for which neither party was responsible. (iii) (Per Denning L.J.) the legal basis for the plaintiffs' claim was not on a quantum meruit, for no contract had been completed, nor for breach of contract, for there had been no breach, but on a request implied in law, that was to say, a claim in restitution. The test of liability in such cases was : On whom, in all the circum- stances, should the risk fall? (iv) In considering the principle that a plaintiff could not recover for work illegally done by reason of the absence of a licence, an item which was not within the specification covered by the licence but was separately ordered was prima facie outside the principle in Dennis & Co. v. Munn [1949] 2 K.B. 327; 55 T.L. It. 251 ; [1949] 1 All E.R. 616. APPEAL from Morris L.J. sitting as an additional judge of the Queen's Bench Division. The defendants were the prospective tenants and the plaintiffs the landlords of premises at 62 Brewer Street, London, W.1. In a letter dated January 9, 1951, the defendants offered to take a lease of the premises for a term of 21 years at a rent of $2,750 a year with an option to purchsse within 60 days of the signing of the lease at a price of $40,00. The plaintiffs' agents, in a letter dated January 10, 1951, agreed as to the duration of the lease and the rent, but as to the option to purchase made a counter offer of a right to first refusal at the same figure. The negotiations had been expressed to be subject to contract, but had proceeded so far, and with such mutual confidence, that both parties assumed that a lease would be granted. The pro- spective tenants, who were anxious to enter by the end of March, desired that certain alterations to the premises should be made. In correspondence between the parties the landlords agreed to make the alterations by their contractors. Among the alterations so desired was the fitting of an extra door in the lift. On January 23, 1951, the plaintiffs' solicitors sent to the defendants' solicitors a draft lease containing a paragraph giving the defendants a right of first refusal if within two years from the execution of the lease the landlords should desire to sell the fee simple. In a letter of January 26, 1951, written by their architect, the defendants agreed to be responsible for the cost of the alterations. On January 31, 1951, the defendants' solicitors returned the draft lease inserting, by revision, an option to purchase the premises. Negotiations continued and the altera- tions were put in hand. Under cover of a letter of February 6, 1951, the draft lease was returned from the plaintiffs' solicitors, amended in purple, with the right to first refusal reinstated. As a result it became clear that the defendants were unwilling to enter into a lease on terms acceptable to the plaintiffs and that the plaintiffs were unwilling to grant a lease acceptable to the defendants. The work on the alterations, which had progressed to a considerable extent was stopped. The plaintiffs paid to their contractors the cost of the work up to that date, and sought to recover it from the defendants. Morris L.J. held that the defendants were liable. The defendants appealed. Gilbert Dare for the defendants. Montague Waters for the plaintiffs. Cases cited in argument: Jennings and Chapman Ld. v. Woodman, Matthews & Co.1; Luxor (Eastbourne) Ld. v. Cooper2; Broome v. Pardess Co-operative Society of Orange Growers (Est 1900) Ld.3 ; Dennis & Co. v. Munn4; Muir v. James5 ; Bostel Bros. Ld. v. Hurlock.6 SOMERVELL L.J. On the claim as a whole Mr. Dare, who appears for the defendants, took two points. He submitted first, that the contract with regard to these alterations should be read as subject to a lease being entered into. Assuming he is wrong, his second point is that the plaintiffs could not recover unless they could show that they were at all times ready and willing to grant a lease on the terms set out in their original letter " subject to contract," namely the first refusal at $40,00 over the period of the lease, and that the contract which they themselves submitted showed that they were not ready and willing to do that. The plaintiffs rely on the fact that the defendants did not ask them to revert to the original term but reinserted in effect a provision for an option. On the first point, which was taken in the pleadings and which was decided against the defendants, the judge in the court below was plainly right. I cannot see any reason for implying into this contract a term that the defendants were to be under no liability unless there was a lease, or, in other words, that the confirmation of their responsibility should be read as subject to their entering into a lease. As was pointed out by Romer L.J. in the course of the argument, the whole matter of the lease 1 [1952] 2 T.L.R. 469. 4 [1949] 2 K.B. 327; 65 T.L.R. 2 [1941] A.C. 108; 57 T.L.R. 213; 251; [1949] 1 All E.R. 616. [1941] 1 All E.R. 33. 5 [1953] 1 Q.B. 454; [1953] 2 3 56 T.L.R. 430; [1940] 1 All W.L.R. 423; [1953] 1 All E.R. 494n. E.R. 603. 6 [1949] K.B. 74; 64 T.L.R. 495; [1948] 2 All E.R. 312. being subject to contract, the defendants could have resiled without giving any reason. It seems impossible that they could have expected the plaintiffs to continue with this work on the basis that they would have to pay for alterations which the defendants wanted if the defendants entirely on their motion decided not to go on with the lease. That point fails. One then approaches the question on the basis of whether any facts are shown which would entitle the defendants to say that they were not in the events which have happened liable to fulfil the responsibility which they undertook by the letter of January 26, 1951. The judge approached the matter in this way. He said : " In approaching the present case it may be " useful to consider two situations just to test the matter " Supposing the work had all been done, and supposing the " defendants had then said they had changed their mind and " they were not going to take a lease at all. There was no " binding contract, and they would have been entitled for no ' reason or for a bad reason to refuse to entering to a lease. " It would seem strange if, in those circumstances, the defen- ' dants were not obliged to pay. Take another case : supposing " the work was all done and the defendants remained willing to " take a lease on the terms in principle agreed, and then " supposing the plaintiffs said : ' Well, we have changed our " ' minds - we are not going to grant you a lease,' or ' We have " ' found someone else who will pay more,' it would seem strsnge " if, in those circumstances, the defendants were obliged to pay. " It seems to me that much turns upon the reason why the " whole of this matter came to an end, and the correspondence " seems to me to show the reason was that the defendants " insisted on having an option though an option had never been " promised, so for that reason the whole of the negotiations came " to an end. I think the basis of the promise entered into by " the defendants might well have been that the plaintigs should " remain in principle agreeable, subject, of course, to contract, " to grant a lease on the general lines of the letter on p. 4 of " the correspondence. The implied term as pleaded in this case, " to which I have referred in my judgment, wholly fails. There " could not have been an implied term on such a wide basis. " The highest I think that it could be stated from the point of " view of the defendants was as 1 have put it, namely that the " promise was on the basis of the plaintiffs remaining of the " same mind as they had revealed before the promise to pay for " items of work was made. Although the plaintigs by the first " draft of their lease were seeming to depart from it, the " correspondence seems to me to show that the real reason why " this matter went off was that the defendants were insisting on " an option." [His Lordship referred to the course of the argument in the court below and continued quoting the judgment of Morris L.J. : ] " They had never been promised an option. " It had been made clear that no option would be given, and " therefore on that part of the case in my judgment the defen- " dants have failed to show that they have a defence to this " claim." I agree with that construction of the correspondence, but if one considers the matter in principle the defendants undertook responsibility for this work at a time when they knew that either side could resile and decide not to conclude a lease. The only question of law therefore would be whether the events which have happened by reason of some implication entitle the defendants to put up a defence. The judge below clearly thought that if the matter had gone off because the plaintiffs had changed their mind or had found someone else who would pay more the defendants would have such a defence. It is unnecessary to decide that point though there seems to be a strong argument for that view. It is plain that the inatter went off through the defendants' own course of conduct in adhering to the condition that they should get an option when it had been made clear to them that the plaintiffs were not willing to grant an option. If Mr. Dare is right in saying in the alternative that the lease went off through circumstances for which neither party can be regarded as responsible, that is in the ordinary course of negotia- tions and misunderstandings, I still think that would not afford a good defence to this claim. I wish to guard the words I use because an earlier case which came before this court shows that the area is somewhat difficult. Each case must be judged on its own circumstances. There might be a case in which the circum- stances were such, and the benefits conferred on the landlord if the matter went off were such, that, even although it was not through the deliberate action of the landlord that the matter went off, the defendants still might have a defence. One should not seek to anticipate circumstances which may arise. For these reasons on the inain claim the decision in the court below was right and the appeal fails. It was then said that there was a defence in respect of the extra door of the lift in that it was said that no licence was obtained for that, that the work was therefore illegal and, on principles which have been applied to this particular area more than once in reported cases, the plaintiffs could not recover for work illegally done because of the absence of a licence. Mr. Waters took the point that this sum of $48 10s. is within the amount of work which can be done under the regulations without a licence. Dennis v. Munn decided that, where a licence had been granted for a certain amount on a specification and that amount had been exceeded, the builder could not claim that the amount of the free allowance should be added to the amount covered by the licence. In Muir v. James 2 the question was raised as to the application of that principle to extras, that is to say, something not in terms covered by the original specifica- tion but separately ordered. There may be cases in which an W.L.R. 423; [1953] 1 All E.R. 494n extra may be separately ordered and may be sufficiently separable from the original work to be plainly coverable by the free allowance. Although the extra is separately ordered, outside the terms of the specification, it may be so involved in the specification as to fall under the principle of Dennis v. Munn. An extra is, however, prima facie outside the principle of Dennis v. Munn and there are no facts proved here which negative that position, the onus being on the defendants. For these reasons this appeal should be dismissed. DENNiNG L.J. This case raises questions of considerable interest. The landlord seeks to recover from the prospective tenant the moneys which he has had to pay to his own con- tractors for the work done on the alterations before the negotiations for the lease broke down The question is whether he can do so. It is not easy to state the legal basis of the landlord's claim The difficulty arises because although the tenant agreed to pay the cost of the alterations, nevertheless those alterations were never completed. The work was abandoned before it was finished. Once the negotiations for a lease broke down, both sides realised that the work must be stopped. It was a very sensible thing to do, but it means that the landlord cannot sue for the price as on a completed contract. Nor can he sue the tenant for damages for breach of contract, because the tenant has not been guilty of a breach. Let me give an instance. One item of the work was a lift door to be made, fixed and installed for the lump sum of $48 1Os. At the time when the work was abandoned, the lift door had been made in the provinces but it had not been transported to London, let alone fixed or installed. Nevertheless the landlord has had to pay to his contractors the full sum of $48 10s presumably by way of damages, and he seeks to recover it from the prospective tenant. He clearly cannot recover on a quantum meruit as ordinarily understood. The way he puts his claim on this item and the others in the statement of claim is money paid on request. The tenant, however, made no request in fact to the landlord to pay the money. His request, if any, was to pay on completion of the work, and it was not completed. In these circumstances, the proper way to formulate the claim is on a request implied in law, or, as 1 would prefer to put it in these days, on a claim in restitution. It is clear on the facts that the parties proceeded on a fundamental assumption--that the lease would be granted-- which has turned out to be wrong. The work done has been wasted. The question is on whom is the loss to fall? The parties themselves did not envisage the situation which has emerged and did not provide for it; and we do not know what [1949] 2 K.B. 327; 65 T.L.R. 251; [1949] 1 All E.R. 616. they would have provided if they had envisaged it. Only the law can resolve their rights and liabilities in the new situation, either by means of implying terms or, more simply, by asking on whom should the risk fall. This is how the court approached a similar question in Jennings and Chapman Ld. v. Woodman, Matthews & Co.,4 and I think we should approach the question in the same way Morris L. J. gave a reserved judgment in which he put the matter in a way which appeals to me. He asked hiinself : what was the reason that the negotiations broke down? If it was the landlord's fault, as for instance if he refused to go on with the lease for no reason at all, or because he demanded a higher rent than that which had been already agreed, then he should not be allowed to recover any part of the cost of the alterations. Even if the landlord derived no benefit from the work, he should not be allowed to recover the cost from the tenant, seeing that it was by his fault that the tenant was deprived of it. On the other hand if it was the tenant's fault that the negotiations broke down, as for instance, if he sought a lower rent than that which had been agreed upon, then the tenant ought to pay the cost of the alterations up to the time they were stopped. After all, he did promise to pay for the work; and he should not be able to get out of his promise by his own fault, even though the alterations were not completed. It is a very old principle laid down by Lord Coke that a man shall not be allowed to take advantage of a condition brought about by himself. I do not think, however, that in the present case it can be said that either party was really at fault. Neither party sought to alter the rent or any other point which had been agreed upon. They fell out on a point which had not been agreed at all. From the very beginning the prospective tenant wanted an option to purchase whereas the landlord was only ready to give him the first refusal. Each of them in the course of the negotia- tions sought on this point to get more favourable terms--the tenant to get a firm option to purchase, the landlord to give a first refusal of little value--but their moves in the negotiations can hardly be considered a default by one or other. What then is the position when the negotiations go off without the default of either? On whom should the risk fall? In my opinion the prospective tenant ought to pay all the costs thrown away. The work was done to meet his special requirements and was prima facie for his benefit and not for the benefit of the landlord. If and in so far as the work is shown to have been of benefit to the landlord, credit should be given in such sum as may be just. Subject to such credit, the tenant ought to pay the cost of the work; because he in the first place agreed to take responsibility for it : and when the matter goes off without the 4 [1952] 2 T.L.R. 569. default of either side, he should pay the costs thrown away. There is no finding here that the work was of any benefit to the landlord and in the circumstances the tenant should, I think pay the amount claimed. Mr. Waters argued that the test laid down in Jennings and Chapman Ld. v. Woodman, Matthews & Co. was wrong It was not right, he said, to ask whose fault it was, or on whom should the risk fall, because each side had an absolute right to withdraw from the negotiations: and could not be said to be at fault in doing so. He referred to Luxor (Eastbourne) Ld v. Cooper and argued that, even if the landlord, for instance, demanded a higher rent and thus caused the negotiations to fall through, he could still recover the cost of the alterations 1 do not think that is right. Estate agents are employed on the footing that they get a large commission if a sale is completed but nothing if it is not. They take the risk of the deal falling through. The cases on the subject are, therefore, illustrations of the same test on whom in all the circumstances should the risk fall? In the present case I think the risk should fall on the prospective tenant and that he should pay the costs of the alterations On the question of illegality I have nothing to add to what Las been said. I agree that the appeal should be dismissed. ROMER L.J. I agree. As has been pointed out by Somer- vell L.J., this case falls to be decided on its particular facts and circumstances. On those facts and circumstances I hope I shall not be regarded as unsympathetic to the defendants if I say that in my opinion they have only themselves to blame for the judg- ment which was delivered against them. The truth of the matter is that they were in a very great hurry to get into these premises because the lease of their own premises was running out and because of that hurry they did things which in the normal course they would not have done. On January 26, 1951, the defendants' architect wrote to the plaintiffs unequivocally accepting responsibility for the cost of the work as mentioned. I am unable to read that letter as amounting in any sense to a conditional acceptance of respon- sibility. The defendants knew what the position was in regard to the lease. They knew that this formidable difference had already arisen between themselves and the plaintigs with regard to the option. But they wanted to get on, they wanted the work done, and I am satisfied that they were prepared to take the risk of the matter of the lease not coming eventually to a satisfactory conclusion. If one is asked to imply something into the acceptance, for example that the responsibility should only arise or be enforceable if a lease was to be granted, two questions [1949] 2 T.L.R. 469 [1941] A.C. 108; 57 T.L.R. 213; [1941] 1 All E.R. 33. agreed) and secondly, what the reaction of the landlords would have been had that condition been introduced in terms. I for " you to put this work in hand but we are only going to pay for " it provided we eventually get a lease which will be agreed " between us," the plaintiffs would not have had the work done " between us," the plaintiffs would not have had the work done at their own risk as to cost. Taking the whole of the circum- stances, the dates, the urgency of the matter, the fact that the defendants themselves paid unequivocally and directly for part of the electrical work without any suggestion of their liability in that regard being conditional, I have no doubt but that in common phraseology they were " taking the risk " for their own purposes in the hope that they would get the benefit of it if, as they hoped and thought, a lease was finally agreed and granted. As the negotiations failed, solely because the defendants to the end insisted on getting that which they had been told allready the plaintiffs were unwilling to give, namely, an option, I cannot see how they can escape responsibility by seeking to put the blame on the shoulders of the plaintiffs. It may well be that if, after this work had been done, the plaintiffs got the benefit of it and had then said " We will not grant a lease at all," the defendants would not have been without remedy. That was not the position in this case. The facts led to an entirely different result. I accordingly agree that the appeal should be dismissed. On the other points which have arisen I have nothing to add. Alppeal dismissed. Solicitors - Lucien Fior, Arnold Lee & Co. [COURT OF APPEAL.] * POWELL v. BRAUN. [Plaint No. 360.] Master and Servant--Remuneration--Employee to be paid by salary and bonus--Method of assessing bonus never agreed--Service terminated --Right of employee to bonus never agreed--Service terminated Contract--Uncertainty--Sum payable not stipulated--Reasonable sum. Quantum meruit. " Bonus." The plaintiff had been employed by the defendant as his secretary in his business for some two years when he wrote to her on March 18, 1946, expressing satisfaction with the services which she had rendered to him in the past and the wish that she should undertake additional responsibility in the future. He offered to pay to her, in recognition of her past services and such additional responsibility, a bonus on the net trading profits of the business instead of an increase in salary. The plaintiff wrote the same day accepting that offer. The manner in which such bonus was to be assessed was never agreed but the defendant did, in fact, pay to the plaintiff a bonus in subsequent years. The plaintiff's contract of service having been terminated, the defendant refused to pay any bonus to the plaintiff in reepect of her last two years' service contending that, on the true construction of his letter, there was no firm promise to pay the plaintiff anything ; alternatively, that his letter was of so vague a character that it was incapable of foruning the basis of a claim in contract. :-- Held, that on the true construction of the letters the parties did not intend the payment of a bonus to be purely in the discretion of the defendant ; that the principle of quantum meruit was no less applicable when the remuneration was additional remuneration-- that was remuneration over and above a fixed salary--than it was when it was the only remuneration ; and that, accordingly, the plaintiff was entitled to be paid the sum which the partiea had agreed to be payable if the defendant were liable to pay a bonus. Taylor v. Brewer (1813) 1 M. & S. 290 considered APPEAL from Judge Glazebrook sitting at Bromley County Court. The plaintiff, Pamela Irene Powell, had been employed by the defendant, H. W. Braun, from 1944, as his confidential secretary. By letter dated March 18, 1946, the defendant wrote to the plaintiff: " You have now been with me for just two " years, both of them very eventful, and during the first you did ' without question many things which were hardly within your " contract of engagement; I shall always remember with " particular gratitude everything you did for Mrs. Braun. As I " have mentioned to you on various occasions, it is my wish for " you to act and work on your own initiative rather than to feel " you must always refer matters to me; I am, of course, on hand " for any business problem which may arise, but now we have ' two juniors it is more necessary than before that you are able " to handle matters yourself both from the business angle and " from your own personal prestige and authority as befits your " position. I have not hitherto mentioned to you the question " of a rise in salary, and with the added responsibility you now " have I feel that some recognition of this and of past service is due to you. A stereotyped rise is all very well, but my " opinion has always been that a bonus on the net trading profit " is more interesting to anyone. I therefore propose to adopt " this with you and that, say, about May each year I shall pay " you an amount according to the trading results of the previous " financial year to the end of March ; I cannot say at this " juncture what the amount will be, but I am sure you will not " be disappointed with it from year to year. I will conclude " with the hope that you may stay with me for many a day as " my confidential secretary and senior member of the stay even " if the latter be only small." The plaintiff replied to that letter on the same date as follows: " Your letter of today was quite unexpected, but a very " pleasant surprise. Your idea of a yearly bonus is very con- " siderate, and one which I much appreciate. I do agree with " you that this is more interesting than an actual weekly increase, ' and it is certainly very encouraging. You have always done " everything possible to make my work happy and interesting " and have assisted me m all ways, and I sincerely hope that I " shall be able to influence our juniors in a similar manner, and " that between us we shall build a really flourishing business " There are very few people who would have included their " secretary as a member of the family as you and Mrs. Braun " included me during our stay in Ayr. Anything I did for Mrs. " Braun during her illness has been more than repaid in the " friendship and consideration you have both shown to me both " in Ayr and since we returned. I also hope that I shall have " the pleasure of working with you for ' many a day ' " The plaintiff relying on the defendant's offer continued in his employment undertaking additional responsibilities and was paid a bonus in 1946 and in each of the following years, the largest payment being $55 and the smallest $20. The plaintiff did not know on what basis these payments were calculated. She con- tinued in the defendant's employment until April 27, 1953, when she left. In these proceedings she claimed, first, two weeks' arrears of salary, as to which no question arose in the appeal; secondly, a declaration that she was entitled to be paid a bonus in respect of the two years ending March 31, 1952, and March 31, 1953; alternatively damages for breach of the agreement contained in the correspondence as a quantum meruit. By his defence the defendant denied that his letter of March 18, 1946, contained an agreement to pay an annual bonus. The county court judge held that the defendant's letter of March 18, 1946, did contain a proimse to pay a bonus, but the sum payable was left to his discretion and the contract was too vague to be enforced. He further held that since the plaintiff had undertaken additional work on the terms that she was to be paid a sum depending on the defendant's discretion, she was precluded from relying on a quantum meruit. He accordingly dismissed her claim to be paid a sum for bonus. He found that, if she were entitled to rely on a quantum meruit, the sum due was $25, which the parties had agreed to be the amount of bonus, if any, payable. The plaintiff appealed. Michael Scholfield for the plaintiff E. A. Bramall for the defendant. The following authorities were referred to in argument: Broome v. Speak1; Bryant v. Flight2; Roberts v. Smith3; Taylor v. Brewer4; Loftus v. Roberts5 ; Way v. Latilla.6 EVERSHED M.R. stated the facts, read the relevant corre- spondence and continued : In this case I have taken a different 1 [1903] 1 Ch. 586; 19 T.L.R. 187. 4 (1813) 1 M. & S. 290. 2 (1839) 5 M. & W. 114. 5 (1902) 18 T.L.R. 532. 3 (1859) 4 H. & N. 315. 6 [1937] 3 All E.R. 759. view from the county court judge. The action was one brought for salary by the plaintiff, who was formerly employed by the defendant. The claim comprehended two heads : first, for a certain small sum for fixed remuneration, about which no question arises in this court; and, secondly, for a further sum alleged to be due by virtue of the letter of March 18, 1946, written by the defendant to the plaintiff and the plaintiff's reply. The question for determination turns on the true intention of the parties to be derived from this correspondence. Unhappily the amiable and generous language in which the plaintiff and defendant addressed each other in March 1946 did desirable to be precise in matters of this kind. Certainly, within quite a short time, the defendant appears to have been somewhat grudging in implementing whatever he intended by his letter. I am bound to say that, to my mind, at the present time he cuts a somewhat unattractive figure. Mean to the plaintiff, he was obviously held by the judge to be an unreliable witness. I have no doubt, on the facts as found by the judge, that the plaintiff's continued service of the defendant would never have occurred had it not been for her reliance upon this promise; and, as the judge expressly said, she thenceforth undertook more responsible work than otherwise she had performed, or would have performed. Still, that is no necessary answer to the questions that are raised, whether, having regard to the vague and general terms of these letters, the plaintiff can now sue upon the letters for the sums which she claims. Two answers to the plaintiff's claim are put forward : First, it is said that on the true construction of the letter of March 18, 1946, there was no firm promise to pay anything ; that it was merely a statement that, if the plaintiff continued to serve and to undertake the more responsible work as suggested, the defen- dant would give her something or nothing as in his discretion he might from time to time think fit. Second, it is said that in any case the whole document is of so vague and general a character that it is incapable of forming the basis of a claim in contract; and further, that a claim based on quantum meruit or its equivalent in a case of this kind is a novelty which finds no parallel, or no exact parallel, in the decided cases. Through the industry of counsel, we have had the advantage of looking at a number of cases in which this kind of question has been before the court, and it emerges, I think quite plainly-, from these authorities that the first and vital question is that of the construction of the two documents which must be taken to represent and evidence the joint intention of the parties on March 18, 1946. The judge, perhaps influenced particularly by the use of the word " bonus," concluded in his careful judgment that the true effect of this arrangement was that any further payment over and above the fixed salary--to quote the lsnguage of Bayley J. in Taylor v. Brewer 1--should be in the breast of the defendant, whether he should pay anything or nothing. For my part, I am unable to accept that view. I think that the nature of the engagement, the service which the plaintiff had rendered, the circumstances in which the letter was written, the particular emphasis upon the defendant's own desire in his own business interest that the plaintiff should assume more responsibility and act more on her initiative--there having been two juniors engaged --all these matters make it quite plain that this suggestion for what was called a bonus meant an obligation to pay something in lieu of an addition to salary, and the conduct of both parties, to my mind, makes it plain that it was so understood by them both. The plaintiff, whom the judge clearly regarded as a truthful witness, said : " I said I should not have accepted [this offer] " if I had known that the defendant claimed, as he did shortly " afterwards, that the arrangement did not operate for another " fourteen months "--making it clear as I think, that she relied upon this promise as being soinething which she was accepting in lieu of increased salary and in consideration of continued service and greater responsibility- On the other side' there is not the smallest hint or suggestion on the part of the defendant that he was under no liability at all, if he chose not to pay, until the action is brought. When eventually the plaintiff left the defen- dant's service, the only point the defendant took was that there was only one year's so-called bonus " due " from him instead of two, as she claimed. Assisted as I have been by the cases cited, which illustrate the approach which the court makes in cases of this kind, I conclude here, as a matter of construction, that the parties did not mean and intend the payment of a bonus to be purely discretionary. That, however, leaves the further question whether the whole document is in its terms and character too vague and general to be capable of supporting a claim of this kind. Again I reject that view. Once it is concluded that this was not to be a reward in the discretion of the defendant, then inevitably it must mean, according to its terms, that the sum to be paid--unless the parties chose from time to time to agree some other figure-- would be a reasonable sum; that is, a sum arrived at so as to bear a reasonable relationship to the trading profit. Of course if there were no trading profit, no doubt there would be no so-called bonus; but, in any other event, then I think that the principle of a quantum meruit or of reasonable remuneration (which comes to the same thing) is no less applicable where the remuneration in question is additional remuneration--that is over and above the fixed salary--than it is to a case where it is the only remuneration 1 (1813) 1 M. & S. 290. That being so, the rest of the case is simple. The judge took the view--adopting what the defendant had said--that 12s. a week would be a fair sum to fix, since that would be the sort of additional salary according to the defendant, which would have been paid if there had not been a bonus. But the parties themselves have seen fit to come to an agreement that, having regard to the trading profits as they in fact were during the two years ending March 31, 1952 and 1953, a reasonable remuneration on the basis of those profits would be $25 for the two years. In those circumstances, and for the reasons which I have tried to state, I think that the plaintiff should have recovered judgment under this head for the sum of $25. I therefore think that the appeal should be allowed, and that judgment ought to be entered for the plaintiff for $25 in addition to the other sum for fixed salary. DENNING L.J. It was said in the course of the argument that no case has been found in the books where a quantum meruit has been awarded in a case like the present. I hope that this case will provide the deficiency. The facts are quite simple : ln lieu of a rise in salary, the defendant agreed to pay the plaintiff a bonus each year on the net trading profit. The defendant made trading profits, but he refuses to pay any bonus. He refuses to pay anything, whereas the agreement quite clearly contemplated that he should pay something. The judge said that it was a matter for the defendant in his discretion as to what he should pay, that is, whether he should pay something or nothing. I do not agree with that. I think the defendant plainly bound himself to pay something. The precise amount would not be an amount in his unfettered discretion. It would be an amount which a fair and just man would pay in the exercise of a reasonable discretion. that sum namely, $25. I agree that the appeal should be ROMER L J. I also agree. This court is not a court of morals, but I am bound to say that I think that the attitude which the defendant has thought proper to adopt in this dispute reflects very little credit upon him. In March, 1946, he obtained an advantage for himself and his business, and he obtained that advantage from the plaintiff. He now seeks to adopt the attitude that he is under no liability over a period of two years to pay, on the ground that he never was under any legal liability to make any payment at all. When one looks at these two letters of March 18, 1946, setting out the promise from the defendant and the acceptance of that promise by the plaintiff, it seems to me clear that she naturally enough took the view that she was to get from the profits of the business, if there were profits, a bonus instead of an increased salary, and the consideration which, as the judge found, she was going to give for that increased emolument was her promise to undertake further responsibilities. It has not been suggested that she failed in the fulfilment of that proimse but it appears to me clear that it never dawned on her (and there was no reason why it should, having regard to the reference in her employer's letter to the increase of salary) that she was going to take on this extra responsibility at a remuneration which rested solely in the discretion of the defendant himself. That indeed, as far as I can make out, was not the view of the defendant himself at one time because he admitted, as the judge found, that there was one bonus due, and, if he was under no liability to pay anything, then the word " due " would seem to be an inapt word to use. I think that where the judge was in error was in finding that the intention of the parties was that the defendant should pay such portion of the profits as he in his discretion might decide. I do not think that is right. In my view, it was a matter of a legal bargain giving rise to a legal right, and the plaintiff was to get at all events something provided there were profits. That being so, I think the case is covered by the type of authority exemplified by Taylor v. Brewer,2 and Way v. Latilla,3 and I agree with my brothers that the plaintiff should be remunerated on a quantum meruit, or reasonable basis in the way that my Lord has indicated. Appeal allowed. Solicitors : Woodroffes, Mealy & Co. 2 (1813) 1 M. & S. 290. 3 [1937] 3 All E.R. 759. B obtained the prize of $750. A sought to recover one-third of the prize from B, alleging an agreement to " go shares " in the event of success. B contended that A had merely assisted her in com- pleting the coupon and that there had been no intention to create legal relations :-- Held, that on the facts the parties had entered into the com- petition as an informal syndicato on the understanding that which- ever forecast in any coupon was successful they should " go shares " iu the prize; there was mutuality in the arrangement between the parties and an intention to create legal relations could be inferred ; A was, therefore, entitled to recover a one-third share of the prize. ACTION. The plaintiff, the defendant and her granddaughter had an arrangement whereby the plaintiff submitted a coupon every week in the name of the defendant for a newspaper fashion competition. The coupon contained three forecasts made by the plaintiff, the defendant and the granddaughter respectively. A forecast made by the granddaughter was successful and the defendant obtamed the prize. The plaintiff sought to recover a third part of the prize alleging an agreement to " go shares " in the event of success. Robin David (Morgan Hughes with him) for the plaintiff. The parties formed a syndicate and made a joint entry. There was an express agreement to " go shares." Alternatively a third part was held by the defendant to the use of the plaintiff: see dictum of Denning L.J. in Hoddinott v. Hoddinott,1 viz., " . . . " if husband and wife together embark on a joint venture in " which they equally contribute their skill, then if nothing is " said between them, the proper inference is that the proceeds go to them jointly." That principle was not limited to husband and wife. Bertrand Richards for the defendant. lf there was an agree- ment between the parties it was not such as was intended to be enforceable : see dictum of Scrutton L.J. in Rose & Frank Co v. J. R. Crompton & Bros. Ld.2 and of Cohen L.J. in Hoddinott v. Hoddinott.3 Balfour v. Balfour4 was also referred to. SELLERS J. Happily this is an unusual type of case to come before a court of law, and it anses out of what seems to be a popular occupation of the public--taking part in a competition run by a Sunday newspaper. In this particular case there was a contest, No. 397, in the Sunday Empire News, of June 27, 1954, whereby readers were invited to place in order of merit, attraction or beauty, eight fashions, or articles of attire. Both the plaintiff and the defendant, along with the defendant's grand- daughter, Miss Esme Pays, sent in a coupon with three forecasts on it. The middle line of the second forecast was successful 1 [1949] 2 K.B. 406, 414; 66 3 [1949] 2 K.B. 406, 413--4. T.L.R. 266. 4 [1919] 2 K.B. 571; 35 T.L.R. 2 [1923] 2 K.B. 261, 288. 609. and won the prize of #750. This action is brought to recover one-third of that amount, $250. The plaintiff had been living in the defendant's house for some time in 1950, having gone there some six months after the defendant's husband had died. The defendant was some 83 years of age. The plaintiff was a much younger person, and was then divorced, though she has married again. They lived together in harmony, the plaintiff paying a weekly sum for her board and lodgings to the defendant. The plaintiff had been competing for some time in newspaper competitions, including the News of the World and the Sunday Empire News, before she went to live in the defendant's house. When she became a lodger at the defendant's house she found that the defendant was com- peting in the News of the World competition, and they seemed to have joined forces and competed together, but independently, although throughout the time I accept the plaintiff's evidence that she was filling up, week by week, a similar sort of compe- tition in the Sunday Empire News, and she so did alone up to a time some seven or eight weeks before this successful forecast, and she was doing that, as far as I can appreciate the evidence, unbeknown to the defendant. She kept the Sunday Empire News up in her room and made her weekly forecast. About seven or eight weeks before June 27, 1954, something had happened which brought the two parties to this action to take an interest in the Empire News. The plaintiff says that she left the Empire News in the living room of the house occupied by the defendant on a Sunday, and the defendant picked it up, took an interest in it and discussed competing in the competition run by the paper. The defendant says that it was the plaintiff who brought the paper down and said : " Why " don't you compete in this as well? " It may be that the truth lies somewhere between the two, but on the whole I think perhaps the plaintiff's version is the preferable one, and that when the defendant did get to know about the paper and they were discussing it, the plaintiff may have said to her: " Well, ' why don't you compete? " From then onwards, each week the two parties to this action. together with the defendant's granddaughter, sent in a coupon with forecasts on it, and, as far as the Empire News is concerned, I am satisfied that the method of doing this was for the defendant to make her forecast, put it on a piece of paper, for the grand- daughter to make hers and put it on the same piece of paper, and then when the plaintiff came home, perhaps rather late at night, as the defendant says, when she was in bed, she would pick this piece of paper up and would fill in the coupon in her own room, putting her own line in first, the granddaughter's second, and the defendant's third, and that would be dispatched on the Monday. The evidence is a little uncertain as to who actually paid for the necessary stamps for the postage, or for the twopence-half- penny which had to be sent for each line forecast, but I accept the plaintiff's evidence that it was done more or less alternately. There was no hard-and-fast rule. In regard to the winning coupon, the defendant had asked the plaintiff to get the stamps and deduct them from the weekly payment, but apparently they were not deducted. The weekly payment was 30s. and, as I understood the defendant, she paid 30s. , I think one of the cases that were referred to in argument held that the payment, when it comes, is not a vital matter in this sort of transaction. It might well be done informally ; one party can pay one time, the other party can pay another time. It might well be the case that, in fact, all the stamps were obtained and paid for by the defendant. The substantial matter is, on what basis were these forecasts being made ? When the plaintiff made out the coupon she put down the forecasts in the way I have indicated, and entered in the appro- priate place on the coupon the name of Mrs. Pays, 11, Trevor Street, Wrexham, and so with each coupon in those seven or were three forecasts there and when the matter first came to be considered, I accept the plaintiff's evidence that what was said, when they were going to do it in that way was: ' We " will go shares " or words to that effect. " Shares " was the word used, and I do not think anythmg very much more specific was said. Whether it was said by the plaintiff or the defendant does not really matter. I think that was the basis, and it may well be that the plaintiff is right when she said, in her evidence, that the defendant said: " You're lucky, May, and if we win we ' will go shares." The alternative position to that of these three competing together as a syndicate is that the plaintiff, with all her pro- pensity for having a gamble, when the defendant became interested, suddenly abandoned all her interest in the competition in the Empire News, and handed it over to the defendant. think that is most improbable, and I accept her evidence that she did not do that. She combined her efforts with the defen- dant's in the way I have indicated, and from then onwards she had shares in the result. It may well be that in the family circle--and this had some element of a family circle about it, although there was no relationship between the parties--or even as between very close friends, the facts might indicate that all that was intended was that if anybody rendered a service to the defendant to fill up her coupon that person also rendered a service to make some forecasts, which might reveal that all they were doing was to help her make her forecasts and make suggestions, and to give her the benefit of their skill or their capacity to guess, whichever it is, so that the venture would be entirely that of the person in whose name the coupon was sent in. On the facts of this case, and on the probabilities as I see them, I do not think that was the case here, and having balanced it as best I can, I prefer the plaintiff's evidence as to how the matter came into being, and how it was carried out. However, it is true that the plaintiff stands alone--she was the only witness for her case. [His Lordship received the evidence and continued : ] The competition, successful as it was for the coupon sent in the defendant's name, was not in fact won, as it would appear, by the forecast of either, the plaintiff or the defendant. If the plaintiff's evidence is right, and I see no reason to reject it-- she gave it before the facts were known at all--the middle line was one not composed by either of the parties, but by the grand- daughter, and the defendant's case involves this, that whichever forecast won--either the plaintiff's or the defendant's, or the granddaughter's--the whole prize was to go to the defendant. I think that is highly improbable. When the prize-money became known the defendant was obviously elated. I think the matter went to her head, and to the heads of her family as well, who all thought they had got a great prize. There was something of a celebration on the very Sunday when this paper had the winning forecast in it. Between them they have sought to shut out the plaintiff from her interest, but from the time when the cheque became due the plaintiff has persisted that she was entitled to her share. I think on what was said she was to go shares. Properly third each. If there were two, there would have been half-shares. On the finding that the plaintiff's evidence is right as to what was said about the shares, and rejecting the incidental evidence given by the witnesses as to what occurred afterwards, counsel for the defendant not unnaturally said : " Even if that " is so, the court cannot enforce this contract unless the arrange- " ment made at the time was one which was intended to give rise " to legal consequences." lt may well be there are many family which would not, on a proper estimate of the circumstances, establish a contract which was contemplated to have legal con- establish a contract which was contemplated to have legal con- a mutuality in the arrangement between the parties. It was not very formal, but certainly in egect it was agreed that every week the forecast should go in in the name of the defendant, and that if there was success, no matter who won, all should share equally. That seems to be the implication from or the interpretation of what was said, that this was in the nature of a very informal syndicate so that they should all get the benefit of success. It would be equally wrong, I think, to say from what was arranged that because the granddaughter's fore- cast was the one which was successful of those submitted by the defendant that the plaintiff and the defendant were to get nothing Although she was not a party before the court and I have not had the benefit of her evidence, as far as I can see, on this arrangement she would be as entitled to the third share as the others, certainly, so far as the plaintiff is concerned. Esme was not, apparently, present when this bargain was made, but both the others knew, at any rate soon after the outset, that she was coming in. It is possible, of course, although the plaintiff is not concerned in it, that the granddaughter's effort was only the plaintiff and the defendant entered into an agreement to share. The plaintiff does not seek to say : " Esme was only " aiding Mrs. Pays," in asking for half the shares but she was entitled to one-third, and I so find and give judgment to the amount of $250. Solicitors: Mason & Moore Dutton, Chester; Cyril Jones, Son & Williams, Wrexham. [COURT OF APPEAL.] ENTORES LD v. MILES FAR EAST CORPORATION. Contract--Offer and acceptance--Where contract made--Contract by telephone--Offer made by Telex communication from London-- Acceptance by Telex message from Holland--Acceptance received in London--Contract made in London--Service of writ out of the jurisdiction--Subsequent variation of contract Effect on where made--R.S.C., Ord. 11, r. 1 (e) (i). House of Lords--Leave to appeal--Court of Appeal, by--Interlocutory matter. Practice--Writ--Servicw out or jurisdiction. The plaintiff company in London made an offer by Telex to the agents in Holland of the defendant corporation whose headquarters were in New York, and their offer was duly accepted by a com- munication received on the plaintiffs' Telex machine in London. The plaintiff company sought leave to serve notice of a writ on the defendant corporation in New York claiming damages for breach of the contract so made :-- Held that, although where a contract is made by post acceptanoe is complete as soon as the letter of acceptance is put into the post box, where a contract is made by instantancous communication, e.g., by telephone, the contract is complete only when the accept- ance is received by the offeror, sinos generally an offer must be in this case was made in London. Accordingly it was a proper case for service out of the jurisdiction under R.S.C., Ord. 11, r. 1 (e). Dicta of Hill J. in Newcomb v. De Roos (1859) 2 E. & E. 271 disapproved. Decision of Donovan J. affirmed. INTERLOCUTORY APPEAL from Donovan J. The facts, which are stated in more detail in the judgment of Denning L.J., were as follows: The plaintiffs, Entores Ld. were an English company with a registered office in London, and the defendants, Miles Far East Corporation, were an American cor- poration with headquarters in New York, and with agents all over the world, including a Dutch company in Amsterdam. Both the plaintiffs and the defendants' agents in Amsterdam had in their office an equipment known as Telex Service by which messages could be dispatched by a teleprinter operated like a typewriter in one country, and almost instantaneously received and typed in another. The plaintiffs desired to make a contract with the defendants' agents in Amsterdam for the purchase of copper cathodes from the defendant corporation. In September, 1954, a series of communications by Telex passed between the plaintiffs and the Dutch company, the material one for the 1 R.S.C., Ord. 11, r. 1, provides (e) to enforce a contract (i) "made that service out of the jurisdiction "within the jurisdiction." a writ of summons may be allowed present purposes being a counter-offer made by the plaintiffs on September 8, 1954, and an acceptance of that offer by the Dutch agents on behalf of the defendants received by the plaintiffs in London by Telex on September 10, 1954. The plaintiffs later alleged that there had been a breach by the defendants of the contract. They accordinly applied for leave to serve notice of a writ on the defendants in New York on the ground that the contract was made in England and therefore fell within the terins of R.S.C., Ord. 11, r. 1 (e). It was contended for the defendants that the contract was made in Holland. The plaintiffs' application was granted by a master and on appeal his decision was affirmed by Donovan J. The defendants appealed. Gerald Gardiner Q.C. and S.B.R.Cooke for the defendants. Maurice Lyell Q.C and Dennis Lloyd for the plaintiffs. The following cases, in addition to those referred to in the judgments, were cited in argument. British and American Tele- graph Co. v. Colson (1); Henthorn v. Fraser (2); Henkel v. Pape (3); Cowan v. O'Connor (4); Bruner v. Moore (5); The Hagen (6); Brogden v. Metropolitan Railway Co.(7) Cur. adv. vult. May 17. The following judgments were read : DENNING L.J. This is an application for leave to serve notice of a writ out of the jurisdiction. The grounds are that the action is brought to recover damages for breach of a contract made within the jurisdiction or by implication to be governed by English law. The plaintiffs are an English company. The defendants are an American corporation with agents all over the world, including a Dutch company in Amsterdam. The plaintiffs say that the contract was made by Telex between the Dutch company in Amsterdam and the English company in London. Communica- tions by Telex are comparatively new. Each company has a teleprinter machine in its office; and each has a Telex number like a telephone number. When one company wishes to send a message to the other, it gets the Post Office to connect up the machines. Then a clerk at one end taps the message on to his machine just as if it were a typwriter, and it is instantaneously passed to the machine at the other end, which automatically types the message onto paper at that end. The relevant Telex messages in this case were as follows: September 8, 1954: Dutch company : " Offer for account our 1 (1871) L.R. 6 Exch. 108. 5 [1904] 1 Ch. 305; 20 T.L.R. 125. 2 [1892] 2 Ch. 27; 8 T.L.R. 459. 6 [1908] P. 189. 3 (1870) L.R. 6 Exch. 7. 7 (1877) 2 App.Cas. 666. 4 (1888) 20 Q.B.D. 640. "associates Miles Far East Corporation Tokyo up to 400 tons " Japanese cathodes sterling 240 longton c.i.f. shipment Mitsui " Line September 25 or October 10 payment by letter of credit. " Your reply Telex Amsterdam 121 74 or phone 31490 before " 4 p.m. invited." English company : " Accept 10 longtons " cathodes Japanese shipment latest October 10 sterling $239 10s. " longton c.i.f. London/Rotterdam payment letter of credit stop " please confirm latest tomorrow." Dutch company : " We " received O.K. Thank you." September 9, 1954: English company : " Regarding our telephone conversation a few minutes " ago we note that there is a query on the acceptance of our bid " for 10 tons payment in sterling and you are ascertaining that " your Tokyo office will confirm the price to be longton we there- " fore await to hear from you further." September 10, 1954: English company : " Is the price for the sterling cathodes under- " stood to be for longton by japan as you were going to find this " out yesterday? " Dutch company: " Yes price $239 10s. for " longton." At that step there was a completed contract by which the defendants agreed to supply 10 tons of cathodes at a price of $239 10s. a ton. The offer was sent by Telex from England offering to pay $239 10s. a ton for 100 tons, and accepted by Telex from Holland. The question for our determination is where was the contract made? When a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made. But there is no clear rule about contracts made by telephone or by Telex. Communications by these means are virtually instantaneous and stand on a different footing. The problem can only be solved by going in stages. Let me first consider a case where two people make a contract by word of mouth in the presence of one another. Suppose, for instance, that I shout an offer to a man across a river or a courtyard but I do not hear his reply because it is drowned by an aircraft flying overhead. There is no contract at that moment. If he wishes to make a contract, he must wait till the aircraft is gone and then shout back his acceptance so that I can hear what he says. Not until I have his answer am I bound. I do not agree with the observations of Hill J. in Newcomb v. De Roos. Now take a case where two people make a contract by telephone. Suppose, for instance, that I make an offer to a man by telephone and, in the middle of his reply, the line goes "dead" so that I do not hear his words of acceptance. There is no con- tract at that moment. The other man may not know the precise moment when the line failed. But he will know that the tele- phone conversation was abruptly broken og : because people usually say something to signify the end of the conversation. If 1 (1859) 2 E. & E. 271. he wishes to make a contract, he must therefore get through again so as to make sure that I heard. Suppose next, that the line does not go dead, but it is nevertheless so indistinct that I on the first time when I do not hear, but only the second time when I do hear. If he does not repeat it, there is no contract. The contract is only complete when I have his answer accepting the offer. Lastly, take the Telex. Suppose a clerk in a London office taps out on the teleprinter an offer which is immediately recorded on a teleprinter in a Manchester office and a clerk at that end taps out an acceptance. If the line goes dead in the middle of the sentence of acceptance, the teleprinter motor will stop. There is then obviously no contract. The clerk at Manchester must get through again and send his complete sentence. But it may happen that the line does not go dead, yet the message does not get through to London. Thus the clerk at Manchester may tap out his message of acceptance and it will not be recorded in London because the ink at the London end fails, or something of that kind. In that case, the Manchester clerk will not know of the failure but the London clerk will know of it and will immediately send back a message " not receiving." Then, when the fault is rectified, the Manchester clerk will repeat his message. Only then is there a contract. If he does not repeat it, there is no lie does not repeat it, there is no message to be received is complete. In all the instances I have taken so far, the man who sends the message of acceptance knows that it has not been received or he has reason to know it. So he must repeat it. But, suppose that he does not know that his message did not get home. He thinks it has. This may happen if the listener on the telephone does not catch the words of acceptance, but nevertheless does not trouble to ask for them to be repeated : or the ink on the teleprinter fails at the receiving end, but the clerk does not ask for the message to be repeated: so that the man who sends an get it. But if there should be a case where the offeror without any fault on his part does not receive the message of acceptance-- yet the sender of it reasonably believes it has got home when it has not--then I think there is no contract. My conclusion is, that the rule about instantaneous communi- cations between the parties is different from the rule about the post. The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received. In a matter of this kind, however, it is very important that the countries of the world should have the same rule. 1 find that the countries of the world should have the same rule. I find that most of the European countries have substantially the same rule as that I have stated. Indeed, they apply it to contracts by post as well as instantaneous communications. But in the United States of America it appears as if instantaneous communications of this divergence, I think we must consider the matter on principle : and so considered, I have come to the view I hsve stated, and I am glad to see that Professor Winfield in this country (55 Law Quarterly Review, 514), and Professor Williston in the United States of America (Contracts, S 52, p. 239), take Applying the principles which I have stated, I think that the contract in this case was made in London where the acceptance was received. It was, therefore, a proper case for service out of the jurisdiction Apart from the contract by Telex, the plaintiffs put the case and that this amounted to a new contract made in England. The Dutch company on September 11, 1954, wrote a letter to the " account of our associates in Tokyo : 100 metric tons electro- " litic copper in cathodes : $239 10s. for longton c.i.f. U.R./ " Continental main ports : prompt shipment from a japanese port " after receipt of export licence : payment by irrevocable and " transferable letter of credit to be opened in favour of Miles Far " East Corporation with a first class Tokyo Bank. The respec- " tive import licences to be sent directly without delay to Miles " Far East Corporation." The variations consisted in the ports of delivery, the provisions of import licence and so forth. The English company say that they accepted the variations by dispatching from London the import licence, and giving instruc- as the acts were done in London first completed; not at the place where the variations are agreed. But whether this be so or not, I think the variations were accepted the original contract and ensuing variations were made in England and leave can properly be given for service out of the jurisdiction. I am inclined to think also that the contract is by implication to be governed by English law, because England is the place with which it has the closest connexion. I think the decisions of the master and the judge were right, and I would dismiss the appeal. BIRKETT L.J. I can state very briefly my agreement with the judgment just delivered by my Lord. [His Lordship stated the facts and continued : ] The plaintiffs contend that the contract : was made in England and, therefore, comes within Ord. 11, r. 1 of the Rules of the Supreme Court, whereby the court or a judge may allow service of a writ outside the jurisdiction where the action is one brought against a defendant for damages for breach of a contract made within the jurisdiction. The defendants say that the contract was not made in England but was made in Holland. I am of opinion that in the case of Telex communications (which do not differ in principle from the cases where the parties negotiating a contract were actually in the presence of each other) there can be no binding contract until the offeror receives notice of the acceptance from the offeree. Mr. Gardiner submitted that the proper principle to be applied to a case like the present could be thus stated: " If A makes an " offer to B, there is a concluded contract when B has done " all that he can do to communicate his acceptance by approved " methods." He further submitted that great difficulties would arise if Telex communications were treated differently from acceptances by post or telegram. In my opinion the cases governing the making of contracts by letters passing through the post have no application to the making of contracts by Telex communications. The ordinary rule of law, to which the special considerations governing contracts by post are exceptions, is that the acceptance of an offer must be communicated to the offeror, and the place where the contract is made is the place where the offeror receives the notification of the acceptance by the offeree. If a Telex instrument in Amsterdam is used to send to London the notification of the acceptance of an offer the contract is complete when the Telex instrument in London receives the notification of the acceptance (usually at the same moment that the message is being printed in Amsterdam), and the acceptance is then notified to the offeror, and the contract is made in London. I agree with the judgment of Donovan J. and this appeal should be dismissed. PARKER L.J. I have come to the same conclusion, and would only add a few words on the basis that the contract sued on is that created by the Telex messages. As was said by Lindley L.J. in Carlill v. Carbolic Smoke Ball Co. : " Unques- " tionably as a general proposition, when an offer is made, it is " necessary in order to make a binding contract, not only that it " should be accepted, but that the acceptance should be notified." In the same case Bowen L.J. said : " One cannot doubt that, as [1893] 1 Q.B. 256, 262; 9 T.L.R. [1893] 1 Q.B. 256, 269. 124. VOL. 3 " an ordinary rule of law, an acceptance of an offer made ought " to be notified to the person who makes the offer, in order that " the two minds may come together. Unless this is done the two " minds may be apart, and there is not that consensus which is " necessary according to English law--I say nothing about the " laws of other countries--to make a contract." Accordingly, as a general rule, a binding contract is made at the place where the offeror receives notification of the acceptance, that is where the offeror is. Since, however, the requirement as to actual notification of the acceptance is for the benefit of the offeror, he may waive it and agree to the substitution for that requirement of some other conduct by the acceptor. He may do so expressly as in the advertisement cases by intimating that he is content with the performance of a condition. Again, he may do so impliedly by indicating a contemplated method of acceptance, for example, by post or telegram. In such a case he does not expressly dispense with actual notification, but he is held to have done so impliedly on grounds of expediency. Thus, in Adams v. Lindsell,(4) the court pointed out that unless this 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." Again, in Dunlop v. Higgins,(5) Lord Cottenham L.C. pointed out that " Common sense tells us that " transactions cannot go on without such a rule "; and in In re Imperial Land Co. of Marseilles (Harris's case (6)), Mellish L.J. referred to the mischievous consequences which would follow in commerce if no such rule was adopted. To the same effect is the judgment of Thesiger L.J. in Household Fire and Carriage Accident Insurance Co. v. Grant,(7) in which he points out that where the parties are at a distance the balance of convenience dictates that the contract shall be deemed complete when the acceptance is handed to the Post Office. Where, however, the parties are in each other's presence or, though separated in space, communication between them is, in effect, instantaneous, there is no need for any such rule of convenience. To hold otherwise would leave no room for the operation of the general rule that notification of the acceptance must be received. An acceptor could say: " I spoke the words " of acceptance in your presence, albeit softly, and it matters " not that you did not hear me "; or, " I telephoned to you and " accepted and it matters not that the telephone went dead and ' you did not get my message." Though in both these cases the acceptor was using the contemplated or, indeed, the expressly 4 (1818) 1 B.& Ald. 681, 683. 6 (1872) 7 Ch. App. 587, 594. 5 (1848) 1 H.L.Cas. 381, 400. 7 (1879) 4 Ex. D. 216. indicated mode of communication, there is no room for any implication that the offeror waived actual notification of the acceptance. It follows that I cannot agree with the observations - of Hill J. in Newcomb v. De Roos. (8) So far as Telex messages are concerned, though the dispatch and receipt of a message is not completely instantaneous, the parties are to all intents and purposes in each other's presence just as if they were in telephonic communication, and I can see no reason for departing from the general rule that there is no binding contract until notice of the acceptance is received by the offeror. That being so, and since the offer--a counter-offer--was made by the plaintiffs in London, and notification of the accept- ance was received by them in London, the contract resulting therefrom was made in London. I would accordingly dismiss the appeal. Cooke. Would your Lordships give me leave to take the matter further? It is a matter of some considerable importance. It appears that communications of this kind are on the increase, and your Lordships have at any rate disposed of a certain amount of authority. I think your Lordships have also indicated that the courts here may depart from the rule which the American courts have observed with regard to the telephone. DENNING L.J. This is an interlocutory appeal. It means that the trial of the action will be still further held up. Cooke. We do not wish to hold up the trial of the action further than necessary. On the other hand, it is an American corporation trading all over the world. It is a matter of consider- able importance to them and others in like position as to what their position really is. DENNING L.J. On the whole we do not think that we ourselves should give leave to appeal. Appeal dismissed. Leave to appeal to House of Lords refused. Solicitors: Allen & Overy; Smiles & Co. 8 2 E.& E. 271. [COURT OF APPEAL.] * FRlBANCE v. FRIBANCE (NO. 2). Husband and Wife--Property--Proceedings under Married Women's Property Act, 1882, s. 17--House purchased for home--Proportions of payment of price--Decree nisi Wife's claim to share in house-- Married Woman's Property Act, 1882 (45 & 46 Vict. c. 75), s. 17. Parties who married in 1933 became in 1940 tenants of the ground floor of a dwelling-house, at which time they had two children. On the husband joining the Royal Air Force it was agreed that he should retain all his pay and allowances, except for the compulsory allotment to the wife, and save what he could, while the wife should go to work to support the family. On demobiliza- tion in 1945 the husband had some #250 in savings and gratuity, part of which was spent for the benefit of the family. Thereafter he handed the bulk of his earnings to his wife, who continued to work and support the household with her earnings. In 1950 the leasehold of the matrimonial home was acquired in the husband's name for #950, of which #800 was raised on mort- gage; #130, the remains of his savings, was contributed by the husband, and #20 was contributed by the wife from the surrender of an insurance policy. In 1952 differences arose between the parties, which led to a suit for divorce by the wife, who before decree absolute applied under section 17 of the Married Women's Property act, 1882, for an order to determine the interests of the parties in the house. The registrar held that the wife's interest was limited to #20. On appeal, Barminski J. held that the parties held in equal shares. On appeal:-- Held, that the conduct of the parties over the years indicated that their spendings or savings were regarded as having been made for the common benefit, so that the wife was entitled to a half interest in the house. Rimmer v. Rimmer [1953] 1 Q.B. 63 ; [1952] 2 T.L.R. 767; [1952] 2 All E.R. 863 applied. Decision of Barminski J. affirmed. APPEAL from Karminski J. The facts are stated in the judgment of Denning L.J. Dimitry Tolstoy for the husband. H. S. Ruttle for the wife. The cases cited in argument are referred to in the judgments. DENNING L.J. This is an application under section 17 of the Married Women's Property Act, 1882, to determine the title to the matrimonial home. The parties married in 1933 and were divorced in 1955. The summons was issued before decree absolute, so the court has jurisdiction to deal with the case. They have two children, one born in 1934 and the other in 1937. The couple, with their two children, went there in 1940 as tenants of rooms on the ground floor. The husband went into the Air Force and made the ordinary compulsory allotment to his wife. In 1941 a question arose as to a further allotment. The husband wrote to his wife about it, and it was arranged between them by their letters that the wife should go out to work to help keep the household going, whereas the husband could save the extra money which he got by the further allotment. He said that he would save it for their future so that it could be used for the welfare of the family thereafter. In 1942 the wife went out to work and she has been out to work ever since. She used all her earnings for family purposes, dressing the children and so on whilst the husband saved what he could. In 1946 the husband was demobilized and at that time his savings, with his gratuity came to #260. (He says that only #12 of that sum came from the allotment which he saved in pursuance of the letters.) Out of the savings they went for a holiday. Afterwards he got work as a car driver and earned #7 or #8 a week and gave his wife about #6 a week out of it. She continued to go out to work and used her earnings for the benefit of the household. Together they bought furniture for the home. By the year 1950 the husband's savings were reduced to #130, but the wife had some savings in the shape of insurance policies. In 1950 an opportunity arose to buy the leasehold of the house in which they were living. The lease had 40 years to run. They bought it for $950, of which $150 was paid in cash and #800 was left on mortgage. A policy of insurance was taken out to cover the mortgage repayments. It was a good business arrangement for this couple. They were living on the ground -- floor themselves. The top two floors were let to other tenants The rents from those tenants would cover most of the outgoings. The rest of the outgoings came out of the husband's earnings but it was no more than the old rent they had had to pay for their rooms. They were therefore in a position to acquire the lease- hold at no extra cost to themselves, except for the first #150 which they had to find. In order to get the #150, the husband contributed the #130 which he had left of his savings and the wife realized #20 on one of the insurance policies. The leasehold was acquired in the husband's name, and all went smoothly until the year 1952, when the couple fell out. The solicitors for the wife wrote to the husband about the financial position between them and at that time they claimed on her behalf no share in the house but only the #20. They said: " We are also instructed to claim from you " the sum of #20 being the amount which our client piovided ' towards the purchase of the house." No solution was reached. Eventually in 1955 the wife filed a petition for divorce on the ground of the husband's cruelty, and on May 10 1955. she obtained a decree nisi. Before it was made absolute, she took out a summons to determine the title to the house and furniture They are both living there still, but occupy separate rooms. In the course of the proceedings it was agreed that the furniture belongs to them both jointly in equal shares, but the question is, to whom does the house belong? The registrar held that it belonged to the husband and that the wife was only entitled to the #20 which she paid towards it. The wife appealed to Karminski J., and he held that the house belonged to them both jointly in equal shares. He thought that the case came within the decision of this court in Rimmer v. Rimmer. The husband appeals to this court and asks us to restore the order of the registrar. Mr. Tolstoy has argued forcibly that the house belonged to the husband. The husband, he said, bought the lease and took it in his own name, the leasehold interest was vested in him, he paid for it out of his own savings and earnings, save only for the #20 contributed by the wife. Mr. Tolstoy said that the wife had no right to the house or any share in it unless she could show a contract by the husband with her or a gift by him to her or a trust by hmi for her in regard to it. In support of this proposition he relied on the well-known case of " savings " from housekeeping, " Blackwell v. Blackwell, In re Sims' Question, and Hoddinott v. Hoddinott. Then, in order to refute any suggestion of a contract, gift or trust enforceable at law, he relied on Balfour v. Balfour 1 [1953] 1 Q.B. 63; [1952] 2 4 [1949] 2 K.B. 406; 65 T.L.R. T.L.R. 767; [1952] 2 All E.R. 863. 266. 2 [1943] 2 All E.R. 579 5 [1919] 2 K.B. 571; 35 T.L.R. 3 [1946] 2 All E.R. 138. 609. I do not think that line of argument is valid today. A wife is not to be put to proof of a contract or gift as if she were a stranger. Romer L.J. made that clear in Rimmer v. Rimmer (6) when he said that " cases between husband and wife ought not " to be governed by the same strict considerations, both at law " and in equity, as are commonly applied to the ascertainment " of the respective rights of strangers." I fully agree with that observation and I think it is the correct way of approaching these cases at the present day. I put, therefore, the question of contract, gift, or trust on one side and apply the law as laid down in Rimmer v. Rimmer (7) and Cobb v. Cobb,(8) which I take to be this: If it is clear that the property, when it was acquired, was intended to belong to one or other absolutely, as in the case of investments, or that they intended to hold it in definite shares, as sometimes happens when they run a business, then effect must be given to their intention; and in that case the title so ascertained is not to be altered by subsequent events unless there has been an agreement to vary it. In many cases, however, the intention of the parties is not clear, for the simple reason that they never formed an intention: so the court has to attribute an intention to them. This is particularly the case with the family assets, by which I mean the things intended to be a continuing provision for them during their joint lives, such as the matrimonial home and the furniture in it. When these are acquired by their joint efforts during the marriage, the parties do not give a thought to future separation. They do not contemplate divorce. They contemplate living in the house and using the furniture together for the rest of their lives. They buy the house and furniture out of their available resources without worrying too much as to whom it belongs. The reason is plain. So long as they are living together, it does not matter which of them does the saving and which does the paying, or which of them goes out to work or which looks after the home, so long as the things they buy are used for their joint benefit. In the present case it so happened that the wife went out to work and used her earnings to help run the household and buy the children s clothes, whilst the husband saved. It might very well have been the other way round. The husband might have allotted to the wife enough money to cover all the housekeeping and the children's clothes, and the wife might have saved her earnings. The title to the family assets does not depend on the mere chance of which way round it was. It does not depend on how they happened to allocate their earnings and their expenditure. The whole of their resources were expended for their joint benefit--either in food and clothes and living expenses for which there was nothing to see or in the house and furniture which are family assets--and the product should belong to them jointly. It belongs to them in equal shares. I agree 6 [1953] 1 Q.B. 63, 76. 8 [1955] 1 W.L.R. 731; [1955] 2 7 Ibid. All. E.R. 696. with Mr. Tolstoy that the title to the property must remain the same, whether the question arises under section 17 before divorce, or in other proceedings after divorce, or under a will but I think that in each case the principles laid down in Rimmer v. Rimmer (9) apply. I think the judge correctly applied those principles here, and I would dismiss the appeal. HODSON L.J. I agree. I think that the judgment of Karminski J. was right, and that this appeal should be dismissed. It is impossible in these cases to arrive at an exact result, because it was pointed out as long ago as 1919, in the leading case of Balfour v. Balfour,(10) that a husband and wife when they are living together do not normally endeavour to regulate their domestic affairs by entering into legal contracts with one another: it is only when they separate that disputes arise and the problem as to the ownership of property becomes one which is almost insoluble. In those cases the court is really driven, I think--as the court has been driven in this case--to arrive at the best conclusion that it can on the evidence, namely, that the property is to be regarded as owned equally. MORRIS L.J. I have found this case an extremely difficult one, and I think that very powerful submissions have been made on both sides. The task of the court has been to ascertain whether the wife had any title to the property, which admittedly was only in the name of the husband. In Rimmer v. Rimmer (11) Evershed M.R. pointed out that in every case of this kind the decision must depend upon its own particular facts. It is so often the case that arrangements are made at times when parties are not contemplating having any dispute as to what is the precise legal basis of an arrangement made. Evershed M.R., in his judgment in Rimmer v. Rimmer, said (12): " Where the court is satisfied that both the parties have a beneficial interest, and " a substantial beneficial interest, and where it is not possible or right to assume some more precise calculation of their shares, " equality, I think, almost necessarily follows." Mr. Tolstoy relies upon that passage, and on other passages, and submits that the court must in the first place be satisfied that the parties have a beneficial interest; and I think that must be so. It is clear from other passages in the judgments in Rimmer v. Rimmer and in other cases that if the court can ascertain the exact position, then section 17 does not give any power to vary what the parties did themselves decide upon. Denning L.J., in his judgment in Rimmer v. Rimmer,(13) said: " In cases when it is clear that the beneficial interest in the matrimonial home, or " in the furniture, belongs to one or other absolutely, or it is " clear that they intended to hold it in definite shares, the court 9 [1953] 1 Q.B. 63. 12 Ibid. 72. 10 [1919] 2 K.B. 571. 13 Ibid. 73. 11 [1953] 1 Q.B. 63 " will give effect to their intention." In Cobb v. Cobb Romer L.J. said this : " I know of no power that the court has under " section 17 to vary agreed or established titles to property. It " has power to ascertain the respective rights of husband and " wife to disputed property, and frequently has to do so on very " little material; but where, as here, the original rights to " property are established by the evidence, and those nghts have " not been varied by subsequent agreement, the court cannot, in " my opinion, under section 17 vary those rights merely because " it thinks that in the light of subsequent events the original " agreement was unfair." It seems to me, therefore, that one must approach this case by considering, on the evidence, in the first place, whether it is shown that the husband and wife were both beneficially interested in this property that the husband took. It seems to me that it is at that stage that this case presents great difficulties, the registrar, in a powerful judgment, having formed one conclusion, and the judge having formed a different conclusion. It seems to me that both the husband and the wife were behaving extremely commendably at the times that are in question. It was a happy marriage: there was no thought then of any divorce or separa- tion, and the parties were not adjusting their arrangements with any thought that they would at a later stage be the subject of critical examination in a court of law. The husband was serving. He appears to have been a careful man, doing his best to save, and he thought of his wife and his family and of the future. That is the very setting that makes it so difficult for a court at a much later period to be able to decide what was the legal effect of what then took place. After the unhappy differences arose, a letter was written--in 1952, some years before the petition for divorce was filed--by solicitors on behalf of the wife in which they said: " We are also " instructed to claim from you the sum of #20 being the amount " which our client provided towards the purchase of the house-" In reply to that, what was said was: " With regard to the #20 " this was voluntarily given on the understanding that when we " sold the house, this sum would be returned." Mr. Tolstoy naturally refers to those letters and submits that that is valuable evidence before the court as to what the wife thought. I do not think that these letters can be carried very far, because some of these matters depend upon the application of the law to the facts. But for what it is worth that is the way in which, on behalf of the wife, the matter was being stated. I think that I have said enough to show why this case has troubled me very considerably. Doing my best to balance the considerations, I have on the whole come to the conclusion that 14 [1955] 1 W.L.R. 731, 736. the decision of the judge can be supported. My reason for evidence have indicated was the relationship or the agreement between them at the proper time. It is clear that the husband himself wrote a letter and suggested that there might be more for the wife but that he could save it--that is to say, save the amount It is said now that he was referring only to an additional allowance and that that allowance was a very small amount. It is said that the wife in her affidavit specifically says that the arrangement was to save the amount of that allowance But she did not know that it was only aii amount of 3d. a day, and it seems to me that the whole spirit of the thing was that the husband was saying- " I could now give you some more, but " would you like me to save it for the period after the war?", and that the wife acceded to that. As I have said, in my judgment, both husband and wife were behaving with veiy commendable forethought and wisdom at that tune. I think, therefore, that the judge was justified in coming to the conclusion that he reached and the way in which the matter appealed to him. He said- " I believe the true position is that the wife said she could " keep herself and the children on the compulsory allotment and " by earning and the husband said he would save for after the " war. Provision for the future was of a most general kind." She did work during the war. She continued working after the war and that did undoubtedly enable the husband to save both during the war and after the war. I think, therefore, that the approach of the judge was justified. The result of that is that when the discussion took place, although the wife may not have worked it out in her mind, the position was that the house, though taken in the husband's name, was taken beneficially for both of them. Then comes the application of what is laid down in Rimmer v. Rimmer, and the result then follows in the way my Lords have outlined it. I have added these words because I have been consideably troubled by this case; and I have endeavoured to indicate why it is that, after much hesitation, I concur in the result proposed. Appeal dismissed. Solicitors: Hillearys; Edwin Coes & Calder Woods. F. R. D. 15 [1953] 1 Q.B. 63. [CHANCERY DIVISION] RAYFIELD v. HANDS AND OTHERS [1957 R. No. 603.] Company--Shares--Articles of association--Enfrocement between members--Provision that every member intending to transfer shares should inform directors who "will take the said shares equally "between them", and who "will take the said shares equally Meaning of " will "--Whether directors liable to take up members shares--Construction--Companies Act 1948 (11 & 12 Geo. 6, c. 38), s. 20 (1). Contract--Parties--Enforcement by third party--Company's articles of association--Enforcement between members inter se. Contract--Construction--Ut res magis valeat quam pereat--Company's articles of association. The plaintiff was a shareholder in a company, article 11 of the articles of association of which required him to inform the directors of his intention to transfer shares in the company, and which pro- vided that the directors " will take the said shares equally between " them at a fair value." In accordance with article 11 the plain- tiff so notified the directors, who contended that they need not take and pay for the plaintiff's sharee, on the ground that the articles imposed no such liability upon them. On the plaintiff's claim for the determination of the fair value of his shares, and for an order that the directors should purchase such shares at a fair value : -- Held, (1) that upon their true construction the articles required the directors to purchase the plaintiff's shares at a fair price. (2) That article 11 was concerned with the relationship between the plaintiff as a member and the defendants, not as directors, but as members of the company. (3) That it was not necessary, for the plaintiff to succeed in his action, that he should join the company as a party in addition to the directors. Judgments of Denning L.J. in Smith and Snipes Hall Farm Ltd. v. River Douglas Catchment Board [1949] 2 K.B. 500; 55 T.L.R. 628; [1949] 2 All E.R. 179; Drive Yourself Hire Co. Ltd. v. Strutt [1954] 1 Q.B. 250; [1953] 3 W.L.R. 1111; [1953] 2 All E.R. 1474; and Dean v. Prince [1954] Ch. 409; [1954] 2 W.L.R. 538; [1954] 1 All E.R. 749 considered. ACTION. Field-Davis Ltd. (hereinafter called "the company") was a private company carrying on business as builders and contractors, incorpotated in 1941 under the Companies Act, 1929, as a com- pany limited by shares, having a share capital of #4,000, divided into 4,000 ordinary shares of #1 each, of which 2,900 fully paid shapes had been issued. The plaintiff, Frank Leslie Rayfield, was the registered holder of 725 of those shares, and the defendants, Gordon Wyndham Hands, Alfred William Scales and Donald Davies were at all material times the sole directors of the company. In so far as is material the articles of association of [Reported by Mr. B. KELLY, Esq., Barrister-at-Law.] the company provided by article 6: " No shares in the company "shall be transferred to a person not a member of the company so "long as any member of the company may be willing to purchase "such shares at a fair value." Article 9 provided : " The "directors may at any time in their absolute discretion refuse "to register any transfer of shares." Under the general heading of " Directors " were the following articles: " 10. The number of " directors of the company shall not be more than four. The " following persons shall be the first directors of the company. . . . " 11. Every member who intends to transfer shares shall inform " the directors who will take the said shares equally between " them at a fair value but subject to the above no person shall " hold more than 1,000 shares in the capital of the company. " 12. In the event of death of any director his shares are to be " taken up equally between the remaining directors who will pay " a fair value therefor together with all moneys due to the " deceased up to the time of his death." On April 4, 1955, the plaintiff by a notice in writing informed the defendants, as directors of the company, of his intention to transfer his 725 shares to them as provided by article 11. The defendants denied any liability to take up and pay for the shares, and the plaintiff, by his statement of claim asked (1) that the fair value of the plaintiff's said shares might be determined by the court, (2) that the defendants be ordered to purchase such shares at their fair value in such proportions as they might agree upon, or in default of agreement, then equally, and (3) that an inquiry be ordered if necessary to ascertain such fair value. R. B. S. Instone for the plaintiff. Michael Albery Q.C. and Paul Baker for the defendants. In addition to the cases cited in the judgment, the following cases were referred to in the course of argument: In re London Sack and Bag Co. Ltd. (1); In re Greene, deed.(2) Cur. adv. vult. April 2. VAISEY J., reading his judgment, stated the facts and continued : It is article 11 with which I am mainly concerned in the present case, in the following circumstances. On or about April 4. 1955, the plaintiff, by a notice in writing bearing that date, informed the defendants aa the directors of the compsny of his intention to transfer his shares to them as provided by article 11 The defendants were and are, however, unwilling and contend that they are not liable to take and pay for the plaintiff's shsres. They say that article 11 imposes no enforceable liability upon them, and they base their contention first on the wording of article 11 itself, arguing that on its true construction it does not purport to impose any liability on the company's directors. It is 1 [1943] 2 All E.R. 763. 2 [1949] Ch. 333; [1949] 1 All E.R. 167. admitted that the words "every member . . . shall inform " the directors does create an obligation but it is argued by the defendants that the words " the directors . . . will take the " shares " imports in some way the idea of an option or choice or volition on the part of the directors having regard to the inherent difference (not always observed) in the English language between the words " shall " and " will. " I appreciate the force of that argument, but I cannot accept it. In this context, while the word " shall " clearly imports compulsion and obligation, the word " will " indicates as it seems to me a resultant prospective eventuality, in which the member has to sell his shares and the directors have to buy them, each being under an obligation to bnng that eventuality into effect. I think there is thus in the language of article 11 a mutual obliga- tion. It has been said that articles of association ought not to be construed too meticulously. See per Wynn-Parry J. in In re Hartley Baird Ltd.,(1) where he said: " In the interpretation of " such a commercial document as articles of association, the " maxim ut res magis valeat quam pereat should certainly be " applied, and I propose to interpret these articles in the light of " that maxim." I am not aware that this maxim has ever been put into English, but I suggest that it directs us to " validate if " possible. " And see also per Jenkins L.J. in Holmes v. Keyes,(2) where he is reported as saying that in his view the " articles of " association of the company should be regarded as a business " document and should be construed so as to give them reasonable " business efficacy . . in preference to a result which would " prove unworkable." I hold that the defendants' case so far as it depends on the construction of the company's articles of association fails, but I have not overlooked the arguments based on the undoubted diffi- culty of giving effect to article 11 in other circumstances, for example, where the member desiring to transfer his shares is him- self a director, or where several intimations of intention to sell are given simultaneously. But, in my judgment, the article ought not to be invalidated for the purposes of a case (such as this) where it is perfectly easy to give effect to it. Another point was taken which I hold to be equally insubstan- tial, namely, that the plaintiff has not in terms pleaded his ability and willingness to carry out his psrt of the bargain. That is a rule of pleading which applies principally, if not exclusively, to actions between vendors and purchasers of real estate. See Halsbury, 2nd ed., vol. 31, p. 421. I should, in the circum- stances, have allowed the statement of claim to be amended to comply with the rule, if it had seemed to me to be necessary, which I do not think it is. The next and most difficult point taken by the defendants, 1 [1955] Ch. 143, 146; [1954] 3 2 Ante, p. 738. W.L.R. 964; [1954] 3 All E.R. 695. as to which it would appear that there is no very clear judicial authority, is that article 11, as part of the company's articles of association, does not do what it looks like doing, that is, to create a contractual relationship between the plaintiff as shareholder and vendor and the defendants as directors and purchasers. This depends on section 20 (1) of the Companies Act, 1948, which reads as follows: " Subject to the provisions of this Act, the memo- " randum and articles shall, when registered, bind the company " and the members thereof to the same extent as if they respec- " tively had been signed and sealed by each member, and " contained covenants on the part of each member to observe all " the provisions of the memorandum and of the articles." This re-enacted corresponding provisions in the earlier Companies Acts, but it seems that such provisions are for the purposes of the present case substantially identical with the subsection which I have just read. In the circumstances, I was referred to what the textbooks have to say on the subject, and I think I ought to summarize their statements. In the 12th edition of Buckley on the Compaiues Acts at p. 52 allusion is made to the " large number of apparently conflicting " judicial decisions and dicta as to the exact nature of the " contractual relations established by the memorandum and " articles both as between the company and the members and as " between the members inter se," and it is further expressly pointed out that there are decisions or dicta both to the effect that the articles do, and also to the effect that they do not, constitute a contract between the members inter se. The variety of the judicial views on the matter is not I think overstated here. Gore-Browne's Handbook on Joint Stock Com- panies, 41st ed., at p. 45, states the effect of section 20 in these words : " [It] is to create an obligation binding alike on the " members in their dealings with the company, on the company " in its dealings with the members as members, and on the " members in their dealings with one another as members . . . " and even a member cannot enforce provisions for his benefit in " some other capacity than that of member : for example he " cannot assert a right to be appointed solicitor, secretary, or " director by reason of provisions contained only in the articles." In Palmer's Company Precedents, l6th ed., Part I, at p. 458, the matter is discussed on general lines, and the effect of some of the cases is summarized, and the following quotation is cited from the speech of Lord Herschell in Welton v. Saffery (3): " It is quite " true that the articles constitute a contract between each mem- " ber and the company, and that there is no contract in terms " between the individual members of the company; but the " articles do not any the less, in my opinion regulate their rights " inter se." I find that statement somewhat cryptic. In Halsbury's Laws of England, 3rd ed., vol. 6, at p. 129, under the sub-heading of " Memorandum and Articles," there 3 [1897] A.C. 299, 315; 13 T.L.R. 340. is a paragraph in these words: " While the articles regulate the " rights of the members inter se, they do not, it would seem, " constitute a contract between the members, inter se, but only a " contract between the company and its members and, therefore " the rights and liabilities of members as members under the " articles can only be enforced by or against the members through " the company." I will consider this proposition later on. article 11 relate to the rights of members inter se (that being the expression found in so many of the cases), or whether the relationship is between a member as such and directors as such. I may dispose of this point very briefly by saying that, in my judg- ment, the relationship here is between the plaintiff as a member and the defendants not as directors but as members. In In re Leicester Club and County Racecourse Co., Pearson " continue members of the company, and I prefer to call them " working members of the company," and on the same page he also said : " directors cannot divest themselves of their character of " members of the company. From first to last, . . . they are doing " their work in the capacity of members, and working members of " the company. . . ." I am of opinion, therefore, that this is in words a contract or quasi-contract between members, and not I have now to deal with the point for which there is consider- able support in the cases, that the notional signing and sealing of the articles creates a contractual relation between the company on the one hand and the corporators (members) on the other, so that no relief can be obtained in the absence of the company as a party to the suit. The defendants' case in so far as it is the Court of Appeal. I refer first to Smith and Snipes Hall Farm Ltd. v. River Douglas Catchment Board, and to the judgment of Denning L.J. in that case, which was a case of a covenant made, not by or with but for the benefit of the plaintiffs, and covenantee. Section 56 of the Law or Property Act, 1925, was referred to in terms which it is not necessary for me to repeat here. This same principle is further exemplified by the case of Drive Yourself Hire Co. (London) Ltd. v. Strutt, see especially the judgment of Denning L.J. as there reported. The case of the plaintiff may also be said to rest upon the well- known decision of Carlill V. carbolic Smoke Ball Co., to which I need not refer except to say that it seems to me to be relevant here. To the like effect is Clarke v. Earl of Dunraven,(8) upon which the plaintiff here is also relied. 4 (1885) 30 Ch.D. 629, 633; I 6 [1954] 1 Q.B. 250; [1953] 3 T.L.R. 658. W.L.R. 1111; [1953] 2 All E.R. 1474. 5 [1949] 2 K.B. 500; 65 T.L.R. 7 [1893] 1 Q.B. 256; 9 T.L.R. 124. 628; [1949] 2 All E.R. 179. 8 [1897] A.C. 59; 13 T.L.R. 58. In general discussions on the effect of section 20 to be found in the cases, I have, of course, considered the dissentient speech of Lord Herschell in Welton v. Saffery,(9) and the comprehensive review of the earlier authorities by Astbury J. in Hickman v. Kent & Romney Marsh Sheepbreeders' Association.(10) Among the numerous dicta in the judgment in that case, one which seems to me to be helpful and convincing is the one which reads as follows (11): " the articles of association are simply a contract as " between the shareholders inter se in respect of their rights as " shareholders. They are the deed of partnership by which the " shareholders agree inter se." Strangely enough the case which comes perhaps nearest to the present is one in which the point under section 20 of the Act was not taken, and either disregarded or ignored, but I cannot say that it was overlooked, as the decision was a decision of the Court of Appeal. I will read the headnote from the report of the case, the name of which is Dean v. Prince (12): " The articles of associa- " tion of a private company carrying on a light engineering " business provided that a deceased director's shares should be " purchased by the surviving directors at a price to be certified " by an auditor as a fair value. A director who held a controlling " interest in the company died. The auditor, having made a " certified valuation, stated in writing that for the purpose of his " valuation he had not regarded the company as a going concern " but that he had valued on a ' break-up ' basis, because in his " opinion the shares had no value on any other basis, having " regard to the losses made by the company. On appeal from " Harman J., who held that the valuation was invalid and not " binding because the auditor had proceeded on the wrong basis " and had not attributed any special value to the shares in " question although they carried control of the company:-- " Held (1) that the auditor was right in not attributing a special " value to these shares on account of their carrying control. The " shares of the company should be valued as a whole and the " total then divided rateably amongst all the shares equally; " (2) that the auditor had correctly rejected the 'going concern' " basis of valuation, as the company had no expectation of profit- " making. " The decision of Harman J. was reversed on the question of valuation, and in the course of his reserved judgment, Wynn- Parry J., sitting as a member of the court, said this (13): " . . . the " auditor, in my view, has to have regard to the realities of the " situation, he must take into account that the other directors, " and not merely one of them, are bound to purchase the shares " in question." To show how close is the similarity between that case and the 9 [1897] A.C. 299, 315; 13 T.L.R. 12 [1954] Ch. 409; [1954] 2 240. W.L.R. 538; [1954] 1 All E.R. 749. 10 [1915] 1 Ch. 881. 13 [1954] Ch. 409, 431. 11 Ibid. 881, 891. present, I will read from the report of the case before Harman J.(14) the article which was in question there : " In the event of the -- " death of any member his shares shall be purchased and taken " by the directors at such price as is certified in writing by the " auditor to be in his opinion the fair value thereof at the date of " death, and in so certifying the auditor shall be considered to " act as an expert and not as an auditor and accordingly the " Arbitration Act, 1889, shall not apply. Unless otherwise agreed " the directors shall take such shares equally between them." I will refer, but only in passing, to another case closely bearing on the point now under consideration of Borland's Trustees v. Steel Bros & Co. Ltd.(15) There, there was a provision in a company's articles of association compelling a shareholder at any time during the continuance of the company to transfer his shares to particular persons at a particular price. It was held that these provisions were not void as being repugnant to absolute ownership nor as tending to perpetuity, and it was also held that there was nothing in such a provision to defeat the rights of a trustee in bankruptcy. The case was decided by Sir George Farwell J., who made a number of remarks which bear on this question. I do not propose to refer to them in detail except one remark, where he says (16); "these articles are nothing more or the director who went bankrupt--" and the other shareholders in " the company under the 16th section of the Companies Act, " 1862," that section being the section which corresponded at that date to section 20 of the present Act which is now in force. On the whole, if the proper way to construe the articles of association of a company is as a commercial or business document to which the maxim " validate if possible" applies, I think that the plaintiff in this action ought to succeed. Not one of the judges in the case to which I have already referred, Dean v. Prince, (17) showed any signs of shock or surprise in the assumption there made of a contract between directors being formed bD the terms of a company's articles. I am encouraged, not I hope unreasonably, to find in this case a contract similarly formed between a member and member-directors in relation to their holdings of the company's shares in its articles. The conclusion to which I have come may not be of so general an application as to extend to the articles of association of every company, for it is, I think, material to remember that this private company is one of that class of comapnies which bears a close analogy to a partnership; see the well-known passages in In re Yenidje Tobacco Co. (18) Nobody, I suppose, would doubt that a partnership deed might validly and properly provide for the acquisition of the share of 14 [1953] Ch. 590; [1953] 3 17 [1954] Ch. 409. W L.R. 271; [1953] 2 All E.R. 636. 18 [1916] 2 Ch. 426; 32 T.L.R. 15 [1901] 1 Ch. 279, 17 T.L.R. 45. 709. 16 [1901] 1 Ch. 279, 290. VOL. 2 one partner by another partner on terms identical with those of article 11 in the present case. I do not intend to decide more in the present case than is necassary to support my conclusion, though it may be that the principles upon which my conclusion is founded are of more general application than might be supposed from some of the authorities on the point. I will make an appropriate declaration of the plaintiff's rights, or will order the defendants to give effect to them, and if neces- sary there must be an inquiry to ascertain the fair value of the shares I am asked not to decide what is the proper date at which the value of the shares is to be fixed, as to which indeed there be no question, but to leave these to be either agreed or decided hereafter. There must be liberty to apply. Declaration accordingly. Solicitors: Simpson, Palmer & Winder; Mark Lemon. [BRISTOL ASSIZES.] * PARKER AND ANOTHER v. CLARK AND ANOTHER. Contract--Formation--Intention to create legal relationship--Family arrangement--sharing home--Agreement by plaintiffs to leave their own home and share home of defendants and by defendants to devise their house to female plaintiff. Contract--Termination--Family agreement--Sharing home--Promise of bequest by owners--Whether agreement for their lives. Vendor and Purchaser--Contract--Memorandum in writing--Offer in writing--Loss of letter of acceptance--Law of Property Act, 1925 (15 Geo. 5, c. 20), s. 40 (1) The defendants, C. and Mrs. C., were an elderly retired and married couple who, in 1955, were living in a large house which C. owned, called " Cramond." The female plaintiff, Mrs. P., was Mrs. C.'s niece, and lived with the male plaintiff, P., her husband, who had also retired, in their cottage, " The Thimble." The plaintiffs were 20 years younger than the defendants. The defendants had very little domestic service and were not in good health, and the plaintiffs, with whom they were on very friendly terms, used often to visit them at " Cramond," sometimes with the object of assisting them when they were unwell. At the conclusion of one of these visits, C. suggested to P. that the plain- tiffs should " come and live with us. P. later wrote to say that the plaintiffs approved of the idea, but that it would mean selling " The Thimble." On September 25, 1955, C. replied in a latter which was produced at the trial, saying that the major difficulty about what was to happen to "The Thimble" could be solved by his leaving "Cramond" and its contents to Mrs. P., her sister and her daughter after the death of himself and Mrs. C. C. set out the maintenance expenses of " Cramond " (about #200) and continued: " If we go fifty-fifty on maintenanoe of house it would " cost you half of the #200 odd as set out and half the running " expense of food, drinks, etc., but I think it would be fair if your " share of the #200 was the same as you now pay at the " ' Thimble ' if it is less than #200. I would pay for a daily " woman four mornings a week, have a T.V. and a new car. You " could sell out and pay off your mortgage and invest proceeds " increase your income. I hope your family vote for or against this " will be unanimous." P. replied in a letter which was not pre- served, saying that he accepted C.'s offer and would sell " The " Thimble." P. then sold " The Thimble " and on March 1, 1955, the plain- tiffs moved to " Cramond." Later in 1957, however, C. told P. that the partnership was not working, and that the plaintiffs would have to find some other place to live. On a claim for damages for breach of the agreement contained in the letter of September 25, 1955:-- Held, (1) that the language of the letter of September 25, 1955, and the reply thereto, taken with the surrounding circumstances, showed that the parties intended to enter into an agreement in [Reported by GROVE HULL, Esq., Barrister-at-Law.) the terms of the letter which was binding in law, and not a mere unenforceable family arrangement (post, p. 294) Balfour v. Balfour [1919] 2 K.B. 571; 35 T.L.R. 609 distin- guished. Synge v. Synge (1894] 1 Q.B. 466; 10 T.L.R. 194; and dictum of Lord Lyndhurst L.C. in Hammersley v. De Biel (1845) 12 Cl. & Fin. 45, 78 applied. (2) That, having regard to the exceptional circumstances of the defendants' age and state of health, there was sufficient in the language of the letter to show it was a term of the agreement that the plaintiffs should reside at " Cramond " for the period of the defendants' lives (post, p. 295). (3) That the letter of Septembor 25, 1955, was a sufficient note or memorandum in writing of the agreement to satisfy the provisions of section 40 (1) of the Law of Property Act, 1925,(1) since, although the agreement was not in existence when it was signed, its language (post, p. 296). Smith v. Neale (1857) 2 C.B.N.S. 67; and Reuss v. Picksley (1866) L.R. 1 Ex. 342 applied. Dictum of Fry J. in Munday v. Asprey (1880) 13 Ch.D. 855, 857 not followed. (4) That the defendants were, accordingly, in breach of contract ; that P. and Mrs. P. were jointly entitled to damages for the loss of the value of the benefits of living at "Cramond" during the joint lives of the defendants; and that Mrs. P. was entitled to damages for the loss of prospect of inheriting a share in " Cramond " under C.'s will. ACTION. The plaintiffs, Dudley Alfred Parker and his wife Madeline Kate Parker, claimed damages in this action against the defen- dants, Herbert Thomas Clark and his wife Jane Edith Constance Clark, for breach of a contract made between the parties, in or about September, 1955. By their statement of claim the plaintiffs alleged: (1) that it was agreed between the parties : (a) that the plaintigs should cease to occupy and should dispose of their interest in a dwelling- house known as " The Thimble "; (b) that the plaintiffs should owned by the defendants, known as " Cramond," for the period of the lifetime of the survivor of the defendants; (c) that the parties should share the running costs of " Cramond "; (d) that the defendants should purchase a television set and a new car for the joint use of the parties; (e) that the defendants should make a valid and binding testamentary disposition giving " Cramond " and its contents jointly to Mrs. Parker, her daughter and sister; (2) that in pursuance of this agreement the plaintiffs performed their obligations under sub-paragraphs (a), (b) and (c), 1 Law of Property Act, 1925, "brought, or some memorandum or s. 40: " (1) No action may be brought "note thereof, is in writing, and " upon any contract for the sale or "signed by the party to be charged " Upon any contract for the sale or " signed by the party to be charged " other disposition of land or any " or by some other person thereuno " interest in land, unless the agree- " by him lawfully authorised." " ment upon which such action is above, and the defendants performed their obligations under sub- paragraph (d), above; (3) that, in or about October, 1957, the defendants repudiated the agreement by wrongfully giving the plaintiffs notice to quit " Cramond " and determining the agree- ment, and by refusing to comply with sub-paragraph (e), above. The plaintiffs claimed damages in respect of this repudiation. The defendants, by their defence, denied that they had made the agreement. They admitted that the plaintiffs resided at " Cramond " between March, 1956, and December, 1957, but denied the plaintiffs' other allegations. Further, they pleaded that the alleged agreement was not in writing and that there was no sufficient note or memorandum in writing thereof to satisfy the provisions of section 40 (1) of the Law of Property Act, 1925. Finally, the defendants pleaded that if the alleged agreement had been made, it was determined by the plaintiffs, or alternatively pursuant to an agreement, express or to be implied from all the circumstances, made in or about October, 1957, between the first plaintiff and the first defendant. The following statement of facts is taken in substance from the judgment: The male defendant was a retired civil servant who owned a large house called " Cramond " in Torquay, where, in 1955, he lived with his wife. He was then aged 77 and his wife was 78. They had no children. Mrs. Parker, the female plaintiff, was Mrs. Clark's niece. Commander Parker, her husband, had retired from the Royal Navy and in 1955 lived with Mrs. Parker in a cottage which he owned, called 'The Thimble," at Mayfield in Sussex. The Parkers were on very friendly terms with the Clarks and visited them from time to time. Sometimes the invitations were in the nature of an S O S , as the Clarks were not in very good health and had little or no domestic service. On September 18, 1955, the Parkers were leaving " Cramond " after a visit when Mr. Clark suddenly proposed to Commander Parker that the Parkers should join forces and live with them. The words used were : " Come and live with us," and Commander Parker assumed, although the word " permanently " was not used, that that was what was meant. The Parkers liked the idea, but Commander Parker was satisfied that it meant selling " The Thimble "; he was not prepared to let it. Accordingly, a few days later, he wrote to Mr. Clark, saying that if they came to live in Torquay they would have to get rid of their cottage. Mr. Clark replied in a letter dated September 25 in the following terms: " My dear Dudley, Many thanks for your letter. The major " diffculty re what is to happen to the ' Thimble ' can be solved " by our leaving ' Cramond ' and its major contents (insured for " #3,000 and #3,000) to Madeline [Mrs. Parker], Mavis [her " sister] and Pamela [the Parkers' daughter] when we both pass " away and if you cannot maintain it they can sell out. Its " present value is #9,00 to #12,000 without contents. Main- " tenance at present costs Elect. #50, Tele. #10, Coal #21, Rates " #113 13s. 4d., Water #8 lls. 3d. Total: #203 4s. 8d. My " pension is #700 per annum and Connie [Mrs. Clark] has an " annuity of #300 p.a. If I pass away Connie gets #30 widow's " pension. This all disappears as we pass away. But I have " some War Loan out of which I pay income tax and eventually " death duties. The War Loan goes to my surviving brother and " sisters. If we go fifty-fifty on maintenance of house it would " cost you half of the #200 odd as set out and half the running " expense of food, drinks, etc., but I think it would be fair if your " share of the #200 was the same as you now pay at the " ' Thimble ' if it is less than #200. I would pay for a daily " woman four mornings a week, have a T.V. and a new car. You " could sell out and pay off your mortgage and invest proceeds to " increase your income. I hope your family vote for or against " this will be unanimous. B.& C." On September 30 Commander Parker replied in a letter which was not preserved, saying that he accepted Mr. Clark's generous offer; that the family vote was unanimously in favour; and that he would dispose of " The Thimble." The Parkers then acted upon the arrangement and sold " The Thimble " for #3,900. Of this money #945 was used to pay off a secured advance and out of the balance #2,000 was lent to their daughter Pamela to enable her to buy a flat. Commander Parker told Mr. Clark what he had done and said that he could not call in the loan without dispossessing his daughter. On March 1, 1956, the Parkers moved to " Cramond." They took with them enough furniture for the bedroom they were to occupy and also a few other pieces; the rest was stored. They found that Mr. Clark had engaged a daily woman and bought a television set, as he had promised. Shortly after their arrival Mrs. Clark told Mrs. Parker that the Clarks had decided not to charge the Parkers with their share of the rates. Apart from this, all the household expenses were shared. Housekeeping tasks and gardening were shared by the Parkers and the Clarks, and most of the work was done by the Parkers. Soon after the Parkers' arrival Mr. Clark, as promised in the letter of Sep- tember 25, bought a new car. Neither of the Clarks drove, so that all the driving was done by Commander Parker. Mr. Clark paid all the running expenses, except that when the Parkers used the car for their own purposes they paid for the petrol. About the time when he bought the car, Mr. Clark told Commander Parker that he would give the Parkers each #400 in order to save death duties on #80, but nothing came of this. In August, 1956, Mr. Clark told Commander Parker that the car was a luxury and that he proposed to lay it up and then sell it. The Commander said that this was unreasonable, and reminded him of what he had said in the letter of September 25. Early in 1957 Mr. Clark made a will. He did not consult a solicitor, but made it out on a form. He stated in evidence that the will was in accordance with the terms of his letter of Septem- ber 25, and left " Cramond " to the three beneficiaries there named, including Mrs. Parker. He later destroyed this will, but shortly after made another similar one. Commander Parker told Mr. Clark that he thought that it was unsatisfactory that the will was made on a purchased form and without legal guidance, and was not kept in a place of safety. Mr. Clark said nothing. In July, 1957, Mr. Clark told Commander Parker that he was con- sidering selling " Cramond." The Commander said that this would mean that the Parkers would be without a home. Mr. Clark said nothing. By the autumn of 1957 Mr. Clark had begun to regret the arrangement whereunder he had taken the Parkers into his home. Matters first came to a head on October 24 when, after another discussion about the car, Mr. Clark told Commander Parker that he thought the partnership was not working and that the Parkers would have to find some other place to live. Commander Parker protested strongly. He consulted a solicitor on November 1, and as the result of the advice which he received asked Mr. Clark to put on paper that he had told them to leave " Cramond." Mr. Clark replied that " Cramond " was not a common lodging-house. Commander Parker decided that he would make his contribution to the rates. He calculated that if he paid #41 5s. 4d., it would bring his total contribution up to what he had been paying at ' The Thimble," which Mr. Clark had said in his letter of September 25 was to be its limit, and on November 4 he tendered a cheque for that amount to Mr. Clark, which Mr. Clark refused- About the middle of November Mr. Clark asked Commander Parker when they intended to leave. The Commander replied that they had no intention of leaving and that he would have to have them evicted. Mr. Clark said: " There are other ways of " getting you out." About this time, Mr. Clark offered to pay the Parkers their expenses incurred in leaving " Cramond " and finding another place to live, and said that for this purpose he would set aside #150. Commander Parker told Mr. Clark that he did not trust him and did not accept his offer. A little later Mr. Clark offered, in addition to the #150, that he would pay for the expenses that the Parkers had incurred in moving their furniture to " Cramond," as well as the expenses for taking it away, and Commander Parker refused. By the beginning of December the Parkers found the atmos- phere unbearable and they decided that they would have to leave. Commander parker told Mrs. Clark that they would accept Mr. Clark's last offer. She gave them a cheque for #150, and he handed to her the bill he had received for the furniture removal from Mayfield to Torquay and said that he would send the other bill when it arrived. On December 9 the Parkers left " Cramond. " On January 7, 1958, Commander Parker wrote a friendly letter to Mrs. Clark in which he sent the further bill for the furniture- There was no talk of any legal action, though Commander Parker described their situation as " anything but pleasant," and said for the furniture removals were not discharged by the Clarks. No further action was taken by the plaintiffs until August 20, 1958, when a solicitor's letter was sent to the defendants putting forward a claim substantially in the terms of the statement of claim in the present action. No reply was received and on November 13, 1958, the writ was issued. C. L. Hawser Q.C. and P. E. Lewis for the plaintiffs. Hugh Park for the defendants. November 26. DEVLIN J. read the following judgment The plaintiffs in this case are suing on an unusual sort of contract. They are a married couple and they are suing another married couple upon an allegation that the defendants repudiated a contract whereunder the two couples were to share the running costs of the defendants' house, and whereunder the defendants' house was to be left by will in a manner that benefited the plaintiffs and their relatives. Such contracts are not easily proved in fact, and when proved are likely to run into legal difficulties such as those that are created by section 40 of the Law of Property Act, 1925. This is the case here. Fortunately the facts are clear. There is not much conflict of evidence and, where there is, I have no hesitation in preferring that of the plaintiffs and their witnesses. The defendant couple are very old and are not very reliable. The plaintiffs gave their evidence very satisfactorily. In all relevant matters they told the truth carefully, not only when they were narrating facts but also when they were giving evidence about their own states of mind. [His Lordship stated the facts and continued: ] The relief claimed by the plaintiffs falls into two categories. It is accepted by both sides that, if there has been a breach of contract, the measure of damage is the value of that which the plaintigs have lost by reason of the breach. The particulars of special damage set out in the statement of claim do not assist much in the assessment, for they specify chiefly costs incurred by the plain- tiffs as the result of entering into the contract and as the result of its breach. The two categories are, first, the value to the plaintiffs of such benefits as are attributable to living at " Cramond " and, secondly, the value to the female plaintiff of the prospect of inheriting " Cramond " when the two defendants are dead. In the first category, the plaintigs do not allege and have not proved that their share of the joint living expenses at " Cramond " was any less than their living expenses indepen- dently would have been. They do not rely on Mr. Clark's statement that he would not charge them rates as being contrac- tually binding; and accordingly, as I have already said, the cost of their living at " The Thimble " was the ceiling over their contribution to the " Cramond " expenses. What they have lost consists therefore of the benefit of living at " Cramond " rent- free, and the value to them of the use of a car and a television set specially provided by Mr. Clark. The appropriate sum to cover these items is claimed by them as joint contractors. In the second category the claim is for the estimated value of " Cramond " and its contents, which is put in the statement of claim at # 12,000. In fact, for the purposes of this action, the value has been agreed as #13,000. But the whole of this amount cannot properly be claimed in the present action. By the terms of the letter the house and contents were to be left jointly to Mrs. Parker, her sister and her daughter. It may be that if the plaintiffs were claiming as trustees, and if they could establish that Mr. Clark's promised bequest was intended for the benefit of the sister and the daughter as well as an inducement to the Parkers, they could obtain judgment for the full value. But Mr. Hawser eventually abandoned the argument that, on the pleadings as they stood, he could recover sums for the benefit of the sister and daughter. It follows, therefore, that the damages in this category cannot exceed one-third of the value of the house and contents. This is the figure which, less certain deductions which I shall consider later, is claimed by Mrs Parker in her own right. The contract relied upon by the plaintiffs is said to be con- tained in the defendants' letter of September 25 and Commander Parker's acceptance thereof. In this part of the case, since Commander Parker and Mr. Clark were the contractual pro- tagonists, it is convenient to refer to them simply as plaintiff and defendant. The defendants' first submission in answer to the claim is that the letters, construed in the light of the surrounding circumstances, show no intention to enter into a legal relationship or to make a binding contract. No doubt a proposal between relatives to share a house, and a promise to make a bequest of it, may very well amount to no more than a family arrangement of the type considered in Balfour v. Balfour,(1) which the courts will not enforce. But there is equally no doubt that arrangements of this sort, and in particular a proposal to leave property in a will, can be the subject of a binding contract. The latter proposal has been considered chiefly in relation to marriage contracts. In Synge v. Synge (2) it was held that the defendant, who promised in writing, as part of the terms of the marriage, to leave a house and land to the plaintiff, had thereby entered into a binding contract. Kay L.J., delivering the judgment of the Court of Appeal, noted (3) the dicta of Lord Lyndhurst L.C. in Hammersley v. De Biel (4): ". . . the principle of law, at least of equity, is this " --that if a party holds out inducements to another to celebrate 1 [1919] 2 K.B. 571; 35 T.L.R. 3 [1894] 1 Q.B. 466. 609. 4 (1845) 12 Cl. & Fin. 45, 78. [1894] 1 Q.B. 466; 10 T.L.R. 194. " a marriage, and holds them out deliberately and plainly, and " the other party consents, and celebrates the marriage in conse- " quence of them, if he had good reason to expect that it was " intended that he should have the benefit of the proposal which " was so held out, a court of equity will take care that he is not " disappointed, and will give effect to the proposal." That is the principle which I apply here; and, indeed, a contract of marriage is not dissimilar to an agreement by two families to live together for the rest of their joint lives. The question must, of course, depend on the intention of the parties, to be inferred from the language they use and from the circumstances in which they use it. On the plaintiff's side, I accept his evidence that he considered that he was making a binding contract. An important factor in this was that he disposed of his own residence. It does not matter for this purpose whether it was or was not a term of the contract that he should sell " The Thimble "; the important thing is that the contract required him to give up his occupation of " The Thimble," and that he was always quite clear, and made it quite clear, that he would not give up occupation unless he also gave up the ownership and parted with the property. He would not have done that, he says--and I believe it--unless he thought that he was securing another permanent home. There is, undoubtedly, in the arrange- ment a lack of formality, upon which Mr. Park greatly relies. This, I think, is largely explained by the relationship between the parties; it is easier to demand formal documents from a stranger than it is from a relative and friend. It is clear that the plaintiff constantly relied upon the letter as a sort of title to his rights; he kept it and referred to it whenever his rights were called in question. When on October 24, 1957, they were seriously legal action as an afterthought, when he found he was not getting what he wanted. The plaintiff is not a moneyed man. On the strength of Mr. Clark's promise he, so to speak, put down #672 l0s. That is the figure that is agreed as the expense which he incurred in giving up " The Thimble," on the assumption that he could repurchase The Thimble " or a cottage like it. In addition to that, he tied up #2,000, so that he has never since been in a position to buy another property like " The Thimble," and has never in fact bought one. The defendant knew this, and had plenty of time to reflect upon it between September 25, 1955, when he wrote his letter and March 1, 1956, when the plaintiffs arrived. If he had thought that all that his letter involved was an amicable arrange- ment terminable at will, I cannot believe that he would not have enlightened the plaintiff and, as a cautious man himself, have warned him against the folly of what he was doing. I cannot believe either that the defendant really thought that the law would leave him at liberty if he so chose, to tell the Parkers when they arrived that he had changed his mind, that they could take ineans. The defendant gave several answers which show that this was not really his state of mind. He said that the object of the letter was to induce the Parkers to come to " Cramond "; and he agreed also that he made the will in fulfilment of the promise. I am satisfied that an arrangement binding in law was intended by both sides. The defendants' second submission is that the agreement is not sufficiently clear in its terms to be capable of constituting a legal contract. No doubt, if the letter had been drafted bv a example, have specified how the running expenses were to be determined and matters of that sort. An agreement of this kind made in general terms requires good hill and co-operation from both sides if it is to be successfully worked. But it was, in fact made to work for more than a year and a half, and the defendants fulfilled all its terms, even to the point of making a will to the required effect. Mr. Park has not argued that the contract was too imprecise in detail to be enforceable. But he has contended that two of the terms pleaded in the statement of claim are not sufficiently clearly set out in the letter of September 25. The former of these is the first pleaded term, which alleges that the plaintiffs were to cease to occupy and dispose of their interest in " The Thimble." Mr. Park argues that there is nothing express or to be implied in the letter which requires the plaintiffs to sell " The Thimble." Mr. Hawser accepts this and agrees that the only term to be implied from the letter about ' The Thimble " is that the plaintiffs should cease to occupy it. But the elimination of part of the term pleaded does not affect the relief for which the plaintiffs are asking. The main consider- tion for the defendants' promise was that the plaintiffs should come and live at " Cramond." This they have done. It may be that the request was also dependent upon " The Thimble " being Mr. Park's second point is on the second term pleaded and he submits that there is nothing in the letter specifying the period for which " Cramond " was to be shared, and therefore nothing which justified the contention in the statement of claim that it was " the period of the lifetime of the survivor of the defendants." On this view, no time being mentioned, the duration of the agree- ment would be subject to reasonable notice on either side. It is clear, I think, that it was intended as a long-term arrangement. But an agreement to last for life must be exceptional, and would certainly be improbable in case of two young couples. Here, however, the circumstances are unusual. The defendants are both over 80 and, describing their condition in September, 1955, Mr. Clark said: " Both of us were in very bad health and neither of " us thought we had much chance to live long." Because the terms of the Clarks' offer were generous, one must not overlook the benefits which they were receiving from the arrangement. It is not easy nowadays to secure domestic assistance, especially in times of illness; and for the Clarks to have living with them permanently a couple 20 years younger, whom they believed to be congenial and who were obviously willing to help was a great advantage and one which at market rates they might have had to pay a great deal for. I have already instanced the sort of things the Parkers did. While there was no bargain about it, I am sure that the Clarks expected this sort of help and that the plaintiffs thought it natural and right to give it. The Clarks obviously wanted comfort and security for the rest of their lives which they believed to be short. It would not have been much of a bargain to them if it had left the Parkers free to give notice before the end; it might be then that the need for their help would be most great. In these circumstances there is, I think, sufficient in the language of the letter to indicate that the agreement was to be for the duration of the defendants' lives. In offering the bequest of " Cramond " to the three women the letter says: " If you cannot maintain it they can sell out." This shows I think, that the defendants expected that at the time of their deaths the plaintiffs would still be in residence. Mr. Park's third submission is that section 40 of the Law of Property Act, 1925, has not been complied with, since the agree- ment was not in writing, nor was there any sufficient note or memorandum of it in writing. In fact, the whole agreement, which consists of the letter of September 25 and of Commander sufficient to satisfy the requirements of the statute. But he did not pursue this argument preferring to rely upon a contention that a written offer which contained all the terms of the contract was a statute and that the acceptance of the offer could be proved orally Mr. Park submitted that the memorandum was not a good one unless the agreement was in existence before it was signed. For this proposition he relied upon Monday v. Aspley. In this case the purchaser's solicitors sent the engrossment of a which they sought an appointment for completion. These docu- ments were held not to be a sufficient memorandum, since they Park particularly relied upon the following dictum of Fry J.(6): " The statute requires that a concluded agreement existing at the " time when the memorandum is signed should be proved by " the plaintiff whereas the document, as I have said, shows no " actual existing agreement." I think with great respect that, whether the case was rightly 5 (1880) 13 Ch.D. 855. 6 (1880) 13 Ch.D. 855, 857. or wrongly decided, the supported. It is con- trary to a number of authorities, two of which, Smith v. Neale 7 and Reuss v. Picksley,8 were cited by Mr. Hawser, which show that a written offer is capable of being a good memorandum, although the agreement cannot come into existence until after the offer has been accepted. I agree that a document which contains no more than a statement of all the terms of a proposed agree- ment would not be enough; and it may be that that is the way in which an engrossment of a contract ought to be regarded. The memorandum must not only contain a statement of all the terms but its language must be such as to show an intention to contract. , Mr. Park has submitted that the letter of September 25 was not an offer, but merely a statement of terms proposed for considera- tion. But I think that the letter was an offer and expressed as such; the concluding sentence of the letter satisfied me of that. The amended defence raises the plea that the plaintiffs them- selves determined the agreement. This was not pursued by Mr. Park in argument, and is contrary to the evidence which I have accepted. The plaintiffs did agree to leave the house--presumably in their view as an alternative to being evicted--in exchange for #150 and the promise of further payments for furniture removal. They maintain that by so doing they did not intend to prejudice their rights and it has not been alleged that they did. In any event the further payments were never made. Accordingly, I am satisfied that there has been a breach of contract and that the plaintiffs are entitled to damages under the two heads I have already particularised. " Cramond " is obviously a desirable and well-appointed house, since with its contents it is valued at $13 000 and I assess the benefit of living in part of it rent-free, together with the use of a car and a television set, at $300 a year. I shall take a multiplier of four as representing the value as in December, 1957, of that sum. This multiplier is based upon what cannot be much more than a guess about the expecta- tion of life of the two defendants. But it Deed not be more than approximate, since a discounting figure, also based upon the same expectation of life, must be applied in order to value Mrs. Parker's prospects under the will. The value of those prospects must also be discounted by the fact that Mrs. Parker might have had to find a sum to pay death duties, and I must also allow for contingencies, such as that the house might have been destroyed before the will took effect. Mr. Clark apparently contemplated finding the death duties from some other source and the house was in fact insured. But Mr. Hawser admits that there was no legal obligation on Mr. Clark to do either of these things, and that his doing them cannot be put higher than an expectation. Taking these matters into account, I value Mrs. Parker's prospects under the will as at today at $3,400. 7 (1857) 2 C.B.N.S. 67. There will, thererore, be judgment for both plaintiffs jointly for #1,200 and costs, and for Mrs. Parker separately for #3,400. Judgment for the plaintiffs. Costs. Solicitors: Skelton, Cobb & Co.; Pennington & Son for Hooper & Wollen, Torquay. [CHANCERY DIVISION.] * BEESLY v. HALLWOOD ESTATES LTD. [1959 B. No. 402] Land Registration--Land charge--Estate contract--Option for new lease --Non-registration--Whether void against purchaser of reversion-- Land Charges Act, 1925 (15 Geo. 5, c. 22), ss. 10 (1), Class C (iv), 13 (2). Contract--Formation--No intention to create new obligations--Intention to give effect to believed existing rights--Mistake of law--Whether new contract created. Estoppel -- Conduct, by -- Contract -- Promise inducing -- Unenforce- able contract--No detriment to promise--Whether promise can render enforceable. Deed--Execution--Escrow--Intention to execute in duplicate--Execution of one part conditional on execution of counterpart--Whether delivery imported. By section 10 (1) of the Land Charges Act, 1925, " The following " classes of charges on, or obligations affecting, land may he " registered as land charges in the register of land charges, " namely: -- . . . Class C: --A mortgage charge or obligation affect- ing land of any of the following kinds, . . . (iv) Any contract by " any of the following kinds, . . . (iv) Any contract by " an estate owner . . . to convey or create a legal estate, including " a contract conferring either expressly or by statutory implication " a valid option of purchase, a right of pre-emption or any other " like right (in this Act referred to as ' an estate contract'). . . ." as hereinafter provided) he void es against a purchaser of the land " charge is registered in the appropriate register before the com- " pletion of the purchase: Provided that, as respects . . . an estate " contract created or entered into after the commencement of this " Act, this subsection only applies in favour of a purchaser of a " legal estate for money or money's worth." By a lease dated May 21, 1938, for a term of 21 years from March 25, 1938, it was provided that on the tenants giving at least six months' notice in writing previous to the determination of the lease they should have the right to obtain a further lease for 21 years on the same conditions subject to certain amendments. The option was never registered as a land charge under the Land Charges Act, 1925. On january 10, 1948, the residue of the term was assigned to the plaintiff for vaIuable consideration; and, in August, 1955, the freehold reversion was purchased by the defandant Both the plaintiff and the directors of the defendant company were then of opinion that the option was binding on the defendant com- pany. On August 27, 1958, the defendant company's solicitors wrote to the plaintiff's solicitors setting out the terms of the new lease and informing them that the grant of the new lease would he subject to an undertaking being given to redecorate the property. There was some further correspondence with regard to the terms of the under- taking but it was never given. On September 11, 1958, the defen- dant company's solicitors sent a counterpart lease to the plaintiff's mistaken believed the option to be binding at law despite non- registration that mistake was a mistake of law and did not afford a defence to the claim that the defendant was bound by the lease which it had executed. Accordingly, subject to the plaintiff handing over the counterpart, the defendants were bound by the lease (post, p. 563). ACTION. By a lease made on May 21, 1938, the lessors, Dr. R. Collum's Representatives Ltd., granted to the tenants, Walter Weeks and Winifred Gertrude Weeks, a lease of property known as No. 132 132a and 132b, Ewell Road, Surbiton, Surrey for a term of 21 years from March 25, 1938. Clause 5 of the lease provided that " On giving at least six months' notice in writing expiring previous " to the determination of this demise the tenants shall have the " right to obtain a further lease for twenty-one years on the same " such further lease. (b) That the yearly rentals payable during " the said term shall be as follows:--(i) Two hundred pounds for " the first seven years. (ii) Two hundred and twenty-five pounds " for the second seven years. (iii) Two hundred and fifty pounds for the last seven years. (c) The legal costs, stamp duties and " other expenses attendant on the granting of such further lease shall be borne by the tenants." That option was never registered as a land charge under the Land Charges Act, 1925 By an assignment dated January 10, 1948, made between the tenants and the plaintiff, Phyllis Eirene Beesly, the tenants, in consideration of a payment of #5,000, assigned the demised property to the plaintiff for the residue of the term subject to the rent, covenants and conditions reserved by and contained in the and other chattels and the goodwill of the business carried on by them at the property. In August, 1955, the defendants, Ball- wood Estates Ltd., purchased the freehold reversion expectant on the term for money. The defendants had notice of the option when they bought the property, and on August 13, 1955, their solicitors applied for an official search under the Land Charges Act, 1925 for entries affecting No. 132, Ewell Road, though not Nos. 132a and 132b under the names (inter alios) of the original lessors and obtained a certificate of no subsisting entries. On July 1, 1958, the plaintiff's then solicitors wrote a letter to the original lessors, c/o Messrs. Whiddington, estate agents, on the plaintiff's behalf, enclosing a formal notice to exercise the option given to her by clause 5 of the lease. On August 27, 1958, the defendant's solicitors wrote to the plaintiff's solicitors that they had been instructed to act by the defendants. The letter continued: " We are instructed that the term is to be for 21 years " at a rental of #200 per annum for the first seven years, #225 " per annum for the next seven gears, and #250 per annum for " the remainder of the term. In other respects the new lease will " be in similar terms to the existing one and this being so " we shall be glad to know whether in the circumstances you " require to see a draft. Our clients inform us that the repairing " covenants have not been complied with by your client and that " the granting of the new lease will be subject to an undertaking " being given that the whole of the exterior and interior will be " redecorated within the course of the next six months, although " they understand that the work to the interior is already in " hand." After some further letters, which are not material, the plain- tiff's solicitors wrote to the defendants' solicitors on September 10, 1958, that " the rents are to be as set out in your letter and the " draft, but we should be glad to know by whom the new lease " is to be granted. Under the existing lease, the lessors are " Dr. R. Collum's Representatives Ltd." The letter also asked if the undertaking could be extended to nine months. On Sep- tember 11, 1958, the defendants' solicitors wrote to the plaintiff's solicitors enclosing a counterpart lease for execution by the plain- tiff and informing them that the lease would be granted by the defendants. On September 13, 1958, the defendants' solicitors wrote a further letter: " With reference to your letter to us of the " 10th instant, our clients say that they are quite prepared for " the period of the exterior decorations to be extended from six " to nine months, and so far as the interior decorations are " concerned they understand that these will be completed shortly, " and they will be glad to hear from your client that this has been " done, so that they may make an inspection." At some date between September 13 and 26, 1958, the seal of the defendants was regularly attached to the new lease; and on September 24 or was regularly attached to the new lease; and on September 24 or At a board meeting of the defendant company held on Septem- ber 26 1958, it was reported to the board as follows: " 132, Ewell " Road, Surbiton. A new lease has been executed for the letting " of this property to Mrs. P. E. Weaver [the plaintiff] for a term " of 21 years from the 25th March, 1959, at a rent of #200 per " annum for the first seven years, #225 for the next seven years, " and #250 for the remaining seven years the tenant to pay all " outgoings." At this time both the plaintiff and the directors of the defendant company believed that the option was valid; but one of the directors suggested that the position as to registration of the option should be investigated. The defendants were advised that the option was void for lack of registration, and on October 8, 1958, their solicitors wrote to the plaintiff's solicitors: " We are " instructed to inform you that our clients have decided not to grant " the new lease to your client." Further correspondence followed in which the plaintiff's solicitors called upon the defendants to execute the new lease. On February 6, 1959 the plaintiff issued the writ claiming [as re-amended] (1) a declaration that the defendants were bound by the further lease sealed by them; (2) an order that upon her handing over to the defendants the counterpart of the further lease they should hand over the further lease to her; alter- natively (3) a declaration that the plaintiff was entitled to a further lease of the demised premises upon the terms contained in clause 5 of the original lease; (4) an order that the defendants should execute a further lease in accordance with the terms contained in the counterpart lease or otherwise in accordance with the terms contained in clause 5; in either event (5) damages. By her re-amended statement of claim she alleged that she had duly exercised the option granted to her by clause 5; alternatively, that by their execution of the new lease and by all or some of the letters dated July 1, August 27, Sep- tember 10, 11 and 13, 1958, the defendants had agreed to grant and she agreed to take a further lease; and that the defendants were bound by the new lease which they had sealed. By their re-amended defence and counterclaim the defendants denied that the plaintiff had against them any right under clause 5 of the lease and relied on section 13 of the Land Charges Act, 1925. They also denied that they had executed the further lease and that they had agreed to grant or the plaintiff to take any further lease. Alternatively they alleged that, if an agreement was constituted by the alleged execution or the letters, it was a condition precedent of the granting of the further lease that the undertaking as to repairs should be given; and, in the further alternative that the alleged agreement was entered into under a mistake of fact or as to private right common to both parties, in that they both believed that the defendants were under a binding obligation to grant the new lease. They also denied that the further lease was binding on them, and alleged that it was delivered as an escrow and was not to take effect until the under- taking had been given and/or until the document should have been exchanged with the counterpart; alternatively, they alleged that the lease had been executed under the mistake previously alleged. The defendants counterclaimed for possession of the part of the property occupied by the plaintiff personally and for mesne profits. It was agreed that, unless the option was unenforceable by reason of non-registration, it was exercisable by the plaintiff against the defendants, although there had been no express assignment to the plaintiff of the benefits of the option and that, if the option was valid, the notice exercising it had been effectually served on the defendants. The facts as to the sealing of the new lease and as to what occurred at the board meeting held on September 26, 1958, were unknown to the plaintiff until one of the directors of the defendant company gave evidence at the hearing in March, 1960. On April 8, 1960, after the conclusion of the legal argument on the other points, the plaintiff applied for leave to amend her statement of claim and leave was given. The question as to the effect of the sealing of the new lease by the defendants was argued at a further hearing on April 11, 1960. F. Bower Alcock for the plaintiff. A. E. Holdsworth for the defendants. The following cases, in addition to those referred to in the judgment, were cited in argument: Robertson v. Minister of Pensions (1); Solle v. Butcher (2); Stromdale and Ball Ltd. v Burden (3); Johnson v. Baker (4); Exton v. Scott (5); Phillips v. Edwards (6); Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd.(7); Doe d. Garnons v. Knight (8); Gudgen v. Besset.(9) Cur. adv. vult. April 13. BUCKLEY J. read the following judgment: In this action the plaintiff originally claimed, in effect, that she had effectually exercised an option for renewal contained in a lease dated May 21, 1938, of certain property known as Nos. 132, 132a and 132b, Ewell Road, Surbiton. By the first amendment of her statement of claim she claimed, alternatively, that by a contract by correspondence between her solicitors and the defendants' solicitors the defendants agreed to grant her a further lease of the property in question. By a further amendment she claims that the defendants are bound by a lease sealed by the defendants in purported pursuance of the option. The defendants counter- claimed for possession of No. 132b and mesne profits. [His Lordship stated the facts and continued : ] The first question for consideration is what is the consequence of the failure to register the option? Section 10 (1) of the Land Charges Act, 1925, so far as relevant provides : " The following classes of charges on, or obligations " of land charges namely . . . Class C:--A mortgage charge or " obligation affecting land of any of the following kinds, created " either before or after the commencement of this Act but if " created before such commencement only if acquired under a " conveyance made after such commencement, namely . . . " (iv) Any contract by an estate owner or by a person entitled at " the date of the contract to have a legal estate conveyed to him " to convey or create a legal estate, including a contract conferring " either expressly or by statutory implication a valid option of " purchase, a right of pre-emption or any other like right (in this 1 [1949] 1 K.B. 227; 64 T.L.R. 4 (1821) 4 B. & Ald. 440. 526; [1948] 2 All E.R. 767. 5 (1833) 6 Sim. 31. 2 [1950] 1 K.B. 671; 66 T.L.R. 6 (1864) 33 Beav. 440. (Pt. 1) 448; [1949] 2 All E.R. 1107, 7 [1955] 1 W.L.R. 761; [1955] 2 C.A. All E.R. 657, H.L. 3 [1952] Ch. 223; [1951] 2 T.L.R. 8 (1826) 5 B.& C. 671. 1192; [1952] 1 All E.R. 59. 9 (1856) 6 E.&.B. 986. " Act referred to as ' an estate contract '). . . ." Section 13 (2) of the same Act is in the following terms: " A land charge of Class " B, Class C or Class D, created or arising after the commence- " ment of this Act, shall (except as hereinafter provided) be void " as against a purchaser of the land charged therewith, or of any " interest in such land, unless the land charge is registered in the " appropriate register before the completion of the purchase : " Provided that, as respects a land charge of Class D and an " estate contract created or entered into after the commencement " of this Act, this subsection only applies in favour of a purchaser The defendants having bought the reversion for money, the option is accordingly void as against them if it is an estate contract within secton 10 (1), Class C (iv). A conditional contract to convey or grant a legal estate is registrable under the section: Sharp v. Coates.1 An option to purchase a legal estate in land may have the appearance of a conditional contract on the part of the grantor to convey or create that estate, but this is not, I think, the true nature of such an option. In Helby v. Matthews2 the House of Lords had to decide whether a person who had entered into a hire-purchase agreement for a piano under which he could terminate the hiring at any time was " a person having agreed " to buy goods " within the meaning of the Factories Act, 1889. It was held that what the hirer was entitled to, apart from the arrangements relating to the hire of the piano, was an option to buy the piano by continuing the stipulated payments for a sufficient period. Lord Herschell said3 : " It was said in the Court of Appeal " that there was an agreement by the appellant to sell, and that " an agreement to sell connotes an agreement to buy. This is " undoubtedly true if the words ' agreement to sell ' be used in " their strict legal sense; but when a person has, for valuable " consideration, bound himself to sell to another on certain terms, " if the other chooses to avail himself of the binding offer, he may, " in popular language, be said to have agreed to sell, though an " agreement to sell in this sense, which is in truth merely an " offer which cannot be withdrawn, certainly does not connote an " agreement to buy, and it is only in this sense that there can be " said to have been an agreement to sell in the present case." I particularly draw attention to the words " which is in truth " merely an offer which cannot be withdrawn." Lord Watson said4 : " Apart from the arrangement for hire of " the piano, the only right given to Brewster by the agreement " in question was the option to become a purchaser. It is true " that whilst he was under no obligation to buy, the appellant was " legally bound to give him that option, and could not retract it, 1 [1949] 1 K.B. 285; 64 T.L.R. 3 [1895] A.C. 471, 477, H.L. 605; [1948] 2 All E.R. 871, C.A. 4 Ibid. 471, 479, H.L. 2 [1895] A.C. 471; 11 T.L.R. 446. H.L. " if the other stipulations of the contract were duly observed by " the hirer. But the possession of such a right of option was, in " no sense, an agreement by Brewster to buy the piano; and the " appellant's obligation to give the option was not, in the sense " of law, an agreement by him to sell. In order to constitute an " agreement for sale and purchase, there must be two parties who are mutually bound by it. From a legal point of view the " are mutually bound by it. From a legal point of view the " appellant was in exactly the same position as if he had made an " offer to sell on certain terms, and had undertaken to keep it open for a definite period." A little later on Lord Wason said5 : " Whilst, in popular language, the appellant's obligation might be described as an agreement to sell, it is in law nothing more than " a binding offer to sell." In Griffith v. Pelton6 Jenkins L.J., delivering the judgment of the court, referred to an option to purchase land in the following terms7: ' An option in gross for the purchase of land is a con- " ditional contract for such purchase by the grantee of the option " from the grantor, which the grantee is entitled to convert into a " concluded contract of purchase, and to have carried to com- " pletion by the grantor, upon giving the prescribed notice and " otherwise complying with the conditions upon which the option " is made exercisable in any particular case." This language, at first sight, seems to be at variance with what was said in Helby v. Matthews8--which was not, apparently, brought to the attention of the Court of Appeal9--but I think that Jenkins L.J.10 cannot have meant by the expression " conditional " contract " to describe a concluded contract under which the rights and liabilities of the parties were dependent on a condition, but a state of affairs capable of resulting in a concluded contract upon a certain contingency. In my judgment, the option contained in clause 5 of the lease in the present case did not constitute a contract, albeit conditional, by the lessor to grant a further term in the land upon the exercise by the lessor of the option: it constituted an offer to grant such a term which the lessor was contractually precluded for with- drawing so long as the option remained exercisable. I am consequently of opinion that the option did not fall within what may be called the first liinb of section 10 (1), Class C (iv). Does it, then, fall within the second limb introduced by the word " including " ? As a matter of syntax and interpretation according to the strict sense of the words used this phrase does not seem appropiate to extend the ambit of the paragraph, but merely to emphasise that options of purchase and the like, so far as they fall withui the class of contracts to convey or create legal estates, come within the ambit of the paragraph. But if I am right in the views I have expressed as to the nature and effect of 5 Ibid. 471, 480, H.L. 8 [1895] A.C. 471, 477, 479, 480 6 [1958] Ch. 205; [1957] 3 H.L. W.L.R. 522. C.A. 9 [1958] Ch. 205. C.A. 7 [1958] Ch. 205, 225, C.A. 10 Ibid. 205, 225, C.A. an option (which must, I think, apply equally to a right of pre- emption or other like right), no such right would ever constitute a contract to convey or create a legal estate. Accordingly, I consider that in this context the word " including " must, as a matter of construction, be given the effect of " which for this " purpose shall be treated as including," and what I have called the second limb of the paragraph must be read as extending the operation of the paragraph. Indeed, both counsel before me argued upon this footing. Did clause 5 of the lease create a valid option of purchase within the ineaning of the paragraph? It is clear from section 20 (8) of the Act that, unless the context otherwise requires, the term " purchaser " includes a lessee and the term " purchase " includes a lease. It must follow, again subject to the context, that the term " option of purchase " includes " option of lease," or " option to take a lease." Counsel for the plaintiff has referred me to section 142 (1) of the Law of Property Act, 1925. He says that, as the option runs with the land it is, under the express terms of that section, bind- ing on the reversioner and enforceable by an assignee of the term. He points out that the section says nothing about registration. Reference may also be made to section 6 of the same Act. In their note to the last-mentioned section the editons of Wolsren- holme & Cherry's Conveyancing Statutes, 12th ed (1932), p. 246 say: " Thus no land charge has to be registered to protect lessor's " or lessee's covenants, for the lease is the charter of the title." With all respect to the editors, I think that statement is too wide. Counsel for the plaintiff says that section 142 (1) of the Law of Property Act, 1925, and section 10 (1), Class C (iv) of the Land Charges Act, 1925, must be construed so as to be mutually con- sistent, and that the way to achieve this is to exclude from the latter any obligation which falls within the former. He says that the term " purchase " does not in its ordinary sense apply to a renewal of a lease. That may be so, but I am concerned with the statutory definition of the term and not merely with its ordinary construe " purchase " in paragraph (iv) of Class C otherwise than according to the statutory definition. I do not consider that it is applicable enforceable against a reversioner for the time being " if and so far as the lessor has power to bind " such reversioner. The section does not empower a lessor to buid a reversioner in respect of any obligation which the legislature has said shall not be enforceable against such reversioner. If an obligation which would otherwise run with the reversion is of a kind which, unless registered as a land charge, will be void against a purchaser for money or money's worth, the lessor cannot, in my judgment, bind in respect of that obligation the reversionary estate in the hands of such a purchaser, who acquires the reversion at a time when the obligation is not registered. The effect of the Land Charges Act 1925, is to take such an obligation out of the scope of section 142 upon a purchase of the reversion for money or money's worth taking place while the obligation is unregistered. in clause 5 of the lease was registrable under section 10 (1); Class C (iv), and that, as it was not registered when the defen- dants bought the reversion immediately expectant on the term, it is void as against the defendants. . I now proceed to the question whether the parties entered into a new contract by correspondence. The letters relied on by the plaintiff in her statement of claim in this respect in conjunction with the sealing of the new lease by the defendants are those dated July 1, August 27, and September 10, 11 and 13, 1958, to which I have referred. These letters were all written at a time when the plaintiff and her solicitors and the directors of the defendant company and their solicitors all believed that the option was exercisable by the plaintiff and enforceable against the defendant company. They were written with the mutual intention of giving effect to what were believed to be existing rights of the plaintiff. I am satisfied that none of the parties concerned thought or intended at the time that any new contractual rights would or should be created by this correspondence, except, of course, so far as the exercise of the option (if valid) would have constituted a new contract. Any transaction between two or more parties can, in my judgment, only result in a contract between them if they enter into that transaction with an intention to create binding contractual obligations, or in circumstances in which such an intention must be attributed to them. The facts of the present case negative such an intention, for these letters were written with the intention of carrying out what were thought to be existing obligations, not of creating any new obligation. On this ground I am of opinon that no contract is shown to have been established by the correspondence. This view is not, I think, in conflict with British Homophone v. Kunz. (11) In that case the well-known jazz pianist, Charlie Kunz, had entered into a contract of service with the plaintiff company containing an option for either party " to extend same " for a further period of twelve months on terms to be hereafter " agreed. " This option was held to have no binding effect as being too uncertain. Neverthless, the company and Kunz, both term of the agreement negotiated and entered into a new formal written agreement. This, it seems, was not merely a continuation of the earlier agreement, the terms being different. The company was anxious to retain the services of Kunz and he, although he would otherwise have wished to enter into a contract with another company--and had, in fact, done so, although he thought the 11 (1935) 152 L.T. 589. arrangement was only provisional--felt himself bound by the option clause to contract with the plaintiff company if they offered him satisfactory terms. Counsel for Kunz (who had subsequently committed breaches of the later contract) contended that because both parties entered into the later contract in the mistaken belief that the option clause in the earlier contract was binding, Kunz was not liable in damages for breach of the later contract. du Parcq J. said (12): " I can deal shortly with Mr. Macaskie's " second contention. I know of no authority for the proposition " that if two parties enter into what is on the face of it a binding " contract, in ignorance of their legal rights, each believing the " other to be legally bound to enter into such a contract when he " is not so bound, the contract so entered into is not enforceable. " So to hold would be to decide that a common mistake of law " vitiated a contract, and I believe that such a decision would be " unsound in principle." The judge was in that case (13) considering the binding character of a formal written agreement, the terms of which did not flow from an earlier contract but had been independently negotiated, and the case is, in my judgment, clearly distinguishable on its facts from the present case, where the correspondence was not, in my view, intended to create any new rights or embody any new agreement. Even if I am wrong in the views I have expressed, I should still hold that the correspondence did not constitute a contract, for I cannot find in any of the letters an unqualified acceptance of any offer contained in any earlier letter or letters. If the letter of July 1 be regarded as an offer to take a lease incorporating such terms are indicated in clause 5 of the existing lease, the letter of August 27 introduces a new term as to an undertaking to do interior and exterior redecorations within six months, which would give that letter the chance of a counter-offer.The letter of September10 asked for the period of the required undertaking to be extended to nine months, and so would constitute a further counter-offer. The letter of September 13 accepts the last proposal, but only as regards exterior decorations, and once again this would constitute a further counter-offer. The question of the form and extent of the proposed undertaking was never fully resolved on the correspondence; and no undertaking was ever given. The defendants' sealing of the new lease cannot, in my judg- ment, advance the plaintiff's case in this respect. If it is to be regarded as an acceptance of an offer on the part of the plaintiff, it was never communicated to her and so cannot have constituted a contract. There is no other way in which it can be regarded as relevant to the question whether a contract to grant a new lease was ever concluded between the parties in 1958. Accordingly, in my judgment, the plaintiff fails to make out her case of a contract for a further lease. 12 (1935) 152 L.T. 589, 593. 13 Ibid. 589. This renders it unnecessary for me to decided the validity of the plea in the defence that, if there was such a contract, it was entered into under a common mistake that the opion was binding. As, however, the argument as to mistake is relevant to a later point, and would, of course, be relevant to the present point if the case were to go to a higher court, I should state my view on this. Such a mistake would, in my judgment, have been a mistake of law; viz., a mistaken view held by all parties that on the known facts the option was binding at law irrespective of registration; for unntil September 26, 1958, none of them had addressed his mind to the question whether the option was registered, but all the other relevant facts were known. The mistake was as to the nature and effect of the general law applicable to those known facts. The mistake would not, I think, have been one that would have afforded a defence to a claim under the alleged contract. By her amended reply the plaintiff claimed that the defendants could not in any case rely upon section 13 of the Land Charges Act. 1925, (a) because they had accepted rent from her since the end of the term (but I have had no evidence of payment of any such rent), and (b) because of promises said to be contained in the letters of August 27, September 11 and 13, 1958, which, as she alleges, were intended to, and did, induce her to believe that the defendants would grant the further lease and would not rely on the section. The plaintiff alleges that she acted on these promises in taking no steps to enforce against the original lessors her rights under clause 5 of the lease. One short answer to this contention is that, as there was never any privity of contract between the plaintiff and the original lessors, the plaintiff did not at any relevant time have any rights which she could have enforced against the original lessors and, accordingly, she has not altered the position to her detriment in this respect. On this part of the case Mr. Alcock for the plaintiff referred me to Central London Property Trust Ltd. v. High Trees House Ltd.,14 Hughes v. Metropolitan Railway Co.,15 and to the state- ment derived from Combe v. Combe,16 which is contained in Halsbury's Laws of England, 3rd ed., vol. XV, p. 175. As I under- stand this part of the law, which has been described as promissory estoppel, it is that where one party is under an existing legal obligation to another, who has so acted as to lead the former party to believe that the latter will not enforce that obligation, or not enforce it to its full extent, or for the tune being, intending the former party to act on that footing, and the former party has so acted, the latter party may be restrauied in equity from enforcing the obligation on any footing inconsistent with the belief so induced, and may be so restrained notwithstanding that he has 14 [1947] 1 K.B. 130; 62 T.L.R. 16 [1951] 2 K.B. 215; [1951] 1 557; [1956] 1 All E.R. 256n. T.L.R. 811; [1951] 1 All E.R. 767, 15 (1877) 2 App. Cas. 439, H.L. C.A. received no consideration for the modification of his rights. The doctrine may afford a defence against the enforcement of other- wise enforceable rights; it cannot create a cause of action. cannot, in my judgment, be invoked to render enforceable a right which would otherwise be unenforceable, nor to negative the operation of a statute. I now pass on to the question whether by sealing the new lease the defendants bound themselves. This falls into two parts: (a) whether the defendants ought to be regarded as having executed the new lease, and 8b) if so, whether they ought to be regarded as having done so unconditionally or as an escrow, and It is clear from authorities which Mr. Holdsworth cited to me, including Murray v. Earl of Stair and Bowker v. Burdekin -- and see Lady Naas v. Westminster Bank Ltd."--that the latter question depends upon the intention of the executing party, and is a question of fact to be determined upon the whole evidence of the circumstances attending the execution. Before I consider the law, I should say a further word about the facts. The minute of the board meeting of September 26, 1958, is in the following terms: " 2. Chairman's report on the " matters in hand. (d) : 132, Ewell Road, Surbiton. A new lease "has been executed for the letting of this property to Mrs. P. E. " March, 1959 at a rent of #200 per annum for the first seven " years, #225 for the next seven gears and #250 for the remaining " seven years, the tenant to pay all outgoings." That is the whole of the relevant passage in the minute. regularly attached to the lease. I know nothing further about the actual circumstances of its being attached. It will be recol- lected that the correspondence to which I have made reference discussed an undertaking to be given by the plaintiff relating to certain decorations. By September 13, a point had been reached at which the defendants' solicitors had said that the defen- dants were quite prepared for the period of the exterior decoration to be extended from six months to nine months, inferring that the period of the interior decorations should be six months. The lease was sealed at some date before September 26, and, as I think, subsequent to September 13, but I have had no evidence enabling me to fix the date more precisely. The counterpart was executed by the plaintiff on September 24 or 25. Nothing, in my view, turns on the sequence of these events. The two parts were In my view, in accordance with contemporary practice, where a deed is intended to be executed in duplicate to give effect to a transaction between two parties by which each undertakes obliga- tions towards the other, the execution of such a deed by one of 17 (1823) 2 B. & C. 82, 87, 88. 19 [1940] A.C. 366, 399; 56 T.L.R. 18 (1843) 11 M. & W. 128, 147. 381; [1940] 1 All E.R. 485, H.L. the plaintiff as to decorations. On the contrary, it is clear from the evidence that everybody present at the board meeting of - September 26 regarded the lease sealed by the defendant company as binding, albeit they did so with regret. Whereas this attitude of mind would, in my opinion, not be inconsistent with the binding quality of the lease being conditional on the lessee binding herself by execution of a counterpart to obligations on her part expressed in the lease, it is inconsistent with any idea that it was also conditional on some matter wholly extraneous to the lease, as was the proposed undertaking as to redecoration. I, therefore, reach the conclusion of fact that the defendants, by sealing the lease, intended to deliver, and did deliver, it as their deed intended to bind them conditionally only upon the plaintiff executing a counterpart, but subject to no other condition. The plaintiff has, as I have already stated, executed the counterpart, and in her statement of claim she alleges that she holds the same as an escrow. She is, and has at all material times been, ready and willing to exchange her counterpart for the lease executed by the defendants The defendants plead that the lease was executed under a mistake, namely, the mistake to which I have already alluded. The mistake having been a mutual mistake of general law would not, in my judgment, entitle the defendants to have the lease rescinded and they do not, in fact, claim rescission. Indeed, they claim no relief based on mistake but merely rely on the mistake as a ground of defence. In my judgment, the mistake can have no bearing on the question whether the defendants have executed the new lease (including delivery thereof) and, if so, whether unconditionally or as an escrow, or upon its binding effect upon them so long as the lease is allowed to stand unrescinded. In these circumstances I propose to declare that subject to the plaintiff handing over to the defendants the counterpart lease referred to in paragraph 8 of the re-amended statement of claim duly executed by her, the defendants are bound by the lease referred to in paragraph 9 of the re-amended statement of claim, and I propose to make the order asked for in paragraph 2 of the plaintiff's claim at the end of the re-amended statement of claim. Declaration accordingly. Order that upon the plaintiff handing over to the defendants the counterpart of the further lease they should hand over the further lease to her. Defendants to pay plaintiff's costs, includ- ing costs of re-amendment or statement of claim but excluding costs of applica- tion for leave to amend and further hearing. Counterclaim dismissed with costs. Solicitors: S. Sydney Silverman; George C. Carter & Co. [QUEEN'S BENCH DEVISION.] GAGE AND ANOTHER v. KING. [1959 G. No. 1220] Damages--Remoteness of damage--Expenses of third party-Expenses incurred as result of injuries to wife-Payment by husband out of joint bank account--No agreement between husband and wife as to ownership of credit balance-Whether husband under legal obliga- tion to pay--Whether special damage recoverable by wife. Husband and Wife--Property-Act of 1882, s. 17--Joint bank account --Discretion of court--No contractual rights during subsistence of marriage. Husband and Wife--Agency--Medical treatment for wife--Husband's 1 -n hility--Inability of icife to recover e~cnses as special damage Banking-Husband and wife--Joint account-Rights of spouses during subsistence or marriage. A husband and wife sustained injuries when their motor-car, driven by the husband, was in collision with a motor-car driven by the defendant. Both husband and wife sued the defendant for damages and the husband was found to be two-thirds and the defen- dant one-third to blame for the collision. Included in the claim for special damage were certain expenses; dcctors' and nursing home fees and additional domestic help, incurred as a result of the injuries to the wife. The majority of those expenses had been paid by the husband out of a joint bank account fed by income from the husband's investments and business and interest on the wife's invest- ments. Both spouses drew on the account for housekeeping and personal expenses but there was no evidence of any agreement between them as to the ownership of any balance standing to the credit of the accounft. Some of the doctors' fees were still unpaid and most of the fee notse bore the name of the wife- On a claim that, since they had bsen paid out of the joint account, the expenses incurred as a result of the wife's injuries were spscial damage which she was entitled to rscover im full against the defendant : -- Held, (1) that the mutual rights of a husband and wife in the balance in a joint account while a marriage was still subsisting were not necessarily the same as their rights on the break up of the marriage, for such an arrangement was not meant to be attended with legal conesquences as between the two spouses during the subsistence of the marriage, and that, since the right of the wife to draw on the account was subject to no limitation and was neither increased nor diminished by the fact that the husband had drawn on it for the experses incurred by reaaon of her injuries, any more than it would have bsen had the expenses bsen incurred in respect of the injuries sustained by him, the fact that the monies paid by the husband for the wife's injuries were paid out of a joint account was irrelevant. Dictum of Atkin L.J. in Balfour v. Balfour [1919] 2 K.B. 571, 578, 579; 35 T.L.R. 609, C.A. applied. Jones v. Maynard [1951] 1 Ch. 572; [1851] 1 T.L.R. 700; [1951] 1 All E.R. 802 and Rimmer v. Rimmer [1953] 1 Q.B. 63; [1952] 2 T.L.R. 767; [1952] 2 All E.R. 863, C.A. distinguished. (2) That the question which of the spouses was entitled to recover the expenses as special damages depended upon which of them had incurred the legal liability to pay them and that, the expenses being in respect of necessaries which the husband was under a duty to provide, in the absence of evidence to rebut the presump- tion that in contracting for them she had done so as agent for her husband, the sole liability was incurred by the husband and that, therefore, the expenses were recoverable as special damage caused to him and not to the wife- Schneider v. Eisovitch [1960] 2 W.L.R. 168; [1960] 1 All E.R. 169 not followed. The plaintigs, Henry Charles Gage and his wife, Edith Annie Gage, claimed damages against the defendant, Cecil Arthur John King, in respect of injuries sustained by them on March 15, 1959, when the motor-car in which they were travelling was in collision with a motor-car driven by the defendant. Diplock J. found that the defendant was one-third and the first plaintig, Henry Charles Gage, two-thirds to blame for the accident. Certain expenses were incurred as a result of the injuries to the second plaintiff in relation to doctors' and nursing home fees and additional domestic help after she returned home. Most of those expenses had been paid by her husband either by cheque or in cash out of a bank account in the joint names of husband and wife. Some of the doctors' fees were still unpaid and the name of the wife and not of the husband appeared on most of the fee notes. The joint account was fed by income from the husband s investments and business and interest on the wife's investments. Both drew on the account for housekeeping and personal expenses, but there was no evidence of any agreement between them as to the ownership of any balance standing to the credit of the account. This report is confined to the issue raised by an alternative claim that the expenses incurred as a result of the injuries to the wife were special damage to the wife which she was entitled to recover in full against the defendant. The facts are more fully stated in the judgment. P. M. O'Connor Q.C. and H. B. Grant for the plaintiffs. Martin Jukes Q.C. and P. Bennett for the defendant. The following cases were cited in argument: Jones v. May- nard ; Schneider v. Eisovitch.(2) DIPLOCK J. stated the facts relating to the accident, found that the defendant was one-third and the first plaintig two-thirds to blame, awarded general damages of #10 and #750 to the first plaintiff and his wife, respectively, and continued: A point of some difficulty arises in respect of expenses which were incurred as a result of the injuries to Mrs. Gage. These were (a) doctors' fees, (b) nursing home fees and (c) additional domestic help after her return home. The majority of these have been paid by her husband either by cheque drawn by hin or in cash. Some of the doctors' fees are, however, still outstanding. As originally pleaded, the full amount was Claimed by the husband as part of his special damage. By an amendment made with my leave at the trial, of which notice had been given by letter to the defendants a little over a month ago, they are now claimed in the alternative by Mrs. Gage. The claim is that they are special damage which she is entitled to recover, and to recover in full, against the defendant instead of as to one-third only as would be the case if they are special damage which her husband is entitled to recover. The claim that Mrs. Gage is entitled to these damages is based on the fact that as respects the amounts already paid they were paid out of a bank account in joint names on which both could draw cheques on their own signature, and as respects the doctors' fees so far unpaid, her name, not her husband's, appears upon the face of the fee notes. The plaintiffs are a happily married couple both in their seventies: he is the younger by six or seven years, has been a successful business man and still continues in business. He is obviously the dominant partner in the union. The joint account is fed by the income from his investments, and some at least of these are the profits from his present business which amount to some #1,500 per annum. There is also paid into it the interest on the sum of #2,000 invested in a building society belonging to Mrs. Gage and this sum was originally a gift from her husband. This interest mounts to #70 per annum or some 41/2 per cent. of the total income of the joint account. (1) [1951] Ch. 572: [1951] T.L.R. (2) [1960] 2 W.L.R. 169: [1960] 1 700; [1951] 1 All E.R. 802. All E.R 169. Both parties drew on the joint account for housekeeping and personal expenses. There is no evidence as to any express agreement between the parties as to the ownership of any balance from time to time standing to the credit of the account. Mr. O'Connor argues, relying on Jones D. Maynard and Rimmer v. Rimmer 2 that the effect of this in law is that the balance standing at any time to the credit of the account is owned in equal moieties by the plaintiffs and that the husband has in fact been paid out of her moneys one-half of the expenses drawn out of that account on his cheques. She has lost, says Mr. O'Connor, at least this amount as a result of her husband's payments of the charges of the doctors, the nursing home and the domestic help which were incurred as a result of her injuries. Indeed, says Mr. O'Connor, and I hope I am doing justice to this branch of his argument, if she herself had drawn the cheques for these expenses even although they were drawn on the joint account, she could have recovered the whole mount of those payments. The effect on the joint account would have been exactly the same it: cannot make any digerence that the cheques were in fact drawn by her husband, therefore, she is entitled to recover the whole of these expenses. I think that this argument involves a fundamental miscon- ception as to the legal position as respects a joint bank account operated upon by husband and wife while the parties are still living together. As Atkin L.J. said in Balfour v. Balfour(3) "it " is the natural and inevitable result of the relationship of " husband and wife, that the two spouses should make arrange- " ments between themselves. . . . Nevertheless they are not " contracts, and they are not contracts because the parties did " not intend that they should be attended by legal consequences. " . . . The parties themselves are advocates, judges, courts, " sheriff's officer and reporter." No doubt when a msrriage breaks up by death, divorce or separation, the court must solve the problem of the destination of the balance in the account-- perhaps, as in Jones v. Maynard (4) property which has been purchased out of it. Under section 17 of the Married Women's Property Act, 1882, the judge is in terms directed to make, " Such order . . . as he " thinks fit." Even in an action where he has no such statutory discretion, he really has to perform a similar task. He givea effect to what he thinks the parties as reasonable people would have intended if they had given their minds which in fact they did not, to what should happen on the break up of the marriage, and in the absence of any other evidence of their intention he 1 [1951] 1 Ch. 572; [1961] 1 3 [1919] 2 K.B. 571, 578, 579. 2 [1953] 1 Q.B. 63; [1952] 2 T.L.R. 767; [1952] 2 All E.R. 863, C.A. would have intended to divide it up in equal shares. But what is to happen to the balance in the joint account when the marriage breaks up is a very different question from that of the mutual rights of the parties in relation to the account while the marriage is still subsisting. As I have said, I do not think that such an arrangement between husband and wife is meant to be attended with legal consequences as between the two spouses while the marriage is still subsisting. Mrs. Gage's right to draw upon the joint account was subject to no legal limitation. It was neither increased nor diminished by the fact that her husband had drawn cheques on it for the expenses of her medical treatment or nursing or for the provision of domestic help any more than it would have been if the expenses had been incurred in respect of her husband's own injuries, and even Mr. O'Connor does not suggest that Mrs. Gage could have recovered as special damage sums paid out of the joint account by her husband for expenses incurred by reason of his own injury. do not think that the fact that moneys paid by her husband for the expenses incurred in respect of Mrs. Gage's injuries came out of the joint bank account is relevant to the question which I have to determine. Which of these spouses is entitled to recover these sums as special damage depends, in my view, upon which of them incurred the legal liabilities to pay them to the persons who had rendered the services In treating this as the crucial question, I appreciate that I am differing from a recent judgment of Paull J. in Schneider v. Eizovitch.5 But it seems to me that this decision is contrary to the ratio decidendi of the Court of Appeal in Allen v. Waters & Co. L.Q.R., Vol. 76, p. 187). I start with the proposition that Mrs. Gage had implied authority, which has never in fact been withdrawn or qualified, to pledge her husband's credit for necessaries supplied to her and all these expenses were in respect of necessaries. Her husband was under a legal duty to provide her with them. When a married woman living with her husband makes a contract for the supply of necessaries prima facie she does so as agent for her husband There is no evidence here to rebut that pre- sumption. Indeed there is in fact no evidence that she herself made the contract. Having seen the two of them the husband, a very young 71, and the wife if she will forgive my saving so, by no means young, 77, I think it is almost certain that it was the husband who made all the arrangements with the doctors; the nursing home and the domestic help. He in fact settled all the bills and made all the payments. In the statement of claim as originally pleaded he claimed the full amount as special damage incurred by him. As one would expect from a man of his type, he said with perfect frankness in his evidence that he 5 [1960] 2 W.L.R. 169; [1960] 6 [1935] 1 K.B. 200; 51 T.L.R. All E.R. 169. 50, C.A. would not expect his wife to repay him; he did not even add the rider " unless she gets it out of the defendant." She is under no legal obligation to repay hin. I think that the sole liability was incurred by him and is recoverable as special damage caused to him and not to Mrs. Gage. I cannot draw any distinction between those expenses which have already been paid by him and those medical fees, for which liability has already been incurred, which are still out- standing. It is true that most of the fee notes bear her name, although there is no evidence as to whether the covering envelope was addressed to him or to her. But this in itself is not decisive to rebut the inference that he was the principal and all the other evidence seems to me to point to the conclusion that he was. It is quite true that Mrs. Gage could have so contracted as to make herself personally liable for the medical, nursing and other expenses incurred in respect of her injuries, and had she done so she could have recovered them as her special damage. She has not satisfied me that she did, and since she has not incurred this loss in law or in fact, it cannot be said that she is any worse off because she and her husband had not the foresight and knowledge of the technicalities of the law as to contribution between joint tortfeasors to make sure that it was her credit that was pledged and not that of her husband. No doubt the defendant or his insurers are about #300 better off as a result, but this sort of situation will continue to arise so long as the law aa to recovering contribution from a husband who is partly to blame for a wrong done to his wife remains unaltered, and I cannot feel any moral indignation that the husband is left to bear two-thirds of the expenses incurred by him as a result of an accident for which I have held he was two-thirds to blame. Accordingly, the amount recoverable by Mrs. gage is #750, the amount recoverable by her husband is the sum of #100; the agreed special damage incurred in respect of his injuries, #148 14s. and the agreed figure of expenses incurred in respect of the injuries of Mrs. Gage is #449 8s. These, when added together, come to #698 2s., which divided by three comes to #232 14s. There will be judgment for the first plaintiff for #232 14s. and for the second plaintiff for #750, with costs. Judgment for the plaintiffs accordingly, with costs. Solicitors : Chalton Hubbard & Co. for Marsh & Ferriman, Worthing; Gardiner & Co. J. F. L. INGRAM AND OTHERS v. LITTLE. [1957 I. No. 516] Contract--Mistake--Mistake as to identity--Sale of car to purchaser physically present--Purchaser impersonated reputable businessman --Offer and acceptance--To whom was offer addressed--Whether mistake vitiated contract--Whether contract void or voidable These plaintiffs, joint owners of a car, advertised it for sale. A rogue, introducing himself as H., offered to buy it. When he pulled out his cheque book to pay for it, the first plaintiff, conducting the negotiations for the plaintiffs, told him that they expected cash, that they were not prepared to accept payment by cheque, and that the proposed sale was cancelled. The rogue thereupon said that he was P. G.M.M., a reputable businessman, living at an address in Caterham, and having business interests in Guildford. The plaintiffs had never heard of P.G. M. H., but the second plaintiff forthwith went to the local post office, and ascertained from the telephone directory that there was such a person as P.G.M.H., living at the address given by the rogue. The second plaintiff told the first plaintiff what she had learnt and, as the result of that information, they believed that the rogue was P.G.M.H. and decided to let the rogue have the car in exchange for his cheque. The rogue had nothing whatever to do with the real P.G.M.H., and the rogue's cheque was dishonoured on presentation. Mean- while, the rogue had sold the car to the defendant, who bought it in good faith. On a claim by the plaintiffs against the defendant for the return of the car, or alternatively, damages for its conversion :-- Held (Devlin L.J. dissenting), that where a person physically present and negotiating to buy a chattel fraudulently assumed the identity of an existing third person, the test to determine to whom the offer was addressed was how the promisee ought to have inter- preted the promise; applying that test to the present case and treating the plaintiffs as the offerors, the offer was made solely to the real P.G.M.H., the rogue was incapable of accepting it, and the plaintiffs' mistake, therefore, prevented the formation of a contract with the rogue ; accordingly, the plaintiffs' claim succeeded (post pp. 513, 515, 520). Dictum of Viscount Haldane in Lake v. Simmons [1927] A.C. 489, 500; 43 T.L.R. 417, H.L. applied. Phillips v. Brooks Ltd. [1919] 2 K.B. 243 ; 35 T.L.R. 470 distinguished. Hardman v. Booth (1863) 1 H.L.C. 803; 158 E.R. 1107 and Cundy v. Lindsay (1878) 3 A.C. 459, H.L. considered. Per Devlin L.J. There was nothing to rebut the ordinary presumption that the first plaintiff was addressing her acceptance to the person to whom she was speaking. Therefore, there was offer and acceptance in form. In the present case, the rogue's identity was immaterial. His credit worthiness was material, for the plaintiffs were really conoerned with his credit-worthiness, not with his identity, but credit worthiness in relation to a contract was not a basic fact, and a mistake about it did not vitiate a contract (post, pp. 526, 527). APPEAL from Slade J. The following facts are taken substantially from the judgment of Slade J. : The plaintigs, Miss Elsie Ingram, Miss Hilda Ingram and Mrs. Mary Ann Maud Badger, advertised their Renault Dauphine motor-car, registration number ULJ 101, for sale, in the issue of the " Bournemouth Echo " for August 2, 1957, in these terms: " 1957 Dauphine, 3,800 miles, sky blue, #725 o.n.o. Park- " stone 4084. " As a result of that advertisement they received two inquiries. One was from a man named Gray, who, having made a telephone call to the plaintigs, was no longer interested. The other was from a swindler who called himself Hutchinson. He telephoned on August 3, 1957, the Saturday before the August Bank Holiday. He spoke to Miss Elsie Ingram, said that he had seen the advertisement and would like to come and see the car. He gave the name of Hutchinson over the telephone, and said that he was staying for the week-end at the Savoy Hotel, Bourne- mouth. Miss Elsie Ingrm told him that she had received another inquiry (the one from the man Gray) whom she thought might come and see the car, and asked whether she could tele- phone Hutchinson back. Later she telephoned the Savoy Hotel, " Hutchinson." About 2.15 p.m. on August 3 the rogue Hutchinson called at the house where the plaintiffs were living. He was admitted by Miss Elsie Ingram; he told her he was Hutchinson, and Miss Hilda Ingram accordingly introduced him to her sister Miss Elsie Ingram as Hutchinson. He looked at the car, and asked Miss Elsie Ingram to take him for a run in it, and she did so. During the run he was very talkative. He told her that he came from Surrey. He talked about his family, who he said were then in Cornwall, and he said that his home was at Caterham. At that time he had given no further information, nor had he even given his initials; he was merely Hutchinson. After the drive they came back to the house and discussed the sale of the car. Hutchinson offered Miss Elsie Ingram, who conducted the negotiations for the plaintiffs, #700 and she refused. He then offered #717. She was prepared to accept #717 in cash. At that moment the rogue pulled out a cheque book and she immediately realised that he was proposing to pay #717 by cheque. She told him that she would not in any circumstances accept a cheque, and that she was only willing to sell the car for cash. She told him that so far as she was concerned the proposed deal was finished. She said that she was not prepared to accept a cheque. She had expected cash, and she made as though to walk out of the room. The rogue started to talk and try to convince her that he was a most reputable person, and then for the first time he gave his initials. He said that he was a P. G. M. Hutchinson. He said that he had business interests in Guildford, and that he lived at Stanstead House, Stanstead Road, Caterham. Vol 3 Miss Hilda Ingram, who had been in the room, slipped out of the room and after a short time retumed She had gone to the Parkstone post office, which was only about two minutes away from the plaintiffs' house, and had looked in the main telephone directory covering the district of Caterham. In that directory she had seen the entry " Hutchinson, P G. M., Stanstead House, " Stanstead Road, Caterham 4665," and she believed that that was the man who, at that moment, was with her sister in their house. On her return to the house she told her sister, Miss Elsie Ingram, who was still discussing the proposed sale, that she had checked with the telephone directory at the post office and that there was such a person as P. G. M. Hutchinson living at Stan- stead House, Stanstead Road, Caterham. Having received that information, the two sisters decided that they would let the rogue have the car in exchange for the cheque. The decision was reached because they believed that the rogue was the person he said he was. When he gave the cheque, the rogue wrote on the back " P. G. M. Hutchinson, Stanstead House, Stanstead Road, " Caterham. " The rogue was not P. G. M. Hutchinson of Stsnstead House, Stanstead Road, Caterham, who had nothing to do with the transaction in question and knew none of the parties connected with it. This gentleman banked with a brsnch of Lloyds Bank Ltd. in London. The rogue " Hutchinson " opened an account on August 2, 1957, at a branch of the Westminster Bank Ltd. in Guildford with a deposit of #10, acquired a cheque book from which he drew cheques on this account to the extent of nearly #4,00, including the cheque of August 3 for #717 made payable to the plaintiffs, none of which cheques were honoured on presen- tation. Unlike the P. G. M. Hutchinson he purported to be, he was not a man of substance with an established address in Caterham. On August 6, 1957, the Tuesday after the bank holiday, a man called Hardy sold the plaintiffs' car to the defendant, Reginald Little, a Blackpool motor dealer, in consideration of an allowance of #605 towards the purchase price of a Ford Consul motor-car sold to him by the defendant for #780 on the same day. Hardy made up the difference by a cash payment to the defendsnt of #175. The transaction was effected on the defendant's behalf by two of his employees, a salesman and his manager. The rogue disappeared, and has remained untraced. In December, 1957, the defendant sold the plaintigs' car to another motor dealer in consideration of an allowance of #725 towards the purchase price of a Rover motor-car, bought by him from the other motor dealer on the same occasion. The defendant paid the balance in respect of the Rover car #75 by cash. The plaintiffs sued the defendant for the return of the car or, alternatively, for damages for its conversion. The plaintiffs con- tended that there never was a contract between them and the rogue Hutchinson so that he could pass no title in the car to the defendant; alternatively, they contended that if he could pass a good title to the defendant, there was no evidence that he and Hardy were the same person, so that there was no evidence that it was he who sold the car to the defendant; as a further alterna- tive, they contended that the defendants had not bought the car in good faith and without notice of any defect in the sellers' title so that the plaintiffs could still avoid the contract. The defendant contended that the rogue Hutchinson had a voidable title in the car as the result of a contract with the plain- tiffs, that the defendant bought the car in good faith and without notice of any defect in the seller's title from the rogue Hutchin- son, and that the defendant thereby obtauied a good title to the car under section 23 of the Sale of Goods Act, 1893. The trial began at Winchester, where the evidence was heard, and the case was then adjourned to London for argument and judgment. The judge held that the rogue Hutchinson and Hardy were one and the same person, and that the defendant had bought the plaintiffs' car in good faith and without notice of any defect in the seller's title from the rogue Hutchinson, but he held that the plaintiffs' mistake as to the identity of the person with whom they were dealing prevented the formation of a contract with the rogue so that he could pass no title in the car to the defendant; judgment was, therefore, given for the plaintiffs for #720. the agreed value of the car, as damages for conversion. The defendant appealed. Ingram Poole for the plaintiffs. Stephen Chapman Q. C. and Ronald Hopkins for the defen- dant. The following cases were cited in argument, in addition to those referred to in the judgments: Raffles v. Wichelhaus(1); Dennant v. Skinner and Collom (5); Monsson v. Robertson (6); Hyde v. Wrench (7); Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd.(8); Upton-on-Severn R.D.C. v. Powell (9); Whitehorn Brothers v. Davison 10; Jones v. Gordon (11); Heap v. Motorsts Advisory Agency Ltd.(12); Bishopsgate Motor Finance Corpn. Ltd. v. Transport Brakes Ltd.(13); Norwich Union Fire Insurance Society v. William H. Pri4e Ltd.it; john Rigby Newbury Car Auctions Ltd. v. Unity Finance Ltd.(16) Cur. adv. vult. July 28. The following judgments were read. SELLERS L.J. In August, 1957, the plaintiffs were the joint owners of a Renault Dauphine motor-car, ULJ 101. On August 3, 1957, the Saturday before the August Bank Holiday of that year, in a transaction with a man not inappro- priately called " the rogue Hutchinson " by the judge, the plaintiffs parted with the car to him. By August 6 the car was in Blackpool and there was a purported sale of it to the defendant by the rogue, as the judge found, then using the name Hardy. If the property in the car had passed on August 3 to " the " rogue Hutchinson," whatever his true name and identity was, then the defendant would have obtained a good title on the judge's findings that Hutchinson and Hardy were but one peeson, " the rogue Hutchinson," and that the defendsnt through his servants bought the car in good faith and without notice of the seller's defect in title. Slade J. held that no contract had in fact been entered into between the plaintigs and " Hutchinson " and that no title had passed to him, and, therefore, none was transferred to the defen- dant, and he gave judgment for the plaintiffs for #720, the agreed value of the car, as damages for conversion. The defendant has appealed against this decision, alleged that the judge was wrong both in law and in fact in so holding and it will be necessary to examine the facts found as well as the law applied. By a cross-notice of appeal, the plaintigs have challenged the dant was the same man as the msn who had obtained it from them and that the defendant bought the car in good faith. It was submitted to us that the judge's findings were unjustified, but I agree so fully with what the judge has said and held on both these matters1 that I do not review the evidence or the argument afresh on the plaintiffs' contentions. The defendant and his servants, like so many who buy and sell secondhand motor-cars, might have been more astute and more careful but it requires more than that to justify a finding of bad faith. The inference that there had been no transaction with the car intervening between that with the plaintiffs and that with the defendant seems reasonable and probable, and, therefore, sufficiently established as the judge has held. The decision in the present case tums solely on whether " Hutchinson " entered into a contract which gave him a title to the car which would subsist until it was avoided on the undoubted fraud being discovered. There was no evidence from the other alleged contracting party, " Hutchinson," the alleged buyer, for he is apparently unknown and untraced, but the judge found the plaintiffs' evidence satisfactory and reliable. [His Lordship then stated the facts as found by Slade J. and continued: ] During the conversation, from which a contract, if any, has to be derived, the rogue "Hutchinson" knew he was not the person the plaintiffs believed him to be and to whom alone they made possession of it in exchange for his cheque. " Hutchinson " knew that the offer to sell the car in exchange for a cheque was not made to him as he was, but only to sn existing person whom he represented himself to be. If the plain- tiffs are to be regarded as the acceptors of "Hutchinson's" offer to pay by cheque, he knew full well that it was not his cheque they were accepting but the cheque of the man they thought he was by reason of his persuasion and deceit. The judge found that Miss Elsie Ingram intended to part not merely with possession but with the property in the car, but that she did so believing that the person to whom she was selling the car was P. G. M. Hutchinson of Stanstead House, Stanstead " same car, registration number ULJ " `in this again. You take this car " 101. He obtained the log book from " ` and sell it on my behalf.' " Miss Elsie Ingram, and he handed " The second question is this. If " over that same log book on the " section 23 of the Sale of Goods Act, " following Tuesday. It matters not " 18Ba, should arise herektbr, I have " whether Hutchinson was Hardy, or " bought the Renault Dauphine on " whether Hardy was someone acting " Tuesday, August 6, 1967, in good " with the authority of Hutchinson-- " faith and without notice of the defect " that is to say, acting as agent of " in Hardy's title. . . . I have seen " Hutchinson to dispose of the car. " Quinn [one of the defendant's sales- " I find as a fact that they were one " men] and Bickerstaffe [the defen- " and the same person. If they were " dant's manager] in the witness-box. " not, it can mean only that in that " I think they were both honest men, " short period from the afternoon of " and I find as a fact that they did " Saturday, August 3, 1957, until the " accept the Renault Dauphine and " afternoon of Tuesday, August 6, " #175 in cash in return for the defen- " 1957, there must have been some " dant's 1966 Ford Consul worth #780, " intermediate disposition of the car " both in good faith and without notice " unless, of course, as I say, Hut- " of any defect in Hardy's title to the " chinson said to one of his fellow " Renault Dauphine car." " rogues : ' I do not want to appear Road, Caterham, with a number in the telephone directory, and he further held that, if the entry in the telephone directory had not been confirmed by Miss Hilda Ingram, the two sisters would not have accepted the cheque in payment or parted with the car. If " Hutchinson " had paid cash for the car, then it seems clear that there would have been a concluded and unimpeachable transaction in which the identity and financial stability of the buyer would have been of no moment. This is not a case where the plaintiffs wished to withhold their car from any particular person or class of persons. Their desire, made quite obvious in the negotiations, was to ensure that they received payment and, unless cash was paid, the person with whom they were dealing was of major importance truly only as to his credit worthiness and this fact was equally clear to " Hutchinson " from the course which the negotiations took. It does not seem to me to matter whether the right view of the facts is, as the judge has held and as I would agree, that there was no concluded contract before the cheue book was produced and before the vital fraudulent statements were made or that there was a concluded contract which " Hutchinson " at once repudiated by refusing to pay cash and that this repudiation was accepted by the plaintiffs and the transaction was then and there at an end. The property would not have passed until cash had been paid and it never was paid or intended to be paid. Was there a contract of sale subsequently made which led to the plaintiffs taking " Hutchinson's " cheque and in exchange for it handing over the car and its log book? The judgment held that there never was a concluded contract, applying, as I understand it, the elementary factors required by law to establish a contract. The judge, treating the plaintiffs as the offerors and the rogue their offer to sell the car not for cash but for a cheque (which in the circumstances of the Bank Holiday week-end could not be banked before the following Tuesday, August 6, 1957) were under the belief that they were dealing with, and therefore making their they had reason to believe was a man of substsnce and standing. minds of the two ladies for he had put it there and he knew that their offer was intended for P. G. M. Hutchinson of Caterham and that they were making no offer to and had no intention to contract with him, as he was. There was no offer which he " Hutchinson " could accept and, therefore, there was no contract. The judge pointed out that the offer which the plaintiffs made was one which was capable of being accepted only by the honest P. G. M. Hutchinson of Caterham and was incapable of acceptance by " Hutchinson." In all the circumstances of the present case I would accept the judge's findings. Indeed the conclusion so reached seems self-evident. Is the conclusion to-be held wrong in law? If it is, then, as I see it, it must be on the sole ground that as " Hutchinson " was present, albeit making fraudulent statements to induce the plaintiffs to part with their car to him in exchange for his worth- less cheque and was successful in so doing, then a bargain must have been struck with him personally, however much he deceived the plaintiffs into thinking they were dealing with someone else. Where two parties are negotiating together and there is no question of one or the other purporting to act as agent for another and an agreement is reached the normal and obvious conclusion would no doubt be that they are the contracting parties. A contrary finding would not be justified unless very clear evidence demanded it. The unfortunate position of the defendant in this case illustrates how third psrties who deal in good faith with the fraudulent person may be prejudiced. The mere presence of an individual cannot, however, be con- clusive that an apparent bargain he may make is made with him. If he were disguised in appearance and in dress to represent someone else and the other party, deceived by the disguise, dealt with him on the basis that he was that person and would not have contracted had he known the truth then, it seems clear. there would be no contract established. If words are substituted for outward disguise so as to depict a different person from the one physically present, in what circumstances would the result be different? Whether the person portrayed, by disguise or words, is known to the other party or not is important in considering whether the identity of the person is of any moment or whether it is a matter of indifference. If a man said his name was Brown when it was in fact Smith and both were unknown to the other party, it would be difficult to say that there was any evidence that the contract was not made and intended to be made with the person present. In King's Norton Metal Co. Ltd. v. Edridge, Merret & Co. Ltd. (2) one Wallis fraudulently described himself as Hallam & Co making it appear a substabtial firm with a large factory. The court held that the use of an assumed name by the buyer did not prevent a finding that the plaintiffs, the sellers of some brass rivet wire, had contracted with him. But personal knowledge of the person fraudulently represented cannot, I think, be an essential feature. It might be a very strong factor but the qualities of a person not personally known a Minister of the Crown or a stockbroker, confidence in the person so identified might arise although the individual so described was wholly unkown personally or by sight to the other party. It would seem that there is an area of fact in cases of the type under consideration where a fraudulent person is present 2 (1897) 14 T.L.R. 98, C.A. purporting to make a bargain with another and that the circum- stances may justify a finding that, notwithstanding some fraud and deceit, the correct view may be that a bargain was struck with the person present, or on the other hand they may equally Some of the difficulties and perhaps confusion which have arisen in some of the cases do not, in my view, arise here. If less had been said by the rogue and if nothing had been done to confirm his statement by Miss Hilda Ingram who com- municated what she had learnt to Miss Elsie who was doing the main negotiation, the result mught have been different, for the sellers' concern about the stability and standing of the buyer might not have been revealed and it might have been held that an offer in such circumstances was to the party present, whatever his true identity would be. In Phillips v. Brooks Ltd.3 the rogue North had apparently been in the shop some time inspecting goods which were brought and displayed for sale to him without any regard to his identity-- he was a " customer " only. The judgment of Horridge J. is, as I read it, based on a finding of fact that Phillips intended to deal with North as a customer. Viscount Haldane, in Lake v. Simmons,4 had taken the view that the case could be explained on the ground that the fraudulent misrepresentation was not made until after the parties had agreed upon a sale. That opinion has been criticised, mainly, I think, by academic writers, but if, as must be conceded, it is a possible view, and as Phillips v. Brooks Ltd.5 has stood for so long and is, as I think, a decision within an area of fact, I would not feel justified in saying it was wrong. It is not an authority to estabish that where an oger or acceptance is addressed to a person (although under a mistake as to his identity) who is present m person, then it must in all circumstances be treated as if actually addressed to him. I would regard the issue as a question of fact m each case depending on what was said and done and applying the elementary principles of offer and acceptance in the manner in which Slade J. directed The judgment quotes extensively from the article by Dr. Goodhart, the editor of the Law Quarterly Review called " Mistake as to identity in the Law of Contract " (1941) 57 L.Q.R. 228, and I would join the judge in his expression of indebtedness to him. Referring to Phillips D. Brooks Ltd.5 Dr. Goodhart asked " Did the shopkeeper believe that he was entering " into a contract with Sir George Bullough and did North know " this? If both answers are in the affirmative, then it is sub- " mitted that there was no contract." I think there may be a doubt in that case whether both the 3 [1919] 2 K.B. 243; 35 T.L.R. 4 [1927] A.C. 487, 501; 43 T.L.R. 470. 417, H.L. by applying the test, which Slade J. applied, " How ought the " promisee to have interpreted the promise " in order to find I am in agreement with the judge when he quotes, accepts and applies the following passage from Dr. Goodhart's article-- " It is the interpretation of the promise which is the essential " thing. This is usually based on the interpretation which a " reasonable man, in the promisee's position, would place on it, " but in those cases where the promisor knows that the promisee -- has placed a peculiar interpretation on his words, then this is " the binding one. The English law is not concerned with the " motives of the parties nor with the reasons which infiuenced " their actions. For practical reasons it has limited itself to the " simple questions : what did the promisor promise, and how " should this be interpreted? " Phillips v. Brooks Ltd.(11) is the closest authority on which the defendant relies. Once that is distinguished on its facts, without going so far as to say it is wrong, authority leans strongly in favour of the judgment appealed from. Cundy v. Lindsay,(12) on the findings of the Court of Appeal (13) and the House of Lords, was to the same effect as the present case. The plaintiffs intended to sell to Blenkiron & Co. but Blenkarn fraudulently assumed the position of the buyer. Therefore, an offer to sell to Blenkiron & Co. was knowingly " accepted " by Blenkarn snd there was no contract. But as the learned authors of Cheshire and Fifoot on the Law of Contract, 5th ed. (1960), p. 197, point out, another view of the facts of that case might have been that " the plaintiffs, " though deceived by the fraud of Blenkarn, intended or were at " least content to sell to the person who traded at 37 Wood " Street, from which address the offer to buy had come and to " which the goods were sent. If this were the true position, " there was a contract with Blenkarn of 37 Wood Street, though " one that was voidable against him for his fraud." Blenkiron & Co.'s address was 123 Wood Street and the three judges of the Queen's Bench Division (14) had taken this view. Hardman v. Booth (15) more closely supports the judgment in the present case. One of the plaintiffs was fraudulently per- suaded by Edward Gandell that he was a member of Gandell. It was Co. which in fact consisted only of Thomas Gandell. It was held that there was no contract since the plaintiff's offer was made to Thomas only, as Edward knew to be the fact, and, therefore, he could not accept it himself. The legal position is, I think, well illustrated by Dr. Goodhart in the article (57 L.Q.R. 228, 241) already referred to. There is a difference between the case where A makes sn oger to B in the 11 [1919] 2 K.B. 243. 14 Sub nom. Lindsay v. Cundy 12 (1878) 3 App.Cas. 459, H.L. (1876) 1 Q.B.D. 348. 13 Aub nom. Lindsay v. Cundy 15 (1863) 1 H. & C. 803; 158 E.R. (1877) 2 Q.B.D. 76, C.A. 1107. belief that B is not B but is someone else, and the case where A makes an offer to B in the belief that B is X. In the first case B does in fact receive an offer, even though the offeror does not know that it is to B he is making it, since he believes B to be someone else. In the second case, A does not in truth make any offer to B at all; he thinks B is X, for whom alone the offer is meant. There was an offer intended for and available only to X. B cannot accept it if he knew or ought to have known that it was not addressed to him. The judgment has quoted and referred to Pothier's statement of the law (Traite de Obligations (1803), s. 19, p. 13), and I have observed that Dr. Goodhart concludes his article by saying that " it is certainly time that Pothier's statement was firmly and " finally buried." Slade J. would have held equally for the plaintiffs if he had applied the subjective test, which Pothier seems to stipulate. Pothier's statement has been cited in several English cases--by Fry J. in Smith v. Wheatcroft,16 a case of specific performance, and in this court in Gordon v. Street,17 and followed in Sowler v. Potter.18 Having regard to the judge's finding that whichever view he takes it does not affect his decision, I do not feel the occasion should play in English law If it is the formation of a contract which calls for considera- tion, as it is here, " How ought the promisee to have interpreted " the promise " is, in my opinion, the correct approac, as the always prove as ascertainable as I belie it to be in the present case. I would dismiss the appeal. PEARCE L.J. I agree. The question here is whether there was any contract, whether offer and acceptance met. For, as Gresson P. said in Fawcett v. Star Car Sales Ltd.,19 " a void " contract is a paradox; in truth there is no contract at all." Much argument has ranged round Professor Goodhart's illum- inating article of which the judge made considerable use in arriving at his conclusion. The author rightly points out that the often-quoted passage from Pothier is misleading, For, it seems to substitute for the objective English test, " How ought " the promisee to have interpreted the promise," the entirely different subjective test, " What did the promisor intend when " he made the promise," and if taken literally it seems to involve " an inquisition into the feelings," and into the motives of the promisor. When an offeror seeks to avoid an apparent confract on the ground of mistaken identity the investigation must start 16 (1878) 9 Ch.D. 223, 230. 18 [1940] 1 K.B. 271; 56 T.L.R. 17 [1899] 2 Q.B. 641, 647; 15 142; [1939] 4 All E.R. 478. T.L.R. 445, C.A. 19 [1960] N.Z.L.R. 406, 412. with his actual state of mind. For it would be absurd if he could avoid the contract when he was not really mistaken in his own mind as to the offeree's identity or when the apparent contract was not induced by mistake, when he was equally prepared to make the contract had he not been mistaken. That, as it seems to me, is a preliminary essential. But the courts, in deciding the question whether the apparent contract is non-existent owing to mistake in identity, apply the usual objective test (see Holmes on the Common Law (1881), p. 308, Lecture 9), rather than a subjective test which would gravely unpair the certainty and stability of contracts. The judge approached the matter on an objective basis. He pointed out however, that he would have reached the same result by approaching the matter on the subjec- tive test suggested by Pothier. In cases such as this the cheat is fully aware of the offeror's actual state of mind. Moreover, he could not be heard to say that he was not aware of the offeror's state of mind when he has himself deliberately and fraudulently induced it. Thus the objective and subjective tests produce the same result in such a case, and it is the ogeror's intention which provides the answer. It is for that reason, I think, that in such cases as this so many observations have been made that are equally referable to the subjective and objective test. The real problem in the present case is whether the plaintiffs were in fact intending to deal with the person physically present, who had fraudulently endowed himself with the attributes of some other identity. If the former, there was a valid but with that other identity. If the former there was a valid but voidable contract and the property passed. If the latter, there Ltd. Co but the facts in that case though they concern the fraudu- lent sale of a motor-car, are dissimilar in certain ways that make the decision itself inapplicable to the present case. do likewise The question which was offeror and which was it may well be that the ultimate offeror was the false Hutchin- son and the plainiffs were the " acceptors," in which case the problem is whether the plaintiffs were intending to deal with or accept an offer from the false Hutchinson physically present or the real Hutchinson of Stanstead House. The mere fact that the offeror is dealing with a person bearing an alias or false attributes does not create a mistake which will prevent the formation of a contract: King's Norton Metal Co. 20 [1960] N.Z.L.R. 406, 408. Ltd. v. Edridge, Menett & Co. Ltd.(21) For in such a case there is no other identity for which the identity of the offeree is mis- taken. " There was only one entity, trading it might be under " an alias, and there was a contract by which the property passed " to him ": see per A. L. Smith L.J.(22) But where a cheat passes himself off as another identity (e.g., as someone with whoin the other party is accustomed to deal), it is otherwise. In Cundy v. Lindsay Lord Cairns L.C. said(23): " I ask the question, how is it possible to imagine that in that " state of things any contract could have arisen between the " respondents and Blenkarn, the dishonest man? Of him they " knew nothing, and of him they never thought. With him they " never intended to deal. Their minds never, even for an instant " of time rested upon him, and as between him and them there " was no consensus of mind which could lead to any agreement " or any contract whatever. As between hn and them there " was merely the one side to a contract, where, in order to " produce a contract, two sides would be required." An apparent contract made orally inter praesentes raises particular difficulties. The offer is apparently addressed to the physical person present. Prima facie, he, by whatever name he is called, is the person to whom the offer is made. His physical presence identified by sight and hearing preponderates over vagaries of nomenclature. " Praesentia corporis tollit errorem nommis said Lord Bacon (Law Tracts (1737), p. 102). Yet clearly, though difficult, it is not impossible to rebut the prima facie presumption that the offer can be accepted by the person to whom it is physically addressed. To take two extreme instances. If a man orally commissions a portrait from some unknown artist who had deliberately passed himself off whether by disguise or merely by verbal cosmetics, as a famous painter, the imposter could not accept the offer. For though the offer is made to him physically, it is obviously, as he knows, addressed to the famous shopkeeper sells goods in a normal cash transaction to a man who misrepresents himself as being some well-known figure, the transaction will normally be valid. For the shopkeeper was ready to sell goods for cash to the world at large and the parti- cular identity of the purchaser in such a contract waa not of sufficient importance to override the physical presence identified by sight and hearing. Thus the nature of the proposed contract must have a strong bearing on the question of whether the inten- tion of the offeror (as understood by his offeree) was to make his offer to some other particular identity rather than to the physical person to whom it was orally offered. 21 14 T.L.R. 98. 22 Ibid. 99. 23 3 App.Cas. 459, 465. In our case, the facts lie in the debatable area between the two extremes. At the beginning of the negotiations, always an important consideration, the name or personality of the false Hutchinson were of no importance and there was no other iden- tity competing with his physical presence. The plaintiffs were content to sell the car for cash to any purchaser. The contractual conversation was orally addressed to the physical identity of the false Hutchinson. The identity was the man present, and his name was merely one of his attributes. Had matters continued thus, there would clearly have been a valid but voidable contract. I accept the judge's view that there was no contract at the stage when the man pulled out his cheque book. From a prac- tical point of view negotiations reached an impasse at that stage. For the vendor refused to discuss the question of selling on credit. It is argued that there was a contract as soon as the price was agreed at #717 and that from that moment either party could have sued on the contract with implied terms as to payment and delivery still needed to be discussed and the parties would be expecting to discuss them. Immediately they did discuss them it become plain that they were not ad idem and that no contract had yet been created. But, even if there had been a concluded agreement before discussion of a cheque, it was rescinded. The man tried to make Miss Ingram take a cheque. She declined and said that the deal was off. He did not demur but set himself to reconstruct the negotiations. For the moment had come, negotiations, the vital crisis of the swindle. He wanted to take away the car on credit against his worthless cheque, but she refused. Thereafter, the negotiations were of a different kind from what the vendor had mistakenly believed them to be hitherto. The parties were no longer concerned with a cash sale of goods where the identity of the purchaser was prima facie unimportant. They were concerned with a credit sale in which both parties knew that the identity of the purchaser was of the utmost importance. She now realised that she was being asked to give to him possession of the car on the faith of his cheque. This was an important stage of the transaction because it demonstrated quite clearly that she was not prepared to sell on credit to the mere physical man in her drawing room though he represented himself as a man of substance. He proceeded to to persuade her to sell to him as P. G. M. Hutchinson of Stan- stead House, a personality which no doubt he had selected for the purpose of inspiring confidence into his victim. This was unsuccessful. Only when she had ascertained (through her sister's short excursion to the local post office and investigation of the telephone directory) that there was a P. G. M. Hutchin- son of Stanstead House in the directory did she agree to sell on credit. The fact that the man wrote the name and address on the back of the cheque is an additional indication of the importance attached by the parties to the individuality of P. G. M. Hutchin- son of Stanstead House. It is not easy to decide whether the vendor was selling to the man in her drawing room (fraudulently misrepresented as being a man of substance with the attnbutes of the real Hutchinson) or to P. G. M. Hutchinson of Stanstead House (fraudulently misrepresented as being the man in her drawing room). Did the individuality of P. G. M. Hutchinson of Stanstead House or the physical presence of the man in the room preponderate? Can it be said that the prima facie predominsnce of the physical presence of the false Hutchinson identified by sight and hearing particular facts of the present case? The judge said: " I have not the slightest hesitation in reach- " ing the conclusion that the offer which the plaintiffs made to " accept the cheque for #717 was one made solely to, and one " which was capable of being accepted only by, the honest Hut- " chinson--that is to say Phillip Gerald Morpath Hutchinson of " Stanstead House, Stanstead Road, Caterham, Surrey, and that " it was capable of being accepted only by the honest Butchin- " son." In view of the experience of the judge and the care which he devoted to the present case, I should hesitate long before interfering with that finding of fact, and I would only do so if compelled by the evidence or by the view that the judge drew some erroneous inference. Where, as here, a borderline case is concerned with ascertaining the intention of the parties, the views of the trial judge who hears the witnesses should not lightly be discarded. I am not persuaded that on the evidence he should have found otherwise. It is argued that the judge should have come to a contrary conclusion by following Phillips v. Brooks Ltd24 I do not find that case easy to evaluate, because the facts are far from clear. It appears from the report that the name of Sir George Bullough was not mentioned until after the deal had apparently been con- cluded and the cheque in payment of the goods had been or was being written out. Then, apparently, as a postscript or variation of the transaction, the false Sir George oobtained leave to take off one of the articles without waiting for the cheque to be cleared, and the vendor thereby relinquished his lien on that article. The those words could hardly be true literally, since he had apparently making any contract with any other person than Sir George, but those words could hardly be true literally, since he had apparently made a contract with the man before he was told that he was Sir George. Viscount Haldane in Lake v. Simmons25 said of that case: " Horridge J. found, as a fact, that though the jeweller believed 24 [1919] 2 K.B. 243. 25 [1927] A.C. 487, 501. " the person to whom he handed the jewel was the person he " pretended to be, yet he intended to sell to the person, whoever " he was, who came into the shop and paid the price, and that " misrepresentation was only as only as to payment." In my view, it was a border-line case decided on its own particular facts, and is in no wise decisive of the case before us. Hardman v. Booth26 was decided the other way. There the plaintiffs, going to the place of business of Gandell & Co., which consisted only of Thomas Gandell, were fraudulently misled at interviews with his son Edward, and unauthorised clerk in the business, into invoicing goods to Edward Gandell & Co. and paying with a bill of exchange similarly made out. It was held that there was no contract. Pollock C.B. said27: " It is difficult " to lay down any general rule by which, at all times and under " any circumstances, it may be determined whether or no there " is a contract voidable at the option of the party defrauded, " but in this case I think it clear that there was no contract. " Mr. Hawkins contended that there was a contract personally " with Edward Gandell, the individual with whom the conversa- " tions took place . . . but the plaintiffs supposed they were dealing " with Gandell & Co., the packers, to whom they sent the goods; " the fact being that Edward Gandell was not a memeber of that " firm and had no authority to act as their agent. Threfore at " no period of time were there two consenting minds to the same " agreement." Wilde B. said28: " It is clear that there was " no sale to Gandell & Co., because they never authorised Edward " Gandell to purchase for them; and it is equally clear that there " was no sale to Edward Gandell, because the plaintiffs never " intended to deal with him personally." That case, however, was a clearer case of there being no contract than is the present one, since there the plaintiffs had gone to the premises of Gandell & Co. to deal with that firm, and on those premises they had dealt with someone who duped them into believing that he was a member of the firm. Had the plaintiffs in the present case gone to Stanstead House especially to deal with the real Hut- chinson and been duped on the premises by the false Hutchinson, their case would have been very clear. In Lake v. Simmons29 the court was dealing with a somewhat different problem, namely, whether a jeweller had " entrusted " possession of jewellery to a cheat, and it held that he had not. Viscount Haldane there said30 : " In circumstances such as these, " I think there was no such consensus ad idem as, for example, " Lord Cairns, in his judgment in Cundy v. Lindsay31 declared " to be requisite for the constitution of a contract. No doubt " physically the woman entered the shop and pretended to bar- " gain in a particular capacity, but only on the footing of being 26 1 H. & C. 803. 27 [1927] A.C. 487. 27 Ibid. 806. 30 Ibid. 500. 28 Ibid. 808. 31 3 App. Cas. 459. " a different person from what she really was. There was never " any contract which could afterwards become voidable by reason " of a false representation made in obtaining it, because there " was no contract at all, nothing exceptin the result of a trick " practised on the jeweller." Each case must be decided on its own facts. The question in such cases is this. Has it been suffiently shown in the particular circumstances that, contrary to the prima facie pre sumption, a party was not contracting with the physical person to whom he uttered the offer, but with another individual whom (to the other party's knowledge) he believed to be the physical person present. The answer to that question is a finding of fact. It is argued that although such a finding might properly have been reached if the cheat had pretended to be some great man or someone known already to the vendor by dealing or by repu- tation, it could not be so in this case, since the vendor had no knowledge of P. G. M. Hutchinson of Stanstead House. Had it not been for investigation of the telephone directory, that might well be so; but here the entry represented an individual of apparent standing and stability, a person whom the vendor was ready to trust with her car against his cheque. His individuality was less dominating than that of a famous man would be, but that is a question of degree. It does not, I think, preclude the judge from finding that it was with him that the vendor was intending to deal. The court is naturally reluctant to accept the argument that there has been a mistake in such a case as this since it creates hardship on subsequent bona fide purchasers. The plaintiffs' unguarded transaction has caused loss to another. And, unfor- tunately, when the contract is void at common law, the court cannot (as the law stands now) by its equitable powers impose terms that would produce a fairer result. However, in the present case the subsequent purchasers, although the judge found that there was no mala fides, were no more wise or careful than the plaintiffs. The regrettable ease with which a dishonest person can accomplish such a fraud is partially due to the unfor- tunate fact that registration books are not documents of title and that registration and legal ownership are so loosely connected. Although I appreciate the force of Mr. Chapman's very full and fair argument, he has failed to persuade me that the judge could not properly arrive at his conclusion. I agree that the appeal should be dismissed. DEVLIN L.J. The point on which the present case turns is the effect of deception about the identity of a contracting party. It is a difficult point on which I have the misfortune to differ from my brethren. On all other points I agree with them and shall add nothing. On the chief point I shall not attempt to analyse all the authorities; there is a very full discussion of them in the recent judgment of Gresson P. in Fawcett v. Star Car Vol 3 Sales Ltd. " and I shall not need to repeat more than the essential facts. The plaintiffs advertised their car for sale at #725 or nearest offer. The swindler, whose true name is unknown and whom Mr. Chapman has conveniently described as H., called in answer to the advertisement and, after inspection and negotiation, offered #717; and as soon as the figure was agreed, produced his cheque book. Miss Elsie Ingram, who was making the deal on behalf of the plaintiffs, at once said that she would not in any circum- stances accept a cheque, and she sought to bring the interview to an end. He went on talking. He had previously given his name as Hutchinson and said that he lived at Caterham; and it is common ground that if he had been able and willing to pay cash the plaintiffs would have required to know no more. H. now said that he was a P G. M. Hutchinson, that he had business interests in Guildford and that he lived at Stanstead House, Stanstead Road, Caterham. On hearing the name and address, Miss Hilda Ingram, who was in the room, slipped out and went round to the post office near by, looked in the directory covering the district of Caterham and saw the entry, " Hutchinson, " P. G. M., Stanstead House, Stanstead Road, Caterham 4665." She was away five minutes or a little longer; and during that time the conversation between H. and Miss Elsie Ingram had continued. He had tried to convince Miss Ingram that he was indeed the Hutchinson he had mentioned. When Miss Hilda came back she told Miss Elsie that she had checked with the telephone directory and that there was such a person listed. They then decided that they would take his cheque and the deal was so concluded. The cheque was in due course dishonoured. Meanwhile, H. sold the car to the defendant. The question is whether H. ws able to pass the property in the car to the defendant so that they can resist a claim based on conversion; and that turns on whether the contract between the plaintiffs and H. was voidable or void. If the plaintiffs were induced to enter into a contract by H.'s false representation as to his identity, the contract remains valid until the plaintiffs elect to disaffirm it; since before they did that, H. had parted with the car to the defendant, he was in a position to give them a good title to it. If, however, mistake as to identity prevented the contract being made at all, the property in the car did not In the textbooks, cases of mistaken identity sre to be found both in the chapters that deal with the formation of contract and in those that deal with the effect of mistake. Whichever way it is looked at, the essential question is the ssme: has a contract been made? If the fatal defect goes to form, the question is answered with a simple negative and the case is put under the head of formation. If the defect is one of substance, that is, 32 [1960] N.Z.L.R. 406. where the outward form is complete but the necessary consensus is vitiated by mistake, the question is answered by saying that the contract is void. It may be objected that a void contract is a meaningless expression; but it is a useful one to describe a contract that is perfect in form but void of substance. There is also this practical difference. It is for the plaintiff to prove offer and acceptance in form. But mistake is a ground of defence and it is for the defendant to plead it and assert that the contract is not what it seems to be. If the contract is complete on the surface, as when it is a formal document, the burden wui oe on him from the outset. But is oral contracts it may well be in question whether that is a contract even in appearance. So the first-thing for a iudge to do is to satisfy himself that the alleged contract has been properly formed, and Dr. Goodhart, in the article that the judge has adopted, has shown how easy it is to fall into error if one does not begin with that. There must be offer and acceptance. The offer must be addressed to the offeree, either as an individual or as a member of a class or of the public. The acceptance must come from one who is so addressed and must itself be addressed to the offeror. Boulton v. Jones,33 for example, is a simple case in which an offer was accepted by someone to whom it was not addressed. The classic case of Cundy v. Lindsay34 was one in which the acceptance was not addressed to the offeror. The offer as in the instant case, was addressed to a person who held himself out as willing to do business. But the offer was made by Blenkarn and the acceptance addressed to Blenkiron. The fact that there was a real Blenkiron, whom Blenkarn was pretending to be, showed that it was not a case of falsa demonstratio on nocet. It is noteworthy that the word "mistake" is not mentioned in the judgments of either if these cases. Before, therefore, I consider mistake, I shall inquire whether there is offer and acceptance in form. There is no doubt that H.'s offer was addressed to Miss Ingram and her acceptance, apparently, addressed to him. But, it is argued, the acceptance was in reality addressed to P. G. M. Hutchinson, who was not the offeror, and, therefore, no contract was made. There can be no doubt upon the authorities that this argument must be settled by inquiring with whom Miss Ingram intended to contract: was it with the person to whom she was speaking or was it with the person whom he represented himself to be? It has been pressed upon us that this is a question of fact and that we ought to give great weight to the answer to it provided by the trial judge. It is, I think, a mixed question of fact and law. I am sure that any attempt to solve it as a pure question of fact would fail. If Miss Ingram had been asked whether she intended to contract with the man in the room or with P. G. M. Hutchinson, the 33 (1857) 2 H. & N. 564; 157 E.R. 34 App.Cas. 459. 232. question could have no meaning for her, since she believed them both to be one and the same. The reasonable man of the law-- if he stood in Miss Ingram's shoes--could not give any better answer. Whether it is fact or law, it is not a question that the trial judge is any better equipped to answer than we are. In saying that, I must acknowledge that I am with diffdence refusing the guidance offered by Viscount Sumner in Lake v. Simmons (35) : " The conclusion that his state of mind was an " appearance of consent produced by the trick and not a real " consent induced by fraud is a judicial conclusion from the cir- " was said and done, what he believed, and what he would or " would not have done in the absence of that belief, and finally, " from the judge's own view of the ability of the witness himself " to analyse and explain his own mental processes with toler- " able exactness. A conclusion from these materials is greatly I hope that I am not diminishing the province of the trial judge, which I should always wish to honour and respect. But I cannot understand how observation of the witness can detect whether his consent was produced by a trick or induced by fraud; I doubt whether an analysis of his mental processes would help either. All that Miss Ingram or any other witness in her position can say is that she did in fact accept the offer made to her; and that, if she had not been tricked or deceived, she would not have accepted it. Courts of law are not inexperienced in dealing with this sort of situation. They do so by means of presumptions. Let me take as an example the law that governs a contract. This depends on the intentions of the parties, but no one ever attempts to ascertain their intentions by question and answer. The answer would almost invariably be that neither of the parties had thought about the matter at all. If one of them were pressed to aay what naturally tend to opt for the law that would be most favourable to him in the circumstances of the dispute that had brought him to court. In the present type of case, the answer to a similar type of question might be equally misleading; as the deceived party in the present case, the plaintig wants the contract declared void ab initio; as the deceived party in the recent case of Fawcett v. Star Car Sales Ltd.,(56) the defendant there wanted it affirmed. The court, therefore, has to work on the presumed intention of the parties. In the case of conflict of laws, there are a number of presumptions which the court uses, such as that the parties are presumed to intend the law of the country where they have provided for arbitration, if such be the case, or the law of the place where the contract was made. Whether the court when it acts in this way is really ascertaining the intentions of the parties or whether it is simply providing a just solution of their difficulties is a theoretical question which I need not explore. Lord Wright has some penetrating observations to make about the problem as it arises in cases of frustration: see Fibrosa Spolka Akcyina v. Fairbairn Lawson Combe Barbour Ltd.(37) and Denny Mott & Dickson Ltd. v. Fraser & Co. Ltd.(38) In my judgment, the court cannot arrive at a satisfactory solution in the present case except by formulating a presumption and taking it at least as a starting point. The presumption that a person is intending to contract with the person to whom he is actually addressing the words of contract seems to me to be a simple and sensible one and supported by some good authority. It is adopted in Benjamin on Sale, 8th ed. (1950), p. 102, where two decisions in the United States are referred to Edmunds v. Merchants Despatch Co. and Phelps v. McQuade. The reasoning in the former case was adopted by Horridge J. in Phillips v. Brooks Ltd.,(41) and the latter case is a decision of the New York Court of Appeals. All these three cases still stand as the law in their respective jurisdictions. Corbin on Contract (1951), vol. 3, s. 602, p. 385 cites them and a number of others, and states the general principle in the United States as follows : " The " courts hold that if A appeared in person before B, impersonating " C, an innocent purchaser from A gets the property in the goods " against B. " I do not think that it can be said that the presumption is conclusive, since there is at least one class of case in which it can be rebutted. If the person addressed is posing only as an agent, it is plain that the party deceived has no thought of contracting with him but only with his supposed principal; if then there is no It is not necessary to strain to find them, for we are here dealing only with offer and acceptance; contracts in which identity really matters may still be avoided on the ground of mistake. I am content to leave the question open, and do not propose to specu- late on what other exceptions there may be to the general rule. What seems plain to me is that the presumption cannot in the present case be rebutted by piling up the evidence to show that Miss Ingram would never have contracted with H. unless she had thought him to be P. G. M. Hutchinson. That fact is conceded and, whether it is proved simpliciter or proved to the victim of fraud. With great respect to the judge, the question that he propounded as the test is not calculated to show any more than that. He said: " Is it to be seriously suggested that they 37 [1943] A.C. 32, 70; 58 T.L.R. 39 (1883) 135 Mass.Rep. 283, 308; [1942] 2 All E.R. 122, H.L. 40 (1917) 220 N.Y.Rep. 232. 38 [1944] A.C. 265, 275; 60 T.L.R. 41 [1919] 2 K.B. 243. 419; [1944] 1 All E.R. 678, H.L. 42 1 H. & C. 803. " were willing to accept the cheque of the rogue other than in " the belief, created by the rogue himself, that he, the rogue, was " in fact the honest P. G. M. Hutchinson of the address in In my judgment, there is everything to show that Miss Ingram would never have accepted H.'s offer if she had known the truth, but nothing to rebut the ordinary presumption that she was addressing her acceptance, in law as well as in fact, to the person to whom she was speaking. I think, therefore, that there was offer and acceptance in form. On my view of the law, it, therefore, becomes necessary to consider next whether there has been a mistake that vitiates the contract. As both my brethren are of opinion that there has been no offer and acceptance, the result of this further inquiry cannot affect the decision in the present case or its ratio, and I shall, therefore, state my conclusions and my reasons for it as briefly as may be. In my judgment, there has been no such mistake. I shall assume without argument what I take to be the widest view of mistake that is to be found in the authorities; and that is that a mistake avoids the contract if at the tune it is made there exists some state of fact which, as assumed, is the basis of the contract and as it is in truth, frustrates its object. Cases of mistaken identity have usually been dealt with in the authorities by the application of the test propounded by Pothier, Traite/ des Obliga- tions (1803), s. 19, p. 13, where he said: " Wherever the " consideration of the person with whom I contract is an ingre- " dient of the contract which I intend to make, an error " respecting the person destroys my consent, and consequently " annuls the agreement." If this is wider than the principle I have stated, I do not think it can be part of the law of England, for I can see no reason why mistake as to identity should operate more easily to avoid a contract than any other sort of mistake. If Pothier is correctly interpreted, the word " ingredient " is very wide; but the examples which he gives to illustrate his proposition are examples in which mistaken identity would generally destroy a fundamental assumption and frustrate the object of the con- tract. The whole object of contracting for a portrait, for instance, is to have it done by the particular artist selected and so his identity is normally essential his supposed name and address had been " verified " goes to show that she regarded his identity as fundamental. In this she was misguided. She should have concerned herself with credit- worthiness rather than with identity. The fact that H. gave P. G. M. Hutchinson's address in the directory was no proof that he was P. G. M. Hutchinson; and if he had been, that fact alone was no proof that his cheque would be met. Identity, therefore, did not really matter. Nevertheless, it may truly be said that to Miss Ingram, as she looked at it, it did. In my judgement, Miss Ingram's state of mind is immaterial to this question. When the law avoids a contract ab initio, it does so irrespective of the intentions or opinions or wishes of the parties themselves. That is the rule in the case of frustration: see Hirji Mulji v. Cheong Yue S.S. Co. Ltd.43 It is the rule also in a case such as Scammell (G.) & Nephew Ltd. v. Ouston,44 where the parties believed themselves to have contracted, but had failed to reach agreement on essentials with sufficient particularity. This rule applies in the case of mistake because the reason for the avoidance is the same, namely that the consent is vitiated by non-agreement about essentials. It is for the court to determine what in the light of all the circumstances is to be deemed essential. In my judgment, in the present case H.'s identity was immaterial. His creditworthiness was not, but creditworthiness in relation to contract is not a basic fact; it is only a way of expressing the belief that each party normally holds that the other will honour his promise. I wish that I could conclude this judgment without any refer- ence to Lake v. Simmons,45 for that is a case with which I find it very difficult to deal briefly. But if, as is often suggested, the ratio decidendi in the House of Lords is that enunciated by Viscount Haldane46 in the leading speech I should find it impos- sible to distinguish the present case satisfactorily. I must, therefore, embark on the difficult task of ascertaining what the true ratio is. I do not think that the reasoning in the case can properly be analysed without some introductory observations about larceny by a trick. I base them on the judgment of Sellers J., as he then was, in Du Jardin v. Beadman Bros. Ltd.47 The history of the offence is fully set out in Russell on Crime, 11th ed. (1958), p. 1036, and I give below only the bare account of it that is necessary for my purpose. Larceny at common law required that there should be an asportavit or taking of the goods with intent to steal. This produced a difficulty in the case of a bailee who obtained possession of the goods lawfully; he could not thereafter be guilty of larceny by appropriating them, however dishonestly. This difficulty was finally removed by statute in 1857 when the offence of larceny by a bailee was created- " In the meantime," as Russell says at p. 1041, " the judges had found themselves " forced to adopt strange contortions of reasoning in order to " justify the conviction of dishonest men." The difficulty, which had to be removed, was that the bailee had taken the chattel with the consent of the owner. In R. D. Pear,48 the court decided, that if a horse was hired with the intention of stealing 43 [1926] A.C. 497, 42 T.L.R. 359, 46 Ibid. 494. P.C. 47 [1952] 2 Q.B. 712; [1952] 1 44 [1941] A.C. 251; 57 T.L.R. 280; T.L.R. 1601; [1952] 2 All E.R. 160. [1941] 1 All E.R. 14, H.L. 48 (1779) 2 East P.C. 685. 45 [1927] A.C. 487. it, the fraudulent intention of the bailee at the inception of the transaction in some way negatived in law the consent of the owner to do what he in fact did. Therefore, there was a taking without consent, which came to be called larceny by a trick. But the courts restricted this doctrine to the transfer of possession; and they always refused to apply it to a case where what was in issue was the transfer of property. It is, perhaps, for this reason that we have not been troubled here by any argument about larceny by a trick. But there has been a great difference of opinion whether this notion of consent should or should not be imported into other branches of the law, particularly liability under the Factors Act, 1889. Until recently, the ruling judg- ments on this point have been obiter; but I trust that the law may now be regarded as settled by the decision of Sellers J. in Du Jardin v. Beadman (49) where he held that " consent " in the Factors Act, 1889, was not to be interpreted in an artificial way in order to bring it into harmony with the criminal law. I need not pursue the controversy further. Its only importance for my purpose is so that the speech of Viscount Sumner, which I think to be crucial in Lake v. Simmons,(50) is properly understood. The facts in Lake v. Simmons centred round a woman who was living with a Van der Borgh, and who had dealings with the plaintiff, a jeweller She falsely represented to him that she was Mrs. Van der Borgh and she obtained jewellery from him by falsely representing that she desired to show it to her husband for his approval, and also to a person she named as Commander Digby, who did not in fact exist. She made away with the jewellery and the plaintiff sued to recover his loss under a Lloyd's policy, the defendant being an underwriter. The policy was against (inter alia) theft, but subject to an exception on which the argument turned. A convenient summary of its essential terms is given by Viscount Sumner (51): "The exception clause " takes out of the stipulated cover against `thefts' generally . . . " those committed by customers . . . but only when, the words " in respect of goods entrusted to them by the assured ' are " satisfied." All three courts held that there was a theft, i.e., larceny by a trick, and, accordingly, that the loss fell within the general words. There was, however, much difference of opinion about the opera- tion of the exception. McCardie J. held (52) that the jewellery was not entrusted to the woman as a customer, but that she received it as a mere agent or messenger for the purpose of showing it to others. He, therefore, decided in favour of the plaintig. His decision was reversed by a majority in the Court of Appeal.(53) None of the Lords Justices accepted his view that the woman was not a customer and the decision turned on the meaning of " entrusted." 49 [1952] 2 Q.B. 712. 52 [1926] 1 K.B. 382; 42 T.L.R. 50 [1927] A.C. 487, 583. 168. 51 Ibid. 507. 53 [1926] 2 K.B. 51; 42 T.L.R. 425. C.A. Bankes L.J. and Warrington L.J. held that were was an entrust- ing within the exception so that the loss fell outside the policy. Atkin L.J. held that there was not. He said54 that the word " entrust " implied a consensual act and that the fact of larceny negatived consent both in criminal and in civil matters. It would be absurd to hold, he thought, that the woman could both take the goods without the consent of the true owner for the purpose of larceny by a trick and be " entrusted " with the goods by the true owner. In the House of Lords,55 the decision of the Court of Appeal was reversed. Viscount Haldane said56 that for the purpose of an entrusting within the meaning of the policy there must be a definite contract. He held that there was never any contract at all, because the plaintiff was entirely deceived as to the identity of the person with whom he was transacting; it was only on the footing and in the belief that she was Mrs. Van der Borgh that he was willing to deal with her at all. This is a bare summary of his reasoning; it is sufficient for my purpose to say that it is clear authority for the view from which I am dissenting. None of the rest of their Lordships expressly followed Viscount Haldane. Lord Atkinson's opinion57 turned on the construction of the policy. He held that the entrusting within the exception could not mean the delivery in all good faith by a dealer of goods to a customer which that customer had planned to steal. He also inclined to McCardie J.'s view that the woman was not a customer. Lord Blanesburgh58 based his conclusion on the simple ground that the woman was not a customer, but entirely agreed with the judgment of Viscount Sumner. Lord Wren- bury59 simply concurred. It is clear, therefore, that Viscount Haldane's reasoning can be accepted as the ratio decidendi only if it was assented to by Viscount Sumner. I know that the fault must be mine but I find the speech of Viscount Sumner very difficult to interpret. I think that the operative part of his reasoning begins60 after he has set out the policy. He gave a special meaning to the word " entrusted," derived from the use of the same word in an earlier part of the policy. He held that it meant entrusted on the condition of sale or return. He held that there was not an entrusting to the woman on this condition; if there was an en- trusting, it was either to Van der Borgh or Commander Digby, one of whom was imaginary and the other was not a customer. That was his first reason. The second reason61 was, I think, an acceptance of Atkin L.J.'s view of the effect of larceny by a trick. Finally, he agreed62 that the woman was not a customer for the purpose of the exceptions clause. 54 [1926] 2 K.B. 51, 71, 72. 59 Ibid. 513. 55 [1927] A.C. 487. 60 Ibid. 507. 56 Ibid. 499. 61 Ibid. 508. 57 Ibid. 511. 62 Ibid. 511. 58 Ibid. 513. But, before he gave this statement of his reasons, he made a number of observations that might suggest that he was agreeing with the view expressed by Viscount Haldane, though he never in fact said so. He said this " : " Again, if Mr. Lake consented to " nothing, analogies from the distinction between void and void- " able contracts are beside the mark, and equally so are argu- " ments which turn on consensus ad idem as an ingredient in the " conclusion of a contract . . . As it is, there was no contract " there was no contract and nothing to avoid " is based upon the so, for, in the next paragraph, Viscount Summer said : " the next step is to consider whether anything can be imputed to " Mr. Lake which would be equivalent to his consent." I think that the clue to what Viscount Sumner is saying in this part of his speech is on the next page where he said (64): " Such facts " may raise difficulties in deciding whether his frame of mind " involved misplaced consent or was consistent with absence " of any consent at all, but the conclusion that it was such as " would negative the appearance of consent and so remove the " difficulty in the way of proving an asportavit, concludes " the whole issue." He elucidates this with three examples, one of which, a case of a confidence trick man, posing as a benevolent millionaire, would certainly not be a ground for avoiding a contract. I think that Viscount Sumner is neither agreemg nor dis- agreeing with Viscount Haldane. What he is saying is that Viscount Haldane's reasoning is not to the point as he, Viscount are beside the mark and so are arguments which tum on con- sensus. The thing is concluded by the fact there is larceny by a trick. In other words, Viscount Sumner is agreeing with Atkin L.J.(65) and is refusing to distinguish between the sort of lack of consent that goes to make larceny by a trick and the sort that avoids a contract, though he reserved (66) his judgment about " consent " in the Factors Act, 1889. In my judgment, there- fore, the ratio decidendi of Lake v. Simmons turns on the construction of the policy, and the only view for which there is a clear majority is the view that the woman was not a customer. Certainly there is no support for the opinion of Viscount Haldane in any of the other speeches and, though I recognise his great authority, I prefer to follow Phillips v. Brooks Ltd.,(67) the cases in the United States to which I have referred,(68) and the decision of the majority of the Court of Appeal in the recent case in New Zealand, Fawcett v. Star Sales Ltd.(69) 63 [1927] A.C. 487, 505. 67 [1919] 2 K.B. 243. 64 Ibid. 506. 68 Ante, p. 525. 65 [1926] 2 K.B. 51, 71, 72. 69 [1960] N.Z.L.R. 406. 66 [1927] A.C. 487, 510. There can be no doubt, as all this difference of opinion shows, that the dividing line between voidness and voidability, between fundamental mistake and incidental deceit, is a very fine one. That a fine and difficult distinction has to be drawn is not neces- sarily any reproach to the law. But need the rights of the parties in a case like this depend on such a distinction? The great virtue of the common law is that it sets out to solve legal problems by the application to them of principles which the ordinary man is expected to recognise as sensible and just; their him a hard result, but as principles they should be within his understanding and merit his approval. But here, contrary to its application in any paricular case may produce what seems to him a hard result, but as principles they should be within his understanding and merit his approval. But here, contrary to its habit, the common law, instead of looking for a principle that is simple and just, rests on theoretical distinctions. Why should the question whether the defendant should or should not pay the plaintiff damages for conversion depend upon voidness or void- ability, and upon inferences to be drawn from a conversation in which the defendant took no part? The true spirit of the common law is to override theoretical distinctions when they stand in the way of doing practical justice. For the doing of justice, the relevant question in this sort of case is not whether the contract was void or voidable, but which of two innocent parties shall suffer for the fraud of a third. The plain answer is that the loss should be divided between them in such proportion as is just in all the circumstances. If it be pure misfortune, the loss should be borne equally; if the fault or imprudence of either party has caused or contributed to the loss, it should be borne by that party in the whole or in the greater part. In saying this, I am suggesting nothing novel, for this sort of observation has often been made. But it is only in comparatively recent times that the idea of giving to a court power to apportion loss has found a place in our law. I have in mind particularly the Law Reform Acts of 1935 1943 and 1945, that dealt respectively with joint tortfeasors, frustrated contracts and contributory negligence. These statutes, which I believe to have worked satisfactorily, show a modern inclination towards a decision based on a just apportionment rather than one given in black or in white accord- ing to the logic of the law. I believe it would be useful if Parlia- ment were now to consider whether or not it is practicable by means of a similar act of law reform to provide for the victims of a fraud a better way of adjusting their mutual loss than that which has grown out of the common law. Appeal dismissed with costs. Leave to appeal to the House of Lords. Solicitors: Gibson & Weldon for B. A. Greenwood & Co., Poole, Dorset; Corbin, Greener & Cook for Charles Ingham Clegg & Crowther, Lytham St. Annes, Lancs. N. P. (QUEEN'S BENCH DIVISION.] FISHER v. BELL. Crime-Offensive weapon--" Offers for sale "--" Flick knife " displayed in shop window with ticket bearing description and price--Whether an offence committed--Restriction of Offensive Weapons Act, 1959 (7 & 8 Eliz. 2, c. 37), s. 1 (1). Statute-Construction--Omission--Interpretation of words used--No power in court to fill in gaps. A shopkeeper displayed in his shop window a knife of the type commonly known as a " flick knife " with a ticket behind it bearing the words " Ejector knife--4s." An information was preferred against him by the police alleging that he had offered the knife for sale contrary to seotion 1 (1) of the Restriction of Offensive Weapons Act 1959, but the justices concluded that no offence had been committed under the section and dismissed the information. On appeal by the prosecutor:-- Held that in the absence of any definition in the Act extending the meaning of " offer for sale," that term must be given the meaning attributed to it in the ordinary law of contract, and as thereunder the display of goods in a shop window with a price ticket attached was merely an invitation to treat and not an offer for sale the acceptance of which constituted a contract, the justices had corrsctly concluded that no offence had bsen committed. Beating v. Homcood (1926) 28 Cox C.C. 198, D.C. and Wiles v. Maddison [1943] W.N. 40; [1945] 1 All E.R. 315, D.C. distinguished. Per Lord Parker C.J. At first sight it seems absurd that knives of this sort cannot be manufactured, sold, hired, lent or given, but can apparently be displayed in shop windows; but even if this is a casus omissus it is not for the court to supply the omission. CASE STATED by Bristol justices. On December 14, 1959, an information was preferred by Chief Inspector George Fisher, of the Bristol Constabulary, against James Charles Bell, the defendant alleging that the defendant, on October 26 1959, at his premises in The Arcade, Broadmead Bristol, unlawfully did offer for sale a knife which had a blade which opened automatically by hand pressure applied to a device attached to the handle of the knife (commonly referred to as a " flick knife ") contrary to section 1 of the Restriction of Offensive Weapons Act, 1959. The justices heard the information on February 3, 1960, and found the following facts: The defendant was the occupier of a shop and premises situate at 15-16, The Arcade, Broadmead, at which premises he carried on business of a retail shopkeeper trading under the name of Bell's Music Shop. At 3.15 p.m. on October 26, 1959, Police Constable John Kingston saw dis- played in the window of the shop amongst other articles a knife, behind which was a ticket upon which the words " Ejector " knife--4s." were printed. The words referred to the knife in question. The police constable entered the shop, saw the defendant, and said he had reason to believe it was a flick knife displayed in the shop window. He asked if he might examine the knife. The defendant removed the knife from the window and said he had had other policemen in there about the knives. The constable examined the knife and pursuant to the invita- tion of the defendant took it away from the premises for examination by a superintendent of police. Later the same day he returned to the defendant's premises and informed him that in his opinion the knife was a flick nife. The defendant said " Why do manufacturers still bring them round for us to sell? " The constable informed the defendant that he would be reported for offering for sale a flick knife and the defendant replied " Fair " enough. " It was contended by the prosecutor that the defendant by his actions in displaying the knife in the window with the ticket behind it and referring to it, such actions being carried out with the object of attracting the attention of a buyer of such knife and selling the same to such buyer, had on the day in question offered the knife for sale within the meaning of the Restriction of Offensive Weapons Act, 1959. It was contended by the defendant that on the facts he at no time offered the knife for sale within the meaning of the Act. The justices were of opinion that in the absence of a defini- tion in the Act of 1959, the words " offer for sale " ought to be construed as they were in the law of contract, so that, in this instance, the defendant's action was but an invitation to treat, and not a firm offer which needed but a customer's acceptance the information. The prosecutor appealed. J. A. Cox for the prosecutor. P. Chadd for the defendant. The following cases were cited in argument: Keating v. Horwood2; Wiles v. Maddison3 ; Phillips v. Dalziel4; Pharma- ceutical Society of Gt. Britain v. Boots Cash Chemists (Southem) Ltd.5 LORD PARKER C.J. read section 1 (1) of the Restriction of Offensive Weapons Act, 1959, stated the facts and continued: The sole question is whether the exhibition of that knife in the window with the ticket constituted an offer for sale within the statute. I confess that I think most lay people and indeed, I myself when I first read the papers, would be inclined to the view that to say that if a knife was displayed in a window like that with a price attached to it was not offering it for sale was just nonsense. In ordinary language it is there inviting. people to buy it, and it is for sale; but any statute must of course be looked at in the light of the general law of the country. Parlia- ment in its wisdom in passing an Act must be taken to know the general law. It is perfectly clear that according to the ordinary 2 (1926) 28 Cox C.C. 198, D.C. 5 [1953] 1 Q.B. 401; [1953] 2 3 [1943] W.N. 40; 1943] 1 All W.L.R. 427; [1953] 1 All E.R. 482, E.R. 315, D.C C.A. 4 [1948] W.N. 429; 64 T.L.R. 623; [1948] 2 All E.R. 810, D.C. Vol 3 law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract- That is clearly the general law of the country. Not only is that so, but it is to be observed that in many statutes and orders which prohibit selling and offering for sale of goods it is very common when it is so desired to insert the words " offering or " exposing for sale," " exposing for sale " being clearly words which would cover the display of goods in a shop window. Not only that, but it appears that under several statutes--we have been referred in particular to the Prices of Goods Act, 1939, and the Goods and Services (Price Control) Act, 1941--Parlia- ment, when it desires to enlarge the ordinary meaning of those words, includes a definition section enlarging the ordinary mean- ing of " offer for sale " to cover other matters including, be it observed, exposure of goods for sale with the price attached. In those circumstances I am driven to the conclusion, though I confess reluctantly, that no offence was here committed. At first sight it sounds absurd that knives of this sort cannot be manufactured, sold, hired, lent, or given, but apparently they can be displayed in shop windows ; but even if this--and I am by no means saying it is--is a casus omissus it is not for this court to supply the omission. I am mindful of the strong words of Lord Simonds in Magor and St. Mellons Rural District Council v. Newport Corporation.(1) In that case one of the Lords Justices in the Court of Appeal(2) had, in effect, said that the court having discovered the supposed intention of Parliament must proceed to fill in the gaps--what the Legislature has not written the court must write--and in answer to that contention Lord Simonds in his speech said(3): " It appears to me to be a naked usurpa- " tion of the legislative function under the thin disguise of " interpretation. " Approaching this matter apart from authority, I find it quite impossible to say that an exhibition of goods in a shop window is itself an offer for sale. We were, however, referred to several cases, one of which is Keating v. Horwood (4) a decision of this court. There, a baker's van was being driven on its rounds. There was bread in it that had been ordered and bread in it that was for sale, and it was found that that bread was under weight contrary to the Sale of Food Order, 1921. That order was an order of the sort to which I have referred already which pro- hibited the offering or exposing for sale. In giving his judgement, " the facts there were, (1) an offering, and (2) an exposure, for " sale. In my opinion, there were both." Avory J. siad (6): "I 1 [1952] A.C. 189; [1951] 2 3 [1952] A.C. 189, 191. T.L.R. 935; [1951] 2 All E.R. 839, 4 (1926) 28 Cox C.C. 198, D.C. H.L. 5 Ibid. 201. 2 [1950] 2 All E.R. 1226, 1236, 6 Ibid. C.A. " agree and have nothing to add- " Shearman J., however, said7. " I am of the same opinion. I am quite clear that this " bread was exposed for sale, but have some doubt whether it " can be said to have been offered for sale until a particular " loaf was tendered to a particular customer." There are three matters to observe on that case. The first is that the order plainly contained the words " expose for sale," and on any view there was an exposing for sale. Therefore the question whether there was an offer for sale was unnecessary for decision. Secondly, the principles of general contract law were never referred to, and thirdly albeit all part of the second ground, the respondent was not represented and there was in fact no argument. I cannot take that as an authority for the proposi- tion that the display here in a shop window was an offer for sale. The other case to which I should refer is Wiles v. Maddi- son.8 I find it unnecessary to go through the facts of that case, which was a very different case and where all that wss proved was an intention to commit an offence the next day, but in the course of his judgment Viscount Caldecote C.J. said9: " A " person might, for instance, be convicted of making an offer " an article of food at too high a price by putting it in his shop " window to be sold at an excessive price, although there would " be no evidence of anybody having passed the shop window or " having seen the offer or the exposure of the article for salQ at " that price." Again, be it observed, that was a case where under the Meat (Maximum Retail Prices) Order, 1940, the words were " No person shall sell or offer or expose for sale or buy or " offer to buy." Although the Lord Chief Justice does refer to the making of an offer by putting it in the shop window, before the sentence is closed he has in fact turned the phrase to one of exposing the article. I cannot get any assistance in favour of the prosecutor from that passage. Accordingly I have come to the conclusion in this case that the justices were right, and this appeal must be dismissed- ASHWORTH J. I also agree. ELWES J. I also agree. Appeal dismissed with costs Solicitors: Robins, Hay & Waters for T. J. Urwin, Town Clerk, Bristol; Haslewoods for Cooke, Painter, Spofforth & Co., Bristol. E. M. W. 7 28 Cox C.C. 198, 201 9 [1943] 1 All E.R. 315, 317. 8 [1943] W.N. 40; [1943] 1 All E.R. 315, D.C. 7 28 Cox C.C. 198 201. 9 [1943] 1 All E.R. 315, 317. 8 [1943] W.N. 40; [1943] 1 All * SPELLMAN v. SPELLMAN. [No. of application 93177.] Husband and Wife--Act of 1882, s. 17--Hire-purchase--Moneys paid- Car acquired on hire-purchase-Whether a gift to wife--Registration book in wife's name--Whether intention to create legal relationships --Whether wife has any rights in car or in hire-purchase agreement --Whether jurisdiction to award compensation--Married Women's Property Act, 1882 (45 & 46 Vict. c. 75), s. 17 Matrimonial Causes (Property and Maintenance) Act, 1958 (6 & 7 Eliz. 2, c. 35), s. 7. Contract-Formation--Intention to create legal relationship--Husband and wife--Hire-purchase by husband of car for wife--Registered in her name. Hire-purchase--Hire-purchase agreement--Covenant not to assign bene- fit--Equitable assignment by husband to wife-Whether breach. A husband and wife, whose marriage was unhappy, hoped that the acquisition of a car would improve their relationship. After discussion the husband promised the wife to buy her a car, and he entered into a hire-purchase agreement in rsepect of a car, which was duly delivered to the matrimonial home. The wife, on seeing the car, asked her husband if that was the car he had bought for her, and he replied that it was. The rsgistration book was put in the wife's name, the wife did not use the car at the time because she did not know how to drive it, and because she was driving another car which suited her purpose. She, however, intended to drive the car in due course. The husband had paid a deposit under the hire-purchase aagreement, and he was required to pay the balance of the hire-purchase price by monthly instal- ments over a period of two years. There were prohibitions in the agreement against his parting with the possession of the car, and against assigning the hire-purchase agreement or the benfit thersof. Shortly after the acquisition of the car, the husband left the matrimonial home taking the car with him. The wife, how- ever, had obtained the registration book and she retained possession of it. On an application under section 17 of the Married Women's Property Act, 18821 as amended by section 7 of the Matrimonial Causes (Property and Maintenance) Act, 1958, to determine the rights of the parties in respect of the car and of the hire-purchase agreement :-- Held, (1) that the arrangement about the car was purely a domestic arrangement not intended to create legal relationships, and, accordingly, could give rise to no rights in the car or in the hire-purchase agreement for the benefit of the wife (post, pp. 926, 927). Balfour v. Balfour [1919] 2 K.B. 571 ; 35 T.L.R. 609, C.A. applied. (2) That there was jurisdiction under the Act of 1882 to deter- mine the title to the rights umder the hire-purchase agreement, for being choses in action they were a species of property (post, p. 926). In re Turcan (1888) 40 Ch.D. 5, C.A. applied. (3) That, even if the wife had any rights, there was no power under the Act of 1958 to order the husband to pay over to the wife as compensation for not obtaining the car the moneys that he had paid under the agreement (post, pp. 926, 927). Per Danckwerts L.J. The husband might have made an equit- able assignment of his rights under the agreement, notwithstanding the prohibition in the agreement against assignment (post, p. 925). Per Willmer L.J. I am not persuaded that it is possible to overlook the specific provision of the agreement whereby the husband has covenanted not to assign or charge the goods or the benefit of the agreement (poet, p. 928). ln re Turcan (supra) considered. APPEAL from Judge Ingress Bell, sitting at Willesden County The following statement of facts is taken substantially from the judgment of Danckwerts L.J. The parties to these pro- ceedings, the applicant, Michael Spellman, hereinafter called " the " husband," and the respondent, Eunice Spellman, hereinafter called " the wife," were married on March 24, 1957, and there was one child of the marriage. Relations between the husband and the wife became apparently less happy than it was hoped they would be, snd matters were in rather a serious state in the early part of 1960. There had been a separation some months pre- viously, but cohabitation had been resumed between husband and wife. The husband had a Ford Zephyr car, which the wife had been accustomed to drive. There was some idea that the pur- chase of another car which the husband promised to buy for the wife, might bring the parties together and improve their relation- ship, perhaps in the same manner as it is often suggested that the birth of a child might effect a similar result. The purchase of a motor-car was discussed and the evidence seemed to estab- lish that it was agreed between them that a car should be bought. The colour was chosen, red, and the car, an Austin-Healey Sprite, was acquired, It was delivered to the matrimonial home by the agent or car dealer; the wife saw it through the window and asked whether that was the car which the husband had bought for her and he said that it was. The car registration book or log book, as it is sometimes called, was put in the name of the wife, and this was done by the husband for reasons which were not entirely plain, but which might possibly have had something to do with the question of insurance. The parties again fell out and the husbsnd left his wife, taking the car with him. The wife, however, had obtained the car registration book and she retained it. The wife in fact had never driven the car because apparently it had a kind of gear change with a gear lever to which she was not accustomed. She was in fact at the time driving. the Ford Zephyr car, which for the time being suited her purpose, but the intention undoubtedly was that the wife should be taught to drive the Austin- Healey in course of time. The parties ultimately separated some three weeks after the acquisition of the car. The husband ac- quired the car on hire purchase under the terms of a hire- purchase agreement. The husband imtiated proceedings under section 17 of the Married Women's Property Act, 1882. He claimed that he was entitled to the benefit of a hire-purchase agreement in respect of the Austin-Healey car, and he originally sought an order: " that the respondent [the wife] be compelled to do all things " necessary to transfer the said agreement to his name, and " that it be declared forthwith that the respondent holds the said " motor-car on trust for the applicant [the husband] and to " convey to the applicant as soon as is legally possible." The husbsnd's claim was later amended to seeking a declaration that he did not hold the benefit of the hire-purchase agreement in trust for the wife, and an order that she retum the registration book to him. The wife, on the other hsnd, originally claimed that the motor-car was a gift from her husband to herself and she denied that there was any understanding at any time that she held the car on trust for her husband. The claim was later amended to seeking a declaration that he held his interest in the car and the benefit of the hire-purchase agreement in trust for her and an order that he give her possession of the car. The judge held that the wife had no rights or interest in the car or in the hire-purchase agreements and he made a declaration that the husband did not hold the benefit of the agreement in trust for the wife, and an order that she return the registration book to him. The wife appealed. Margaret Puxon for the wife. Neil Taylor for the husband. The following cases were cited in argument, in addition to those referred to in the judgments : In re Lind, Industrial Finance Syndicate v. Lind (2); Bishopsgate Motor Finance Corporation Ltd. v. Transport Brakes Ltd.(3); Shephard v. Cartwright (4); Tasker v. Tasker (5); Tunstall v. Tunstall; United Dominions Trust (Com- mercial) Ltd. v. Parkway Motors Ltd(7); In re Freelands; Cobb v. Cobb (9) ; Jefferys v. Jefferys (10); Short v. Short (11); In re Camkins Questions (12); Gascoigne v. Gascoigne (13) ; Central London Property Trust Ltd. v. High Trees house Ltd.(14) ORMEROD L.J. I will ask Danckwerts L.J. to deliver the first judgment. DANCKWERTS L.J. This is a case which has raised some interesting points and may, perhaps, be said to illustrate the complexities caused by modern life and the practice of obtaining property on hire-purchase. [His Lordship stated the facts set out above and continued : ] I think it is probable that the parties originally had no conception of the position of the motor-car except that of an ordinary gift of a motor-car, a chattel, from the husband to the wife. But it turned out that it was the subject of a hire-purchase agreement dated May 19, 1960, and that was really a fatal obstacle to the delivery of the motor-car as a gift in the ordinary way. The hire-purchases agreement was in the usual form in which such things are drawn up and the property in the motor-car was in the hire-purchase company and not in the husband at all. Consequently, it was impossible for him to make a delivery of what he did not own. Furthermore there was the complication added by the provisions contained in this, as I believe in most hire-purchase agreements in connection with motor-cars. There was an obligation to make further payments. I think about #300 had been paid altogether in respect of the motor-car (including #200 as a deposit) and there were instal- ments to be paid which would last for a matter of two years and then, and not until then, there was an option which could be exercised by the hirer with whom the hire-purchase agreement had been made to purchase the car by the payment of #1. There were provisions that the car should kept in repair, that the hirer should pay the rent in respect of the premises where the car was kept, there was a provision against assignment of the hire- purchase agreement or the benefit thereof, and there was a pro- hibition against the hirer parting with possession. All those complications obviously made it very difficult to effect a simple gift of the car by a man to his wife. It appears from his note that the judge came to the conclusion that the husband had the idea of maling a gift of the car to his wife, but the conclusion of the judge was that it was impossible in the circumstances, and no gift could be made until the husband hsd acquired the car by the final payment. Of course, on that view of the matter, it is impossible to sustain the wife's claim based upon the theory of a gift of the car, but it did appear to me at one time that possibly there might be something in the nature of an equitable assignment of the vsrious rights which were owned by the husband under the hire-purchase agreement. That would be a chose in action, as it appears to me, and it would be the subject of an equitable assignment, which would not require to be in writing, nor, if it was done in an effective manner, would it require consideration, and that position has been discussed in the arguments. It is plain, also, that the fact that there is a prohibition in the document creating the chose in action against assignment is not necessarily fatal to such a claimn: see In re Turcan.1 It is possible, as it seems to me, that if such an equitable assigment had been made, there could have been (as between husband wife) an assignment of the benefit of the hire- purchase agreement with, perhaps the obligation to indemnify the husband against the various liabilities which have to be carried out in order to comply with the terms of the hire-purchase agreement. That is the position, and I do not think it is necessary really to consider the matter in great detail, because I have been com- pelled to come to the conclusion that it is impossible to spell out any equitable assignment in the circumstances of the case. It is perfectly true that no form of words is required for the purpose of making an equitable assignment as long as the intention can be fairly collected from what was said between the parties, or even from a course of conduct. The facts as found by the judge seem to me to be insufficient to reach that conclusion. It is perfectly true that the fact that the wife's name was put in the log book is some evidence of an intention to convey the ownership of the car to the wife, but it is not, it seems to me, sufficient for the purposes of the transfer of equitable rights which could be required by an equitable assignment. The judge said that he thought the husband might have said: " I have bought it for her " use and intend in due course to give it to her," and in the 1 (1888) 40 Ch.D. 5, C.A. course of his judgment he said it was not a declaration of trust. As regards that point it seems to me that the conclusion of the judge was clearly right. If there was an intention to execute an equit- able assignment or to make a gift, in either of those cases the matter involves a transfer, and if it is not done in a way which satisfies the law and equity, then one cannot translate what has in fact been attempted into something else, that is to say, a v Lord (2) and a long series of later cases have clearly established that principle. It seems to me, in the first place, that it is not possible to find sufficient words or evidence of intention to create the necessary equitable assignment in the present case. The other matter which brings me to the conclusion that the wife is not entitled to relief in the present case is the principle which has been discussed in such cases as Balfour v. Balfour.(3) It seems to me that the proper conclusion on all the evidence in the present case is that there was not any intention to create legal relations, but merely an informal dealing with the matter between the husband and wife, which is common in daily life, and which does not result in some legal transaction but is merely a matter of convenience. Consequently, it seems to me that this point is also fatal to the claim of the wife in the present case. There are two other matters which I think I must mention. One is that it was contended on behalf of the husband in the present case that the question of whether the wife had a right by means of an equitable assignment to the chose in action repre- sented by the hire-purchase agreement is not a proper subject of proceedings under section 17 of the Married Women's Property Act, 1882. That point, it seems to me, is entirely misconceived and one which it is difficult for the husband to sustain considering that he was responsible for the initiation of the proceedings. It is quite plain that a chose in action is a species of property; that is clear from In re Turcan (4) to which I have referred and if it is a species of property, then questions as to the title to that property are properly raised by a summons under section 17 of the Act of 1882 between husband and wife. The other matter is a point which was taken on behalf of the wife, which I really found very difficult to understand. Mrs. Puxon, on behalf of the wife, invoked the Matrimonial Causes (Property snd Maintenance) Act, 1958, the amending Act, and contended that the provisions of section 7 of that Act enabled the court to direct some payment to be made to the wife in respect of the car--I gather as compensation for not obtaining the car. Apart from all the other difficulties in the case, it seems to me that section 7 of the Act of 1958 has no relevance to the present case at all, and it would be quite impossible to 2 (1862) 4 De G.F. & J. 264; 45 3 [1919] 2 K.B. 571; 35 T.L.R. E.R. 1185. 609, C.A. 4 40 Ch.D. 5. make an order that the husband should pay over moneys which had been paid as part of the purchase price of the car in the course of its acquisition in accordance with the terms of the hire- purchase agreement. It seems to me that that argument is quite impossible to sustain- The result then, as it seems to me, is that the judge, as far as the contention of a gift was concerned, reached the right con- clusion, that there was no trust of any sort declared by the husband, and that the declaration that the husband does not hold the benefit of a hire-purchase agreement dated May 19, 1960, in trust for the wife is entirely correct. The other matter concerns the question of registration and the log book. As regards that, of course, it was by the husbands' own act that the car was put in the name of the wife. The registra- tion book was sent to her apparently by post or delivered possibly by hand, I do not know, and she actually acquired it by finding it in the husband's wardrobe, but those are merely incidental circumstances. I felt some doubt at one time whether it was right to take away from the wife that which had been delivered to her through the act of the husband, but on the whole I have come to the conclusion that it was correct for the judge to direct that she should deliver up to the husband the log book with all necessary signatures (if any were needed), because it is plain on the conclusions I have already reached that the wife has no ownership or rights in respect of the car, however unfoffrtunate that may be from her point of view; and that being so, it seems to me that it would not be proper to leave the wife in possession of a document which is really of no use to her except for its nuisance value, and which is really part of the documents con- cerned with the car, and which should be held by the husband, who has the right to acquire the car--one cannot call him the owner at present--in accordance with the terms of the hire- purchase agreement. Accordingly, it seems to me that the appeal must be dismissed. ORMROD L.J. I am in full agreement with the views expressed by Danckwerts L.J., and there is nothing I wish to add. WILLMER L.J. I also agree, but in doing so I should like to make it clear, that for my part I have found this a difficult case. In the end, however, I have come to the conclusion that it really falls to be decided on the ground already stated by my Lord, namely, that the arrangement made by the parties falls within the principle enunciated in Balfour v. Belfour; that is to say, it was not intended to create legal relationships. I have said that I have found the case difficult; but the difficulties, I think, are largely of the appellant wife's own 5 [1919] 2 K.B. 571. making. The main difficulty to my mind, oddly enough, lies in ascertaining what is the property, the title to which, or the possession of which, is in question between the parties in the present case. As to that, it has always been the husband's case that the property in question is the car. He has throughout claimed to be entitled to possession of the car. This was also the wife's case to start with; and I may perhaps be permitted to refer to the notice of appeal, which asks " that the applicant," that is the husband, " be ordered to deliver up possession of the " said motor-car to the respondent and to assign to her the " benefits of the said hire-purchase agreement." But there has been a complete change round in the wife's case in the course of the argument. It is no longer suggested on behalf of the wife that she is entitled to possession of the motor-car; so far from our being asked to make an order requiring the husband to assign to her the benefit of the hire-purchase agreement, we have now been faced with the argument that, as a result of what took place in May, 1960, there has already been an equitable assignment of the benefit of the hire-purchase agreement. That has rather com- plicated the appeal; for, if it be right, the property in question is not the car, but the benefit of the hire-purchase agreement. If, when properly looked at, the property in question in this case is the car, then I think plainly the answer must be in favour of the husband. There could no question as to the title to the car, which for the next year or two must remain in the hire- purchase company. But the right to possession of the car must clearly be with the husband; and it would be quite impossible for this court to make an order to the contrary, because such an order would, in effect, require the husband to break his contract with the hire-purchase company. The same difficulty arises, I think, on the alternative sugges- tion put forward by Mrs. Puxon, that the husband holds the car in some. way in trust for the wife. It was when Mrs. Puxon started running into difficulties on this aspect of the case that Danckwerts L.J., if I may respectfully say so, came to the rescue by suggesting the possibility that her case might be put on the basis that the events of May, 1960, amounted in effect to an equitable assignment of the benefit of the hire-purchase agree- ment. My Lord has already dealt with the difficulties of that view, and I share his difficulties. For myself, I am not persuaded that it is possible to overlook the specific provision of the agree ment whereby the hirer, that is the husband, has covenanted that he will not assign or charge the goods or the benefit of the agreement. Giving all due weight to the decision in In re Tur- can, to which we have been referred, it does seem to me that, if we were to make a declaration such as Mrs. Puxon finally asked for, it would amount in effect to a declaration that the husband was in fact in breach of his agreement, in that he had purported 6 40 Ch.D. 5. to assign the benefit of the agreement. Moreover, I think, there are difficulties in fitting the known facts into this conception of an equitable assignment. The principal fact relied on, namely, the promise to buy the motor-car as some sort of security for the resumed cohabitation which was in contemplation, preceded the actual acquisition of the car; it certainly preceded the making of the hire-purchase agreement, and I find difficulty in conceiving of an equitable assignment of something which has not yet been called into evidence. The main reason, however, why I think the argument fails is that which I mentioned at the beginning of this judgment, namely, that fairly looked at, what took place in May, 1960, was something which was never intended to create legal relationships at all. With regard to the alternative money claim, I only desire to say that I share the difficulty of Danckwerts L.J. in understanding exactly what the argument was. It does not seem to me that section 7 of the Act of 1958 is of any relevance to the circum- stances of the present case. For these reasons, therefore, in addition to those which my Lord has already advanced, I agree that the appeal should be dismissed. Appeal dismissed with costs, No taxation of costs by the respon- dent without further order. Taxation under the Legal Aid and Advice Act, 1949, for the appellant. Solicitors: Willis & Willis; John Morris Wilks & Co. N. P. [COURT OF APPEAL] * FINANCINGS LTD. v. STIMSON. [Plaint No. R. 3594.] Hire-purchase--Hire-purchase agreement--Agent, whether dealer--Offer to purchase on hire-purchase terms--Whether dealer agent to receive revocation of hirer's offer. Contract--Formation--Offer and acceptance--Offer to purchase motor- car under hire-purchase agreement--Motor-car damaged before offer accepted--Whether offer capable of acceptance. On March 16, 1961, the hirer paid a deposit of #70 to a dealer and signed a form of hire-purchase agreement to purchase a motor- car from the plaintiff finance company for #414. That agreement was produced by the dealer with the authority of the finance com- pany. The agreement stated that it should beoome binding on the finance company only upon acceptance by signature on behalf of the finance company. In fact the finance company did not sign the agreement until March 25. In the meantime the hirer had, on March 18, asked the dealer if he could take the motor-car away. The dealer, after obtaining the authority of the finance company on the telephone, gave him permission to do so. The hirer returned the motor-car to the dealer on March 20 stating that he did not wish that time both the dealer and the hirer thought that the finance company had signed the agrsement. On the night of March 24/25 the dealer's premises were broken into and the motor-car the subject of the agreement, was stolen, and when it was reoovered it was found to be damaged. The finance company sought to recover the price of the motor-car from the hirer, allowance being made for the sum of #224 recovered on its sale:- Held, (1) Lord Denning M.R. and Donovan L.J. (Pearson L.J. dissenting) that on the facts of the case the dealer had ostensible authority to receive the hirer's revocation of his offer to purchase the motor-car, and the hirer's offer was revoked on March 20, and there was, accordingly, no concluded contract for the purchase of the motor-car (post, pp. 1188; 1190). Campbell Discount Co. Ltd. v. Gall [1961] 1 Q.B. 431; [1961] 2 W.L.R. 514; [1961] 2 All E.R. 104, C.A. distinguished. (2) That the offer made by the hirer was conditional on the motor-car remaining in substantially the same condition as it was in the motor-car had suffersd before the hirsr's offer was accepted by the finance company, that company was not in a position to accept the offer because the condition on which it was made had not been fulfilled and, accordingly, there was no contract (post, pp. 1189, 1190, 1193 1194). paid as a deposit and the sum so received on its sale. The hirer counterclaimed for the return of the #70 he had paid. The countu court judge gave judgment for the hirer, holding that it was an implied term of the agreemtn that either party might withdraw between the making of his offer by the hirer and its acceptance by the finance company if some substantial change occurred in the condition of the vehicle. Accordingly, the hirer was entitled to withdraw from the bargain. He further ordered that the hirer should recover on his counterclaim #70. The finance company appealed. The facts are more fully stated in the judgment of Lord Denning M.R. Alan Rawley for the finance company. Quintin Iwi for the hirer. The following cases, which are not mentioned in the judgments, were referred to in argument: Lowe v. Lombank Ltd.(1); Ridgway v. Wharton.(2) LORD DENNING M.R. Anthony George Stimson, the defen- dant, saw an Austin motor-car on the premises of the Stanmore Motor Co. advertised for sale at #350. On March 16, 1961, he signed a hire-purchase agreement form which was produced by only an offer by the hirer to enter into a hire-purchase agreement with the plaintiffs, a company called Financings Ltd. I need not go into all the details except to say at once that there was a clause m it which made it clear that " this agreement shall " become binding on the owner," that is on the plaintiffs, the finance company, " only upon acceptance by signature on behalf " of the owner and the hiring shall be deemed to commence on such date of acceptance." Now, to go at once almost to the end of the story, the finance company did not sign the acceptance until the date which they put upon it, on March 25, 1961. The interval of time between the signing of the offer on March 16 and the purported acceptance on March 25 is most important because much happened in between. The hirer was not allowed to take the car away on March 16 even though he had signed the form. The reason was because he had not then got the required insurance cover for it. He produced the ordinary third-party insurance cover. This was not satisfac- tory because comprehensive cover was required. But on Saturday, March 18, the hirer produced a comprehensive cover note to the Stanmore Motor Co., who telephoned the finance company and got their assent. The hirer paid the first instalment of #70 on the car and he was allowed to take it away. No doubt both the hirer and the finance company thought at that time that an 1 [1960] 1 W.L.R. 195; [1960] 2 (1857) 6 H.L.Cas. 238, H.L. 1 All E.R. 611, C.A. agreement had been concluded, but in got it had not. Certainly a hire-purchase agreement had not been concluded because, as I have said, on its wording, it depended on a signature which did not take place until a week later. The hirer had the car on the Saturday and drove it on the Sunday. He was not satisfied at all with its condition and performance. In the result on Monday, March 20, the hirer was so dissatisfied with it that he returned it to the Stanmore Motor Co. He saw the manager and proprietor, Mr. Cousins Walker, and explained that he did not went the car after all, and in order to settle the matter he offered to forfeit the #70 he had paid. It is not altogether clear what Mr. Cousins Walker said to him, but it seems that he told him that the Stan- more Motor Co. would get in touch with the finance company and let him know the outcome. Also I think it was suggested that the hirer should get in touch with the finance company himself. However, by some oversight, the Stanmore Motor Co. did not get in touch with the finance company; nor did the hirer. Neverthe- less he thought that, having returned the car, he had no longer any responsibility for it. Accordingly on Thursday, March 23, he cancelled the insurance cover note. Then the critical event happened. On the night of March 24/25 the Stanmore Motor Company's premises were broken into and the car was stolen. In the course of the theft the car was badly scratched and damaged. When it was recovered it was obviously not worth the same money as it was before. The car having been recovered, the finance company were told about it. They had the car back and sold it by auction and got, I think, some #240 for it. Now they claim in this action damages from the hirer. They say that he defaulted under the hire-purchase agreement which he signed. Alternatively, by an amendment they seek to claim damages against him as a bailee upon the terms of that hire- purchase agreement. Such is the outline of the facts. I need not at the moment go into the question of the condition and roadworthiness of the car, because it seems to me that the crucial matter in the case is whether there was ever a binding agreement between the hirer and the finance company. The document which he signed on March 16 was only an offer. Before it was accepted, he returned the car to the dealer and made it clear that he did uot want it any more. Was that a revocation of the offer? To my mind that was a clear revocation. provided that it was made to a person having authority to receive it. But was the dealer a person authorised to receive the revocation? Was he the agent of the finance company for the purpose? It was urged before the county court judge, on the authority of the case in this court of Campbell Discount Co. Ltd. v. Gall1 that the dealer is not the agent of the finance company; and the county court judge, to his regret, felt that he was bound to hold 1 [1961] 1 Q.B. 431; [1961] 2 W.L.R. 514; [1961] 2 All E.R. 104, C.A. that there was insufficient evidence to show that the dealer was the agent of the finance compamy for the purpose of receiving back the motor-car. I take a different view. I look upon Camp- bell Discount Co. Ltd. v. Gall as being a very special case on its own facts. It seems to me that in this transaction before us, as indeed in most of these hire-purchase transactions, the dealer is for many purposes the agent of the finance company. Mr. Iwi, in his argument, pointed out a number of matters in which it cannot be denied that the dealer is the agent of the finance company. The dealer holds the necessary forms; he hands them over to the hirer to sign; he forwards them to the finance com- pany; he receives the deposit as agent for the finance company; he receives from the finance compamy information that they are willing to accept the transaction; and he is authorised to pass on that communication to the hirer. He was im this very case the agent on behalf of the finance company to see that the insurance cover was all in proper order. He rejected the first cover which was offered and accepted the comprehensive cover which he said was satisfactory. Most important of all, he was the agent of the finance company to hand over the motor-car to the hirer. It seems to me that, if we take, as we should, a realistic view of the position, the dealer is in many respects and for many purposes the agent of the finance company. I am aware, of course, that finance companies often put clauses into their forms in which they say the dealer is not their agent. But these clauses are often not worth the paper they are written on. Nobody can make an asser- tion of that kind in an agreement so as to bind the courts, if it is contrary to the facts of the case. We all know that people often try to put clauses in a tenancy agreement so as to say it is a licence and not a tenancy; but the courts take no notice of it if it is contrary to the truth. So also if they put into one of these agreements a clause that the dealer is not their agent, it does not bind the courts if he is in fact their agent. In this case we are not troubled by any such clause: for there is none. And on the facts of this case I am clearly of opinion that the dealer was ostensibly authorised to receive communications on behalf of the finance company. Just as he was authorised to deliver the car to the hirer in the first place, so he was ostensibly authorised to receive it back when it was returned. Just as he was authorised to receive the offer for the finsnce company, so also he was ostensibly authorised to receive the revocation : snd to receive the communication that the hirer had no further use for the car. I am aware that the hirer did not in terms revoke the offer, for the simple reason that he thought the agreement wss con- cluded. But he made it clesr that he did not wish to proceed with the matter and that is all that was necessary. In my judg- ment, therefore, the offer was revoked on March 20 end there was, for this reason, no concluded contract. 1 [1961] 1 Q.B. 431. Even if I am wrong on that point, there is the second point to be considered which appealed to the county court judge. He said : when this offer was made, it was made on the basis that the car was in good condition, or at all events in the condition in which the hirer had seen it, but before the offer was accepted (it was accepted on March 25) on the night of March 24/25 it suffered this extra damage which cost #44 to repair, having been scratched and dented by the thieves who stole it. Can a man accept an offer when the condition of the goods has deteriorated in a material respect since the date of the offer? It seems to me that, on the facts of this case, the offer made by the hirer was a conditional offer. It was conditional on the car remaining in substantially the same condition until the moment of acceptance. Take the case put by my brother Donovan in the course of the argument: suppose an offer is made to buy a Rolls Royce car at a high price on one day and before it is accepted, it suffers the next day severe damage. Can it be accepted and the offeror bound? My answer to that is : ' no, because the offer is conditional on the goods at the moment of acceptance remaining in substantially the same condition as at the time of the offer.' Mr. Rawley argued before us that there was an express clause here saying that the goods were to be " at the risk of the hirer " from the time of purchase by the owner. " The time of purchase by the owner, he said, was March 18, when the finance company told the dealer orally that they accepted the transaction. Thence- forward, he said, the goods were at the risk of the hirer. This shows, says Mr. Rawley, that the condition which I have sug- gested is inconsistent with the express terms, or, at all events, is not to be imlied. In my judgment, however, this clause on which Mr. Rawley relies only comes into operation when a con- tract is concluded and accepted. Meanwhile the offer is made on the understanding that, so long as it remans an offer, it is condi- tional on the goods being in substantially the same condition as at the time when the offer was made. I agree, therefore, with the county court judge in thinking that, in view of the damage which occurred to this car before the acceptance was given, the finance company were not in a position to accept the offer, because the condition on which it was made had not been fulfilled. So on that ground also there was no contract. In these circumstances there is no need for me to go into the other points which were raised in the course of the argument as to the roadworthiness of the car or into the question of damages. But as to the amendment which was put in by Mr. Rawley in this court suggesting that this was a bailment on the terms of the hire-purchase agreement, I would only say that if the hire- purchase agreement was never concluded, I cannot think that there was a bailment on the terms of it. I would, therefore, dismiss this appeal. DONOVAN L.J. The dealer in this case was clearly the finance company's agent to do a variety of things: to receive an offer of hire-purchase; to tell the proposed hire-purchaser that the finance company would accept the business, to ensure that the compre- hensive insurance was effected by the proposed hire purchaser; and thereafter to deliver the car to him. In the written hire- purchase form of agreement there was no clause negativing agency between the finance company and the dealer. In these circumstances authority to receive a notice of revocation of the hire-purchase offer was, in my opmion, within the dealers authority as ostensible agent for the finance company, and on this point I entirely agree with what has been said by the Master of the Rolls. Then was a notice of revocation given before the offer was accepted? That acceptance must be taken to have taken place not earlier than March 25, 1961. Before then, namely, on March 20, the proposed hire-purchaser had taken the car back to the dealer, told hun he did not want to go on with the transaction and offered to forfeit his deposit. The dealer said words to the effect that he would get in touch with the finance company to see what could be arranged, and told the proposed hire purchaser that he himself should communicate with the finance company also, which the proposed hire purchaser did not do. Clesrly both parties were under the impression that what was in view was the rescission of an existuig concluded contract, whereas at this moment there was no contract at all. But it is conceded, and I think rightly so, that if an offeror makes it clear that he does not want to go on with the transaction, it is properly treated as a revocation of his offer, notwithstanding that the words used would be more appropriate to a case of rescission. Thus one reaches the stage that an offer here has been revoked before agent of the offeree. There is thus an end of the matter in favour of the hirer. But if this view be wrong I would agree that the oger here was on the basis that the car remained substantially in the same condition until acceptance, and this did not happen. I do not regard clause 2 of the terms of the printed hire-purchase agree- ment as incorporated in the offer. Who would offer to purchase a car on terms that if it were severely damaged before the offer was accepted, he, the offeror, would pay the bill? The sugges- tion seems to me to be quite unreal. I think that the offer is conditioned, in a case where the documents sre in the form which they take here, by the clause which the offeror signs to the effect that he has examined the goods and satisfied himself that they are in good order and condition. What is the point of this provi- sion if, before acceptsnce, the goods are heavily damaged but nevertheless the offeror can still be compelled to buy them. The county court judge held that there must, therefore, be implied a term that until acceptance the goods would remain in sub- stantially the same state as at the date of the offer; and I think this is both good sense and good law. On either of the foregoing grounds, therefore, I think that the appeal fails, though, if I may say so, it could not have been better argued than it was by Mr. Rawley. With regard to the alternative argument which we permitted on receiving Mr. Rawley's amendment to his pleading, to the effect that there was a separate oral contract on March 18 when the car was delivered in advance of the expected hire-purchase agreement, such oral contract embodying practically all the terms of the proposed hire-purchase agreement, I agree with the con- tention of the hirer that on the facts this argument cannot be sustained. I think that all that happened was that the proposed hire purchaser was allowed to possess the car in advance of the contract. He thereby became a bailee but the bailment ceased on March 20 when the car was returned to the dealer whom, as I say, I regard as having ostensible authority to receive it back. PEARSON L.J. This hire-purchase transaction, as unhappily so often happens with hire-purchase transactions, creates com- plicated, artificial and obscure legal relationships between the parties. I am not able, on the point of ostensible authority, to see the position in quite the same way as my brethren have seen it. It is very difficult, in my view, to assess exactly how much authority the dealer has to act, on the one side on behalf of the proposed hire purchaser, and on the other side on behalf of the finance company. There is a complicated relationship, because the dealer has himself his own interest in the transaction and he is a party to the three-cornered arrangements. He is going to sell the car to the finance company, whereupon the finance com- pany will let it out on lure to the hire purchaser. Therefore, it is often very difficult to make sure to what extent the dealer is acting in any one of his three capacities, first, on his own behalf as the proposed seller; secondly, sometimes in some respects as agent for the hire purchaser; and, thirdly, sometimes in some respects as agent for the finance company. Now in this case it was, or must be taken to have been, made clear to the hire purchaser that the dealer was not authorised to conclude the hire-purchase agreement. The form of the hire- purchase agreement was produced to him, and it was plainly set out in condition No. 13 of the proposed hire-purchase agreement: " This agreement shall become binding on the owner only upon " acceptance by signature on behalf of the owner and the hiring " shall be deemed to commence on such date of acceptance." On March 16 the proposed hire purchaser, the defendant, having had time to study these documents came back with his own signature on the front page. He thereby made his offer, and he handed it to the dealer on that day for transmission to the finance company. It was transmitted, and the finance company seem to have received it probably on March 17, or at any rate not later than March 20: almost certainly it must have been about March 17 After a telephone conversation had taken place between the dealer and the finance company, the dealer, obviously with the authority of the finance company, informed the proposed hire purchaser that the proposition was acceptable to the finance company, and possession of the car was given by the dealer to the hire purchaser. At that moment the transaction was not concluded: the agree- ment had not yet been signed by the finance company as owners, and, therefore, there was no hire-purchase agreement in exiatence But some contract has to be inferred from the conduct of the parties. On the one hand the proposed hire purchaser signed and handed in his offer. He had also, at the request of the dealer and for the benefit of the finance company, produced a compre hensive insurance cover to show that the car was going to be properly covered. But at that moment there was only a pre- liminary bailment. There was delivery of the car to the hire purchaser but no hire-purchase agreement had come into force. The expectation was that in a few days' time there would be a signature on behalf of the finance company as owners, which would be an acceptance of the offer and conclude the contract and there would be a hire-purchase agreement. But if for some reason the finance company decided that they would not go on with the transaction, then, the understanding must have been that in such event the motor-car would have to be handed back by the proposed hire purchaser. That is the position on March 18, and I agree one cannot read into the terms of that provisional bailment all the terms of the hire-purchase agreement. That would not be consistent with the evident intention of the parties, which was merely to create a provisional situation in anticipation of the hire-purchase agreement being concluded. It may well be that the dealer had authority and appeared to have authority from the finance compsny to do various things, in particular to hand over the car and to scrutimse the proposed insurance cover to make sure it was a satisfactory comprehensive cover, and it may be that there was authority in other respects as well. But I do not see that it follows from any of the facts of this case that the dealer had authority to receive notice of revoca- tion in the relevant sense, which would not be merely to receive it and transmit it to the finance company on the basis that the dealer would be the authorised and proper channel of communica- tion. The authority would have to go further in the present case. It would have to be said that at the moment when the hire pur- chaser gave notice to the dealer of his desire to revoke the offer, that was automatically at that moment notice to the finance com- pany. In my view that is not a reasonable view of the facts. It is reasonable to say that if the hire purchaser wished to withdraw his offer, it would be right for him to inform the dealer and make the dealer his agent for the purpose of passing on the message. The dealer would be the authorised channel of communication, but it does not follow that the finance company had made the dealer their agent to such an extent that the mere giving of a revocation notice to the dealer would then and there amount to a withdrawal of the offer. It is clear that the dealer was not aufhorised to con- clude the transaction, and, therefore, one may ask: why should he be authorised on his own initiative or by his mere receipt of some notice to undo the transaction? He clearly was not authorised to rescind an agreement if an agreement had been completed, and it does not seem to me to follow from any of the facts that he was acting in such a capacity that information given to him was at once information given to the finance company. That view of the matter is also borne out by the evidence as to what happened on Monday, March 20, when the intending hire purchaser came to the dealer and said in effect: " Here is the " car; I have brought it back; I do not want to go on with the " transaction." What was then said by Mr. Cousins Walker on behalf of the dealer was: " Very well; I will get in touch with " one of the directors of the finance company whom I know and " will see what can be done and I will let you know the outcome," and according to the evidence of Mr. Cousins Walker, which seems to have been accepted by the judge, he also added: " But you, " Mr. Stimson, must also see if you can get in touch with the " finance company and make the necessary arrangements your- " self." The explsnation of that as a matter of history is that probably both of those parties, namely, the dealer and the pro- posed hire purchaser, thought that there was a concluded contract and what had to be done was to bring about a rescission of it by agreement, because the proposed hire purchaser also added that he was willing to forfeit his deposit of #70 which he had already paid in order to secure a rescission of the proposed transaction so far as it had gone That is consistent with a belief that there was a concluded agreement which had to be reacinded on terms rather than an offer which had to be withdrawn. I do not see how one can spell out from that conversation a receipt by the dealer of notice of revocation of the offer. It was not what they were purporting to do, and to my mind there is no sufficient evidence of actual or ostensible authority on the part of the dealer to receive any communication as immediately constituting notice to the finance compsny. Such authority was not possessed in fact; it was not an apparent or ostensible authority; and Mr. Cousins Walker did not profess to have it. So on the first point I am unfortunately not able to agree that there was ostensible autho- rity, or, as I think is the more accurate way of putting it, that the mere holding of that conversation between the proposed hire purchaser and Mr. Cousins Walker on behalf of the dealer con- stituted the giving of notice to the finance company of revocation of the offer. However, on the second point I do agree that the offer was conditional. It is not necessary for the purpose of this case to lay down any broad general propositions as to what happens when there is a change in the condition of the goods between the date of offer and the date of acceptance, because we have important special features in this case. This was a hire-purchase transaction and the offer which was signed by the proposed hire purchaser on March 16 contained this provision: " In signing this agreement " the hirer acknowledges that before he signed it--(c) he had " examined the goods and satisfied himself that they were in good " order and condition." That is something which has to be signed by the offeror. What is the meaning of it and what must one infer in order to give reasonable busuiess efficacy to this transaction? The obvious intention is this, that both the hire condition of the car as it appears to the proposed hire purchaser when he makes his offer, and it is on the basis of the car being in that condition that various figures, which one finds on the same page, must have been assessed. The cash price of the goods was #350. That is right as long as the car remains in the same condition, but if in the meantime it suffers injury so that it depreciates by #100, that figure will be wrong and it should be altered to #250. Equally, the initial instalment of #70 having been paid, it appears to leave #280 to be found, but that figure also would be wrong; if #100 damage had occurred in the mean- time, it should be reduced to #180. The amount and number of the monthly instalments would also become wrong. Furthermore (and this is important), in the event of the hire purchaser making default in payment of the instalments, he would, under the terms of the hire-purchase agreement, become liable to pay a certain figure. That figure would by that time have become much too high if damage to the extent of #100 had been incurred. The judge found in terms that this car suffered severe damage before the acceptance and that there was substantial depreciation implication read into this offer, in order to give the transaction that business efficacy which the parties must have intended it to have, an implied condition that this offer was capable of accept- ance only if the car remained in substantially the same condition with substantially the same value. That condition in this case was not fulfilled because the car was severely damaged and its value was substantially depreciated. Therefore, when the finance company purported to accept it on a date which we must assume was March 25, it was an oger which was no longer capable of acceptance, and therefore no agreement was concluded. On that ground I agree that the appeal should be dismissed. Appeal dismissed with no order as to the costs or the appeal. Solicitors: Lawford & Co.; Edward A. Iwi for Vyvyan Wells & Sons, Edgware. B. A. B. COWARD v. MOTOR INSURERS' BUREAU [1959 C. No. 1491] Road Trafic--Third party insurance.--"Hire or reward"--Work-- man carried to factory on fellow-workman's motor-cycle--Evidence of some arrangement for payment--No intention to enter into legally binding contract--Whether a passenger " carried for " hire or reward "--Whether obligation to insure--Road Traffic Act, 1930 (20 & 21 Geo. 5, c. 43), s. 36 (1) (b) (ii). Contract--Formation--Intention to create legal relationship--Arrange- ment whereby worker carried fellow-worker to work on motor-cycle. Road Traffic--Third party insurance--Motor Insurers Bureau--Agree- ment with Minister-Action on agreement by third party--Not necessary for court to object on ground of no privity. Contrac--Parties-Enforcement by third party--Jurisdiction of court if defendant to action by third party does not object--Motor Insurers' Bureau. Evidence--Deceased's statement--Declaration against pecuniary interest --No admission of legal obligation to pay--Whether admissible [Reported by D. M. GOODBODY, Esq. Barrister-at-Law.] On December 7, 1953, Coward was a pillion passenger on a motor-cycle owned and driven by Cole which was involved in an accident in which both Coward and Cole were killed. The accident was due to the admitted negligence of Cole, and on June 21, 1958, in an action against Cole's personal representative, Coward's widow was given judgment for #7,550 19s. damages. The policy of insurance which Cole had effected did not cover pillion passengers and he had no other estate so that that judgment was unsatisfied The widow then brought an action against the Motor Insurers' Bureau alleging that under their agreement with the Minister of Transport, dated June 17, 1946, they were bound to satisfy the judgment since it was a judgment in respect of a " liability which " is required to be covered by a policy or a security . . . under " Part II of the Road Traffic Act, 1930, " within the agreement. It was contended that Coward was a person carried for " hire or " reward " whom Cole was bound to insure under section 36 of the Road Traffic Act, 1930.1 For about 18 months before the accident Cole had bsen taking Coward on the pillion of the motor-cycle to and from the factory where they both worked. Evidence was given that Coward was ssen to hand money to Cole from time to time and evidence was tendered, inter alia, of statements made by Coward, the inference from which was that there was an agreement whereby he paid some weekly sum to Cole for transporting him to work. The trial judge held that that evidence was inadmissible on the ground that the statements did not amount to a recognition of a oontractual obligation : he found, inter alia, that there was no evidence that Coward was being carried for hire or reward within section 36 (1) (b) (ii) and that the agreement of 1946 did not apply, and dismissed the action. On appeal : -- Held, (1) that the evidence as to the statements by Cole was admissible, for the test was not whether a declaration amounted to a reoognition of a legal or contractual obligation but whether it was against the pecuniary interest of the declarant: whether there was a contractual obligation could only be established when the whole of the relevant admissible evidence had bsen considered, and the admissibility of a declaration against interest must be judged at the time when it was tendered (post, p. 670). Dicta of Lord Campbell in the Sussex Peerage Case (1844) 11 Cl. & Fin. 85, 113, M.L. and Parke B. in Rex v. Inhabitants of Lower Heyford (1830) 1 B. & Ad. 75 applied. (2) That, notwithstanding that there was admissible evidence of an arrangement whereby Coward paid a weekly sum to Cole for his transportation, on the probabilities, neither party contemplated that the one was legally bound to carry, and the other to be carried, to work, or intended to enter into a legal oontract (post, p. 672) (3) That, on its true construction, the expression " carrying " passengers for hire or reward " in seotion 36 (1) (b) (ii), meant carrying passengers for a monetary reward legally recoverable by the carrier under a contract exprees or implied by the mere act of entering the vehicle; and that, since Coward and Cole never intended to enter into a legally binding obligation of carriage, Coward was not a passenger whom Cole was bound to insure under Part II of the Act of 1930. The Motor Insurers' Bureau, therefore were not bound to satisfy the judgment and the judge was right in dismissing the action (post, p. 675). Bonham v. Zurich General Accident and Liability Insurance Co. Ltd. [1945] K.B. 292; 61 T.L.R. 271; [1945] 1 All E.R. 427, C.A. distinguished. Decision of Edmund Davies J. affirmed. APPEAL from Edmund Davies J. On December 7, 1953, James Coward was riding as a pillion passenger on a motor-cycle owned and driven by James Dermot Cole, when, owing to the admitted negligence of Cole, there was an accident and both men were killed. The plaintiff, Louie Irene Coward, the widow and administratrix of Coward, brought an action for damages against Esther Reid, the administratrix of Cole, for damages in respect of the death of Coward. That action was heard at Gloucester Assizes and on June 21, 1958, judgment was given for the plaint~ for #7,h850 19s. That ]udgment was unsatis- fied because the policy of insurance taken out by Cole did not cover liil L~ tor in]uries to pillion passengers. The plaint~ brought the present action against the Motor Insurers' Bureau alleging that, in consequence of an agreement made between them and the Minister of Transport dated June 17, 1946, they were legally bound to satisfy the ]udgment on the oround that it was in respect of a liabinty which was required to Tra$c Act, 1930. The agreement of June 17, 1946, contained, inter alia, the The agreement of June 17, 1946, contained, lnter alia, the following clause: " If ~udgment in respect of anj liW y W " is required to be covered by a policy of insurance or a security . . ' . " whether or not such person or persons be ln fact covered by " a contract of insurance and any such judgment is not satisfied ' in fuli withm- seven days from the date upon which the person " or persons in whose favour the ]udgment was ~ven became . . entitled to enforce it the Motor Insurers' Bureau ~ " [subject to the provisions of clauses 5 and 6 of these presents] " satisfy or cause to ba paid any sum payable (under the said " ]ud~ent]." It was the contention of the plain~ that since about June, 1952, Coward had been in the hahit of trave~g on the phon of Cole's motor-cycle from Aylesbury to the works of the Pressed Steel Company near Oxford, where both men - . . was because of practical convenience to both- It was further alleged by the plaint~ that Coward was in the habit of making regular payments to Cole to oover the cost in part of the daily VOL 2 journeys. The evidence as to those payments which was given at the trial was classified as follows: (a) statements made by Coward to his wife; (b) statements made to Cole by Coward in the hearing of his wife; (c) statements made by Coward to his sister-in-law, Mrs. Collingridge, as to the terms on which Coward was being carried by Cole. There were in addition declarations made by Cole to fellow-workmen which were rejected by the judge as being hearsay and res inter alios acta. The judge in considering the evidence of the wife and sister- in-law took the view that whereas the evidence amounted to the recognition of a moral obligation on the part of Coward to pay Cole, in order to be admissible the declarations must proceed on the basis and must amount to the recognition of a legally enforce- able contractual obligation: that element the judge found was absent; he rejected the evidence of the plaintiff and her sister as to statements made by Coward in their presence and to Cole, and statements by Cole to his fellow-workmen, and held that, as Coward was not being carried "for hire or reward," there was no obligation to insure under section 36 of the Road Traffic Act, 1930. He therefore gave judgment for the defendants on May 9, 1961. The plaintiff appealed. Daniel Brabin Q.C. and B. W. Budd for the appellants. Marven Everett Q.C. and Tudor Evans for the respondents. The following cases, which are not referred to in the judgment, were cited in argument: Newell v. Cross (2); Wyatt v. Guildhall Insurance Co. Ltd.(3); McCarthy v. British Oak Insurance Co. Ltd.(4); In re Adams (5); The Henry Coxon (6); East Midland Traffic Area Traffic Commissioners v. Tyler (7); and Teper v. The Queen (8) UPJOHN L.J. This is an appeal from the judgment given on May 9, 1961, by Edmund Davies J. when he dismissed the plaintiff's action against the defendants. The present action arose in this way. James Cowsrd died on December 7, 1953, when he was a pillion passenger on a motor-cycle owned and driven by one, James Dermot Cole both of them being killed in a collision which was admittedly due to the negligence of Cole. The plaintig, who is Coward's widow and administratrix, therefore brought an action against the admin- stratrix of Cole and judgment was given in her favour at Gloucester Assizes on June 21, 1958, in the sum of #7,850 19s. and costs. Unfortunately, it was found that the policy of insurance which Cole had effected did not cover pillion passengers against accident and as he had no other estate the judgment went unsatisfied. In those circumstsnces the plaintig claims in this action against the defendsnts, the Motor Insurers' Bureau, in reliance upon an agreement made between the defendants and the Minister of Transport on June 17, 1946. It is unnecessary to review that agreement in any detail; it is sufficient to say that by that agree- ment the defendants undertook to satisfy a judgment in respect of any liability which was required to be covered by a policy of insurance under Part H of the Road Traffic Act, 1930, whether or not such persons were in fact covered by a policy of inaurance provided certain conditions precedent were satisfied. It is not in dispute that such conditions were satisfied so that the basic problem is whether Cole was bound to insure his passenger Coward against accident while carrying him on the pillion seat of his motor-cycle. No point is taken by the defendants that the plaintiff was not privy to that contract or that the Minister of Transport should have been a party. As we understand other actions have been maintained in circumstances similar to this in the High Court, this court has not thought it necessary to raise any such objection independently and the appeal has been entertained accordingly. The question whether Cole should have insured his pillion passenger Coward against injury involves two quite separate points. First, what were the terms upon which Cole was carrying Coward upon his pillion when the accident occurred. In the circumstances of this case that involves sn interesting question as to the admissibility of declarations by deceased persons. Secondly, when the terms of the arrangement (if any) between Cole and Coward are ascertained, was Cole bound to insure Coward under section 36 of the Road Traffic Act, 1930, as one who was carried for " hire or reward " within the meaning of the Act? It may be noted at this stage that the Act has in fact now been repealed by the Road Traffic Act, 1960. Briefly the facts were these. Coward for some two years before his death had been an employee of the Pressed Steel Co. Ltd., whose works are at Cowley in the neighbourhood of Oxford. He himself with his wife and children lived at Aylesbury. The distance between the two towns is about 23 miles. At the beginning of his employment it was his custom to travel to and from his work by some bus provided for the workmen though by whom or upon what terms did not emerge at the trial. Cole also worked with the Pressed Steel Company at Cowley and he also lived at Aylesbury at a house about five minutes' walk away from Coward's house, and for about 18 months before the accident fatal to both of them Cole took Coward on his 600 c.c. Panther solo motor-cycle to the Pressed Steel Co.'s works and back during the working week. The undisputed evidence was that durin' the first 13 months h h lld h b C 1 d Al b , y uY p-: o w o o e s ouse in y es ury a a out 1 p-m- in e ' Y g y - would return home, when Cole would drop Coward at the latter's house at about 8.30 a.m. in the morning. For the last five months before the accident they were both on day-shift. Coward would then leave home at 6.30 a.m., w~ to Cole's house, and Cole would drop Coward back at the latter s house at about 5.45 p.m. except when they were both doing overtime when th~g would arrive at about 8.30 p.m. Evidence, plainly admissible, was tendered that Coward was seen to hand money to Cole from time to time, but that per se was no evidence of any monetary arrangements between them for the c~iage of Coward by Cole and the first question to be determined, therefore, is what evi- dence of statements or declarations by Coward on the one hand or Cole on the other, madc to one another or to third parties (both of them being dead), is admissible for the purposes of ascertaining the terms of carriage between them. The ]udge heard much evidence of such declarations de bene esse before ruling upon admissibility. These declarations may be classified as follows : (A) Declarations by Coward: (1) Stat~ents made by Coward to his wife. The judge in his judgment summarised these thus : " The plaintig has said, and " it is right that I should make it clear that I accept what she " says, namelg, that it was a practice of .her husband, when he " arrived home on a Friday morning after night-shift, ahnost " immediately to take out his unopened pay packet. He would " then put some money aside on a top shelf in a cupboard in the " living-room, always in the same place. I accept that, and I " accept further although of course not on every occasion but " on quite frequent occasions, that he would say words to the " effect that he was putting money aside for ~. Cole, that she " was not to touch it, and furthermore that he was putting it " aside for Cole for t~g him to work." Miss Mundey, Coward's sister-in-law, gave evidence and supported this. (2) Statements made by Coward to Cole in the hearing of his wife or Miss Mundey when he was getting off the motor-c cle on arriving home after the day-shift. The judge summarised them thus : " The other evidence about the payment of money between " the two is derived firstly from the plaintig, who says that on one " Friday evening she saw her husband gBt off the deceased Cole's " motor-cycle giving him some money and saying, ' I'd better " ' settle up with you now.' That was objected to by Mr. Marven " Everett. There was another occasion when she saw the same " sort of thing happening, although she did not overhear anything " being said on that occasion. Miss Mundey speaks of two " Friday evenings when the same sort of thing happened. On " the first occasion in August or September, 1953, she saw the " deceased Coward get off the motor-cycle, take out his pay- " packet and take something out of it and hand it over to Cole. " On a later evening when the same thing happened, she over- " heard Coward say: ' Jim, you had best have it now. It's as " ' good a time as any '; and Cole replied, ' Fair enough.' She " did not actually see what was handed over, but I am quite satis- " fied that what was handed over was money, and I accept her " evidence that those words passed between the two men, just " as I accept the evidence of the widow, and on the occasion that " she speaks of on the Friday evening the deceased Coward said " to Cole, ' I'd better settle up with you now.' " (3) Statements made to Mrs. Collingridge, another sister-in- law of Coward who gave evidence as to a conversation with Coward as to the terms upon which he was carried by Cole. (B) Declarations by Cole : (1) A statement made to Hammond, a fellow-workman, who deposed to a conversation between Cole and himself when Cole invited Hammond, then seated in a bus, to travel to work with him on his motor-cycle instead of in the bus, upon the terms of sharing the cost of the motor-cycle. (2) Similar statements made by Cole to another fellow-work- man, Baughan, on a different occasion. Evidence of all these declarations or statements was given by the persons to whom they were made and the judge accepted all of them as honest and truthful witnesses. The judge rejected all this evidence. He did so rightly, in our judgment, in the case of Hammond and Baughan. This evidence ws inadmissible on two grounds. First, it was pure hearsay, not to be justified on any of the well-known exceptions to the rule rejecting hearsay evidence. Secondly, it was irrelevant being res inter alios acta. The judge in our judgment also rightly rejected the evidence of Mrs. Collingridge as being hesrsay, not to be justified by any of the exceptions, for it merely stated the terms of an agreement whether or not binding in law in which each gave legal or moral consideration for the promise or perfor- mance by the other. See Lloyd v. Powell Duffryn Steam Coal Co.1 The real question, therefore, is whether the judge rightly rejected the evidence of the plaintiff and of her sister Miss Mundey. It was submitted on behalf of the plaintitt that the evidence was admissible as being a declaration against Coward's pecuniary interest. The judge rejected this submission, upon the ground which we now quote from his judgment: " It is an " essential requirement of a declaration against pecuniary interest " that it should amount to a recognition of a contractual obliga- " tion." Then in fairness to the judge let it be said that later in his judgment he pointed out that the leading counsel then 1 [1913] 2 K.B. 130. 140; 29 T.L.R. 291, C.A. appearing for the plaintiff in his final address conceded that the declaration to be admissable must amount to the recognition of a legal interest. The judge continued: "Can one from the state- " ments of the deceased man, as testified to by members of his " family, spell out from them any acknowledgment of his indeb- " tedness to Mr. Cole? Or, on the other hsnd, are the statements " neutral and equally consistent with his recognition of some sort " of moral obligation to recognise in a practical manner the co- " operation of Cole in providing transport for him? Are the " declarations clear or are they ambivalent? Do they leave the " matter in doubt as to whether the deceased Coward was " acknowledging in indebtedness? With hesitation I have come to " the conclusion that the declarations do not amount to an ack- " nowledgment of indebtedness, and therefore cannot be received " or taken into account by this court when it has to assess whether " or not the plaintiff has on a balance established her case." The first question, therefore, that we have to determine is whether the judge is correct in his conclusion that a statement against pecuniary interest is only admissible if it is an acknow- ledgment or recognition of a legal obligation, but not if it recognises only a moral obligation. We cannot agree that the law is as stated by the judge and that evidence is only admissible where the declaration recognises a contractual obligation. No authority supports that proposition and the books of Professor Cross and Dr. Nokes on evidence, to which we have been referred, do not, in our view, support a contrary view. The rule is, we think, clearly settled. We take it from one of the earliest and leading cases in the House of Lords, the Sussex Peerage case,(2) where Lord Campbell L.C. said (3): " But as to the " point of interest, I have always understood the rule to be, that " the declaration, to be admissible, must have been one which " was contrary to the interests of the party making it, in a " pecuniary point of view." This does not suggest the test of a legal or contractual obligation; the test is whether it is against the pecuniary interest of the declarant, that is, that it must appear to be against his interest. Whether in the end there is a contractual obligation can surely only be established when the whole of the relevant admissible evidence has been considered. The admissibility of a declaration against interest must neces- sarily be judged at the time when it is tendered. To make the admissibility of such declsrations depend ex post facto on the ultimate conclusion reached upon subsequent evidence would defeat the rule itself snd in addition make it unworkable in rule on the admissibility of such a declaration at the time it was 2 (1844) 11 Cl. & Fin. 85, H.L. 3 Ibid. 113. tendered. In jury trials there is no Power to admit evidence de bene esse. It is quite true that there are conflicting decisions upon the question whether an apparent declaration against interest becomes inadmissible when it is proved that the debt was statute-barred so that in fact the declaration is in the interest of the declarant. See, for example, the inconsistent cases of Bradley v. James4 and Newbould v. Smith.5 However, it is unnecessary to con- sider these cases further and it is better to leave their reconciliation until the point actually arises. In our judgment the test of admissibility was accurately propounded by Sir George Jessel M.R., in Taylor v. Witham6: " It is, no doubt, an established rule in the courts of this country " that an entry against the interest of the man who made it is " receivable in evidence after his death for all purposes. What " is the meaning of its being against his interest? I adopt the " view of Parke B. in Rex v. Inhabitants of Lower Heyford,7 that " it must be prima facie against his interest, that is to say, the " natural meaning of the entry standing alone must be against " the interest of the man who made it." We apply that test to the declarations in this case. In our judgment the declarations made by Coward to his wife, sometimes in the presence of Miss. Munday, when he arrived home on Friday mornings after the night shift, judged by this test, were plainly admissible for they recognise some pecuniary obligation to Cole for carrying him to Cowley and back. The statements made by Coward to Cole on Friday afternoons on arriving bat at Coward's home seem to us equally admissible, for the phrase " Jim, you had best have it now " before handing over a sum of money is, standing by itself, plainly against the interest of Coward. However, this particular declaration against interest well illustrates the difference between admissibility and the weight to be attached to admitted evidence. These con- versations between Coward and Cole, though admissible, carry the matter no firther in isolation for they might realte to some trans- action between the two which had no relation to their joint journeys to Cowley and back. It is, however, proper to consider these statements in the light of the other admissible evidence, and in our view, bearing in mind that the payments were made on Fridays out of the pay packet, they lend some, though by no means strong, support to the view that the payments were made in reference to the carriage by Cole of Coward to and from work. Accordingly, in our judgment these declarations are admissible and establish as a matter of inference that there was an arrang- ment whereby Coward did pay weekly a sum, the exact amount of which was not ascertained by admssible evidence, to Cole for transporting hn between Aylesbury and Cowley to and from work. 4 (1853) 13 C.B. 822. 6 (1876) 3 Ch.D. 605, 607. 5 (1885) 29 Ch.D. 882. 7 (1830) 1 B. & Ad. 75. This, however, does not determuie the question whether this arrangement contemplated that the parties would enter into a legal relationship enforceable in the courts of this country. Upon this point the fact that both parties are dead we believe, matters little, for if the question had been posed to Coward or Cole : " Did you intend to enter into a legal relationship?" each would probably have answered " I never gave it a thought." The practice whereby workmen go to their place of business in the motor-car or on the motor-cycle of a fellow-workman upon the terms of making a contribution to the costs of transport is well known and widespread. In the absence of evidence that the parties intended to be bound contractually, we should be reluctant to conclude that the daily carriage by one of another involved them in a legal contractual relationship. The hazards of everyday life, such as temporary indisposition, the incidence of holidays, the possibility of a change of shift or different hours of overtime, or incompatibility arising, make it most unlikely that either contemplated that the one was legally bound to carry and the other to be carried to work. It is made all the more improbable On the probabilities of the case, therefore, we reach the con- clusion that, while admitting the evidence rejected by the judge, which in our judgment clearly proved an arrangement whereby Coward paid a weekly sum to Cole for transporting him to and from his work, neither party intended to enter into a legal contract. It then becomes necessary to consider whether in those cir- cumstances Cole was bound to insure Coward against his negligent driving. This depends on the Road Traffic Act, 1930; and it is necessary to refer to a number of sections of the Act, 1930; and " Act, it shall not be lawful for any person to use, or to cause or " permit any other person to use, a motor vehicle on a road unless " there is in force in relation to the user of the vehicle by that " insurance or such a security in respect of third party risks as " complies with the requirements of this Part of this Act." Sub- section (2) provides penalties for acting in contravention of the section. Section 36 (1) reads as follows: " In order to comply with " the requirements of this Part of this Act, a policy of insurance " must be a policy which " (and I can omit (a)) " . . . (b) insures " such person, persons or classes of persons as may be specified " in the policy in respect of any liability which may be incurred " by him or them in respect of the death of or bodily injury to " any person caused by or srising out of the use of the vehicle " on a road: Provided that such a policy shall not be required to " cover "--and I can omit paragraph (i) and read paragraph (ii)-- " except in the case of a vehicle in which passengers are carried " for hire or reward or by reason of or in pursuance of a con- " tract of employment, liability in respect of the death of or bodily " injury to persons being carried in or upon or entering or getting " on to or alighting from the vehicle at the time of the occurrence " of the event out of which the claims arise." It is not neces- sary at this stage to refer to sections 61, 67 and 121, though reference thereto will be made later. The question, therefore, as stated earlier in this judgment, purposes of section 36 though there was no contractual nexus between them. Mr. Everett for the respondents takes the preliminary point that for the purposes of section 36 a solo motor-cycle ought not to be regarded as a motor-vehicle within the terms of the section for it plainly contemplates a vehicle capable of carrying passen- gers either pursuant to a contract of employment or carrying for hire and reward and it is absurd to suppose the carriage of a pillion passenger was within the contemplation of the Act. We think that this argument fails having regard to the definition in section 2. If a man makes a practice of offering his pilion seat to others upon plainly contractual terms of carriage, there seems no reason why he should not be within the Act and so bound to obtain the appropriate licence. Mr. Everett's next point is that in order to carry for hire or reward there must be a pre-existing contract of carriage and there- fore, upon the finding which this court has now made, there can be no hire or reward for there is no contract. This point is not without authority. In Bonham v. Zurich General Accident and Liability Insur- ance Co. Ltd.8 the Court of Appeal had to determine the meaning of the question: " Will passengers be carried for hire or reward " or will the motor-car be let on hire? " in a proposal form for a policy of insurance. The Court of Appeal, by a majority, du Parcq L.J. and Uthwatt J., MacKinnon L.J., dissentmg, held on the passengers for reward notwithstanding the fact that there was no legally enforceable contract in respect of such carriage. Brabin has urged that this decision is binding upon us and com- pels us to hold that a vehicle is one " in which passengers are " carried for hire or reward " within the meaning of section 36 (1) (b) (ii) of the Road Traffic Act, 1930, notwithstanding the carriage. This makes it necessary to examine Bonham's case9 with some care and. in particular, the rationes decidendi of the majority. 8 [1945] K.B. 292; 61 T.L.R. 271; 9 [1945] K.B. 292. [1945] 1 All E.R. 427, C.A. It is to be noted, in the first place, that although it was a decision on the meaning of the words " passengers . . . carried for hire " or reward," these words appeared in a different context and in a commercial document, not in an Act of Parliament. Techni- cally, in any event, the case is not a binding authority as to the meaning of those words in the section of the Act of Parliament which we have to construe and we deprecate any suggestion that a decision of this court upon the meaning of particular words in one context can determine the meaning of the same or similar words in another context. In his judgment du Parcq L.J. says10 in terms " I do not think that any assistance is to be gained " here by looking at cases dealing with the Road Traffic Act " or the law of contract," and treats the case as turning upon what an ordinary man, not being a lawyer, would have understood by the question in the proposal form : " Will passengers be carried " for hire or reward? " Uthwatt J. agreed with du Parcq L.J. and held that " reward " as used in that question included cases where there was no obligation to pay. On the particular facts of the case he, like du Parcq L.J., held that passengers were being carried for "reward" although there was no legally enforceable obligation to pay. It seems to us that this case is no authority as to the meaning of the expression " a vehicle in which passengers are carried for " hire or reward " in section 36 (1) (b) (ii) of the Road Traffic Act, 1930, and that this court is at liberty to form its own view as to its meaning. The expressions " for hire " and " for reward " have been used indigerently for very many gears to express the monetary con- sideration for which a carrier of goods or passengers undertakes, either by virtue of a special contract or by reason of his common law status as a common carrier, to carry goods or passengers upon a journey. A perusal of the relevant counts in the third edition of Bullen and Leake on Precedents of Pleading and the cases therein referred to, shows that one or other of these expres- sions was invariably used and that, at any rate by 1868, no distinction was drawn between the two expressions. Prima facie when one finds in an Act of Parliament a reference to carriage of passengers " for hire or reward " one would construe it as referring to carriage in consideration of a monetary payment to be made to the carrier and legally recoverable by him. The expression " for hire or reward " appears in the Road Traffic Act, 1930, in three sections, namely, section 36, relating to compulsory insurance; section 61, relating to public service vehicles; and section 121, the definition section. Prima facie it is used in the same meaning in each of these sections. In section 61 it is quite plain that the expression " vehicle (or vehicles) " carrying passengers for hire or reward " is limited to vehicles in which passengers are carried for a monetary consideration legally 10 [1945] K.B. 292, 298. recoverable by the carrier. The references in paragraphs (a) and (b) of subsection (1) to " separate fares " and in paragraph (c) to a contract express or implied make this clear. The subsection and the subsequent references to classes of vehicles in section 67 (which deals with licences) also make it clear that the three classes referred to in paragraphs (a), (b) and (c) embrace all " public service vehicles," subject to the provisions of subsections (2) and (3), which provide that vehicles when used in certain ways which would not otherwise fall within the classes shall be deemed to do so. In section 121 " public service vehicle " is defined as meaning " a motor vehicle used for carrying passengers for hire or reward " other than a vehicle which is a contract carriage within the " meaning of this Act adapted to carry less than eight passengers " or a tramcar or a trolley vehicle." If the expression " carrying " passengers for hire or reward " included carriage of passengers for a reward which was not legally recoverable, the definition would embrace vehicles adapted to carry less than eight passengers provided that such passengers were not carried under a legally enforceable contract, although it would exclude such vehicles where the passengers were carried under a contract. This would be contrary to the whole scheme of Part IV of the Act relating to the regulation of public service vehicles. It is in our view clear that the expression " carrying passengers for hire or reward " in sections 61 and 121 means carrying passengers for a monetary reward legally recoverable by the carrier under a contract express or implied by the mere act of entering the vehicle and we can see no reason why the same expression in section 36 (1) (b) (ii) of the Act should not be given the same meaning. The judge cannot, in our view, be criticised for following Bonham's case,11 and it is fair to say that even before us the point was not urged very strongly that this court was entitled to express a different view. In the result, however, we dismisa the appeal upon the grounds that: (1) The relevant provisions of the Road Traffic Act, 1930, only apply where a passenger is being carried for hire or reward under a legally binding contract, express or to be implied in all the circumstances of the case from entering the vehicle. (2) Upon the facts Coward and Cole never intended to enter into a legally binding obligation of carriage. Appeal dismissed with costs. Leave to appeal to House of Lords. Solicitors : Burton, Yeates & Hart for Andrew Walsh, Lightfoot & Co., Oxford ; Berrymans. 11 [1945] K.B. 292. * TROLLOPE & COLLS LTD. AND HOLLAND & HANNEN AND CUBITTS LTD., TRADING AS NUCLEAR CIVIL CONSTRUCTORS (A FIRM) v. ATOMIC POWER CONSTRUCTIONS LTD. Contract-Fromation--Consensus ad idem--Tender authorising varia- tions in work--Changes in work before acceptance--Acceptance of tender after work begun--Retrospective effect of contract Contract--Implied term--Retrospective effect of contract--Building tender-Work done before contract concluded. On February 14, 1959, the plaintiffs submitted to the defendants a tender for carrying out as sub-contractors the civil engineering works in the building of a nuclear power station. The tender, which was for a lump sum price, incorporated conditions autho- rising the defendants to make variation in the form, quality or quantity of the work and providing that such variations were to be taken into account in ascertaining the contract price. It also contained a clause providing for adjustment in the contract price according to costs of labour and materials. Some changes in the work were made by the authority for whom the work was being done before the tender was submitted (for which provisions were made in it), and further substantial changes were made after the submission of the tender which neosesitated the amendment of some of the tender drawings, specifications and bills of quantities. Both parties intended from the outset that a legally binding contract shoudd be made between them, and in June, 1959, the plaintiffs, at the request of the defendants, began work on the project. On April 11, 1960, the form of the general conditions of contract was agreed between the parties, the parties being ad idem on the terms which they regarded as necessary to constitute the contract. On the question whether there was a contract between the plaintiffs and the defendants governing their rights as to the work done since June, 1959 :-- Held, that the parties having acted in the course of negoiations on the understanding and in the anticipation that, if and whenever a contract were made, it would goveru what was being done meaa- while, the contract which came into existance on April 11, 1960, could rightly be supported as governing the rights of the parties as to prior work, on either of two grounds, namely, (i) by the implication of a stipulation, necessary for the business efficacy of the contract, that the variations clauses should apply retrospec- tively, or (ii) that the tender constituted aa offer that contemplated variation of the work and the ultimate acceptance of that offer was, in the circumstances, an acceptance of the offer as applied to and embracing the changes requested and agreed in anticipation of the ultimate acceptance. ACTION. The plaintiffs, Trollope & Colls Ltd. and Holland & Hannen and Cubitts Ltd., entered into a partnership under the name of ------------------------------ [Reported by M. N. PUNGLIYA, Esq., Barristerr-at-Law.] Neclear Civil Constructors as civil engineers, builders and con- structors, for the purpose of carrying out work in the erection of a nuclear power station. The defendants, Atomic Power Con- structions Ltd., were a consortium of engineering and construc- tion companies and were engaged in the construction of a nuclear power station for the Central Electricity Generating Board (hereinafter referred to as " the board ") at Trawsfynydd in Merionethshire. In April, 1958, the board invited tenders for the construction of the power station and the defendants were amongst those who submitted tenders in 1959. The plaintiffs and defendants collaborated in the preparation of a tender by the defendants, it being intended, if the tender were accepted, that the defendants should be the main contractors and that the plaintiffs should be sub-contractors for the civil engmeering part of the work. On February 14, 1959, the plaintiffs, by arrange- ment with the defendants, submitted a tender to the defendants for this part of the work and that tender was made part of the defendants' tender to the board. The contract price in the plaintiffs' tender was a lump sum of #9,069,70. The tender incorporated drawings conditions of proposed contract specifica- tions and supporting information, and contained a schedule of " key dates " showing the times for completion of the various parts of the work. The terms of the tender were as follow : " Having examined the drawings, conditions of contract, specifi- " cation and supporting information for the construction of the " above-named works, we offer to design, construct, complete and " maintain the whole of the said works in conformity with our " tender and the said drawings, conditions of contract, specifica- " tion and supporting information for the sum of #9,069,70 or " such other sum as may be ascertained in accordance with the " said conditions, and in accordsnce with the terms of our tender " letter dated January 30, 1959 [this letter had accompanied a " previous abortive tender, not material to this report]. The " percentage for adjustment of prime cost sums provided for " under clause 58 (2) of the conditions of contract shall be (blank) " per cent., to be discussed when extent of prime cost sums (if " any) is known. We jointly and severally undertake to complete " and deliver the whole of the works comprised in the contract " within the times stated in the appendix attached hereto. " Unless and until a formal agreement is prepared and executed " constitute a binding contract between us." The general conditions were called the " Part A " conditions and contained, inter alia, definitions of words and phrases, a contract price adjustment clause (clause 70), providing for adjustments in the contract price according to variations in the cost of labour and materials, and clauses authorising the defendsnts to make varia- tions in the form, quality snd quantity of the work required with consequential vsriation of the contract price (clauses 51 and 52). They also contained terms of payment and provision for the alteration in " key dates." Numerous and substantial changes in the work were notified from time to time by the board to the defendants, and where they affected the civil engineering work, by the defendants to the plaintiffs. Some of the changes were notified in time for the plaintiffs to make provision for them in their tender, but others (and among them substantial changes) were not received in sufficient time for the tender to deal pre- cisely with them, and these were provided for by the general provisions for contingencies (clauses 51 and 52). It was not suggested by either party that the subsequent changes were so extensive that the doctrine of frustration could have been invoked, assumuig that a contract had been previously concluded, or that, as a matter of law, having regard to the discretion left to the defendants to vary the work, acceptance of the tender would not have produced a binding contract. By reason of the changes a number of the tender drawings ceased to be relevant, certain amendments were made in the specifications and accepted by the plaintiffs, and amendments were made in the bills of quantities, some of which ceased to be relevant. The schedule of " key " dates " followed the tender. No question arose about the provision of prime cost sums, since none were in fact included. After the tender had been submitted, the terms of the con- templated contract and four versions of the " Part A " conditions were prepared and discussed. On June 23, 1959, after the board had assented to the defendants acting as contractors and the plaintiffs acting as sub-contractors for the civil engineering work, the defendants issued their " letter of intent " to the plaintiffs as follows : " We have to inform you that it is our intention to " enter into a contract with you for the civil engineering works " associated with the design and construction of the nuclear power " station for the Central Electricity Board at Trawsfynydd. As " soon as matters outstanding between us are settled, we will " enter into a contract agreement with you, and in the meantime " please accept this letter as an instruction to proceed with the " work necessary to permit you to meet the agreed programme." The plaintiffs thereupon began work on the project. On April 11, 1960, the Part A conditions were agreed between the plaintiffs and the defendants, by which time a substantial part of the work had been carried out, though the greater part still remained to be done. By a writ dated March 8, 1962, the plaintiffs brought an action for (1) a declaration that the work done and services, plant, designs and materials provided by them as civil engineers, builders and constructors during the period from January, 1959, or thereabouts until the date thereof and which were still con- tinuing in and about the preparation for and design and construc- tion of a nuclear power station at Trawsfynydd had been and were being so done and provided at the request of the defendants, but not pursuant to or by virtue of a concluded contract between the plaintiffs and the defendants, and that no contract existed with regard to the doing of such work or the providmg of such services, designs, plant and materials, or any of them; alternatively, (2) a declaration as to the terms of any contract which might be held by the court to exist in respect of the douig of such work and the provision of such services, plant, design and materials. The plauitiffs' primary claim was that they were free to terminate work at any time and were entitled to be paid on a quantum meruit for what they had done. The defendants, by their points of defence, pleaded that there was, as from April 11, 1960, a concluded contract between the parties for the execution by the plaintiffs of the civil engineering work for the power station, and in the alternative that the plaintigs were estopped from denying the existence of such a contract. Megaw J. held that agreement on the Part A conditions as a whole was essential to the conclusion of a binding contract, that the conditions could not become contractually bindmg piecemeal, and that up to April 11, 1960, the plaintiffs were doing work on a quantum meruit basis and that no binding contract existed between the parties before that date. On the question whether a binding contract came into being on April 11, 1960, the judge said that four propositions were apposite : (i) there must have been an intention by both parties, continuing up to April 11, 1960, to make a contract; (ii) at that date, the parties must have been ad idem on all the terms which they then regarded as being required in order that a contract should come into existence; (iii) the terms on which the parties were ad idem must not omit any term which, even though the parties did not realise it, was in fact essential to be agreed, as a term of the contract, if the contract was to be commercially workable; snd (iv) there must be some manifeststion which indicated with sufficient clarity the acceptance by the offeree of the oger as then made to him, such acceptance complying with any stipulation in the oger itself as to the msnner of acceptance. The judge held that the require- ments of (i), (ii) and (iv) were satisfied on the facts of the present case. The case is reported only with reference to proposition (iii), and, in particular, the issue thereunder which may conveniently be called " the retrospectivity issue." R. J. Parker Q.C. and Gordon Slynn for the plaintiffs. Mark Littmann Q.C., K. F. Goodfellow and T. H. Bingham for the defendants. The cases cited in argument were referred to in the judgment. October 26. MEGAW J. read the following judgment, in which he first outlined the facts and issues. After stating the proposi- tions referred to in the statement of facts and reaching conclusions on propositions (i) and (ii) as stated therein, he continued: In my judgment, the parties on April 11, 1960, were ad idem on all matters which they themselves at that time regarded as being required in order that a contract should exist. Proposition (iii) : The defendants must establish, not only that the parties were ad idem on all terms which they then regarded as being requisite for a contract, but also that they had not omitted to agree any term which was, in law, essential to be agreed in order to make the contract commercially workable. I take the phrase " essential terms " from the judgment of Denning L.J. in Nicolene Ltd. v. Simmonds.(1) Lord Wright used the same phrase in Hillas & Co. Ltd. v. Arcos Ltd.(2) Lord Blackburn, in Rossiter v. Miller,(3) said that " if some particulars essential to the " agreement still remain to be settled afterwards, there is no " contract." In dealing with this proposition, I have to consider the point which was stressed by Mr. Parker as being his main point. His argument, summarised, is as follows : The contract which the defendants allege is a contract under which the plaintiffs under- took to do the February, 1959, work (that is, the work actually specified in the tender, drawings and specifications, subject to comparatively minor agreed amendments) at the February, 1959, price (namely, #9,069,700), on the April, 1960, conditions (that is, the Part A conditions, as then agreed). If such contract had ever been made--for example, on April 11, 1960--it would have been a contract which the plaintiffs would have fulfilled (apart from any variations ordered after the date of the contract) by building the February, 1959, power station (or rather the civil engineering part thereof), to the February, 1959, specifications and drawings, and the defendants would have fulfilled their obligations by payuig the plamtiffs the February, 1959, lump-sum price, subject only to adjustment for true contract price adjust- ments under clause 70. The defendants do not, by their pleadings, set up a contract to do any other work. If their case were that it was a contract to do other work, it would have been necessary for them to plead and establish what that other work was, because until one knows what the contractual work was, one cannot say what the contract was. It is common ground, or at any rate clear on the evidence and documents, that the plaintiffs were never instructed or requested by the defendants to build the February, 1959, power station and the plaintiffs never contracted to build it. The case depends on elementary principles of offer and acceptance. To make a contract, there must be an offer and an acceptance. If an offer is rejected, there may be a counter-offer, but the counter-offer kills the original offer. The offeree cannot revert to the original offer and purport to accept it. Here, there was never an acceptance by the defendants 1 [1953] 1 Q.B. 543, 552; [1953] 2 (1932) 38 Com.Cas. 23, 43, H.L. 2 W.L.R. 717; [1953] 1 All E.R. 822, 3 (1878) 3 App.Cas. 1124, 1151, H.L. of the plaintiffs' offer, in their tender of February, 1959, to build the power station to the then stated specifications at the then stated price. Before the earliest date when it could be suggested that there was an acceptance of that offer, the whole position had changed. The defendants had no intention of accepting that offer, once the substantial changes in the work began to be required by the board. Yet that is the offer which the defendants are now alleging that they accepted, without taking into account that what they desired, and what they requested the plaintiffs to do, was something substantially different, both as to the work to be done and as to the price to be paid. Mr. Parker put the same argument in another way as follows : " Just coming back to what I was saying about the variation " orders and the difference between the request to change before " the offer has been accepted, if it were otherwise the elementary " doctrine that for an offei to become a contract requires an " unqualified acceptance is going to be violated in every case " where the offeror proposes that if it is accepted without qualifi- " cation, the offeree should have a certain right of variation under " the resultant contract, because it would always mean that the " offeree could write back and say : ' I vary. I don't want this. " ' I want something else, and you are bound as of now.' The " reason why that is not so is this, that until an offer is accepted, " as indeed Hodson L.J. said,4 the variation clause, like every- " thing else in the offer, is of no effect. It cannot become " effective until the offer is accepted, just as nothing else in the " offer can become effective and/or operative or contractual until " the offer is accepted." Mr. Parker's submission would involve this conclusion: Suppose that the parties had, in July, 1960, without any further discussion of the work to be done or the price to be paid, executed a simple agreement in the form of the one-page document sent to the plaintiffs in November, 1958, with, annexed to it, documents recording accurately the Part A conditions snd all the other matters specifically agreed by April 11, 1960: there would, as a matter of law, have been no contract. This, according to the submission, would be because essential conditions would not have been agreed, despite the parties' express acknowledgment of and assent to contractual relations. The " contract " would be meaningless and unworkable in law, in the absence of further agreement on the work to be done and the price to be paid. Of course, Mr. Parker says, it is unreal to suppose that the parties would have signed a formal agreement. That is a matter with which I have already dealt. However, says Mr. Parker, even if the plaintiffs had signed, there would have been no contract, despite the intention and recognition of contractual relations which could not, on that hypothesis, have been disputed. The point raised is, I think, in its essence, a point which is 4 [1958] 1 Q.B. 543, 553. capable of being simply expressed, though not, perhaps, simply decided. It is this: None of the terms of an offer is binding on the offeror until the offer is accepted. When the offer is accepted it does not apply retrospectively so as to govern the relations between the parties during the period between offer and accept- ance. In the present case the defendants could not vary the work to be done, so as to have any contractual effect, until the offer had been accepted. Therefore, if the offer had been accepted by the defendants on April 11, 1960, what would have been accepted would and could only have been the original offer, as set out in the tender, for certain specified works, coupled with the right of the defendants to vary the works after, but only after, they had accepted the offer and made the contract. Any purported varia- tions asked for by the defendants before April 11, 1960, would be ineffective, because they could not be made contractually until there was a contract which conferred the right to vary. Logically this position is, I think, unassailable if, but only if, one has to assume that the acceptance of an offer cannot have retrospective effect so as to make the contract apply to things done earlier in anticipation of the contract. But, so far as I am aware, there is no principle of English law which provides that a contract cannot in any circumstances have retrospective effect, or that, if it purports to have, in fact, retrospective effect, it is in law a nullity. If, indeed, there were such a principle, there would be many important mercantile contracts which would, no doubt to the consternation of the parties, be nullities. Frequently, in large transactions a written contract is expressed to have retrospective effect, sometimes lengthy retrospective effect; and this in cases where the negotiations on some of the terms have continued up to almost, if not quite, the date of the signature of transactions with one another, it may be for many months, on various constituent terms of the proposed contract still under discussion. The parties have assumed that when the contract is made--when all the terms have been agreed in their final form-- the contract will apply retrospectively to the preceding trans- actions. Often, as I say, the ultimate contract expressly so provides. I can see no reason why, if the parties so intend and agree, such a stipulation should be denied legal effect. Take, as an example, a simple case. Suppose that a contract for the sale of goods is under negotiation. The offeror has said: " I will sell you 1,000 tons of coal on such and such terms." While the detailed terms of sale are still under negotiation, the offeree asks for the delivery of 500 tons and the offeror makes will count against the contract quantity if and when the contract is made, or perhaps believing wrongly that the contract has already been made. The final terms are then agreed, the offer is accepted, and the contract is made. Even if in the actual acceptance by the offeree no express reference is made to the antecedent delivery of the 500 tons, I should have thought that there would be little room for doubt that the contract was intended to govern, and in law did govern, that antecedent delivery, and that neither party could successfully assert that there was no contract, or that the 500 tons was delivered on a quantum meruit basis; or that the whole 1,00 tons still fell to be deliverd after the contract. Of course, the position would be different if no contract were ultimately made, as, for example, by the offeror's withdrawal of the offer before acceptance. So here. If a contract was made on April 11, 1960, and if the contract expressly provided, or should in law be assumed to have provided, that its terms as then agreed were to apply retrospec- tively to previous acts of the parties done since the date of the date, I see no reason why, in law, effect should not lie given to such a povision. It is true that such retrospectivity may give rise to difficulties for one or other or both of the parties, where things have been done at a time when certain of the terms which ultimately and retrospectively become contractusl were in a state of flux. Thus, it might turn out that something done by a party before the making of the contract had been done otherwise than in accordance with a term as subsequently agreed. That is a matter which may have to be taken into account as tending to militate against the implication of such an agreement as to retro- spective effect. It would not, however, be sufficient to negative the existence of a contract with retrospective effect, if the assent of the parties to such a contract were clearly eatablished. In the present case, so far as I have seem, a retrospective effect is nowhere expressly stated or stipulated. Is it to be implied into the contract of April 11, 1960, if contract there was? That, I conceive, is the crucial question on this issue. It has been said on many occasions that terms are not to be implied merely because they are desirable, or merely because the parties, if they had considered the question, would probably or as reasonable men have agreed such terms. Terms can only be implied where, to use the common phrase, they are necessary in order to give " business efficacy " to the contract. In the present case, in one sense at least, this term of retrospectivity is necessary to give business efficacy to the contract, if contract there was. Mr. Parker's submission is in my view right to this extent, that, in the absence of retrospective effect to the variations clauses, an agreement made on April 11, 1960, would not only be devoid of business efficacy but would not be capable of being a contract at all, because it would pre-suppose a state of affairs (the original specifications and price), which had long since ceased to be realistic or practicable or within the true intentions of either party in relation to the work to be done under an agreement. On the other hand, I do not think that a term such as this can be implied simply for the purpose of upholding the existence of a contract unless it csn clesrly be seen that it conforms with have accepted as a matter of course had the question been raised in the course of the negotiations or at the moment of the making of the supposed contract. But if those factors are present, in my judgment it is right and necessary that such a term should be treated as being implied. I am satisfied from all the circum- stances that both parties, in all that they did in the course of the negotiations, in the defendants' requests or instructions to the plaintiffs to carry out the work as varied, and in the plaintiffs' acceptance of those instructions, were doing so on the under- standing and in the anticipation that, if a contract were made, and whenever it was made, that contract would apply to and govern what was meanwhile being done by the parties. I am satisfied that if, on April 11, 1960 (still assuming that a contract was, otherwise, made on that date), the question had been raised, both parties would have said, as a matter of course: " This con- " tract is to be treated as applying, not only to our future " relations, but also to what has been done by us in the past " since the date of the tender in the anticipation of the making " of this contract." Mr. Littman, in answer to Mr. Parker's submission on this point, did not submit, in those words, that the contract was to be treated as applying retrospectively. He emphasised the fact that the offer itself--the tender with its incorporated conditions-- was not an offer of fixed and immutable work at a fixed and immutable price. The tender contained an offer to construct " the whole of the said works." " Works " is defined for the purpose of, inter alia, the tender in the Part A conditions, and covers not merely the specified work but the work as it might be varied. Similarly with price. The tender referred to " #9,069,700 or such other sum as may be ascertained in accordance with the " said conditions." " Contract price " is defined in the Part A conditions as " the sum named in the tender subject to such " under the provisions hereinafter contained." Those provisions include clauses 51 and 52 the variation clauses. Mr. Littman agreed that nothing was binding on the parties until the offer was accepted. But he contended that when the offer was accepted what was accepted was the original offer to do the work then specified plus any other work which might be directed or with the work varied in any way which might be directed. The obliga- tion, when that offer was accepted, was to do the work contained in the original specification or any variations thereof or additions thereto which had already been directed or might be directed VOL. 1 thereafter. The tender was not refused, nor regarded as having that was something contemplated by the terms of the offer itself. This might again be illustrated by an example, in order to see the principle involved. If A offers to sell to B 50 tons of goods at a stated price, and includes in the conditions of the offer that B may at his option require delivery of up to 1,000 tons, with prices specified for any such excess over the 500 tons; and if, while the detailed terms are still under discussion, B asks A to deliver, and A does deliver, 750 tons, both parties contemplating that this delivery will be governed by the contract if and when made; then a contract is made by B simply accepting the offer in its finally agreed terms. The offer is not to be regarding as with- drawn or varied or amended by virtue of the request for, and delivery of, the 750 tons. The anticipatory requirement of 750 tons is in no way inconsistent with, and in no way amounts to a rejection of, the offer, because the offer contained, as an integral part of it, the right of the offeree to require up to 1,00 tons. It is quite immaterial whether the offer was expressed in one piece of paper, " 500 to 1,000 tons at offeree's option," or in two pieces of paper, one containing an oger of " 50 tons subject to the " attached conditions," and the other, being the attached condi- tions, saymg that the offeree might stipulate for a larger quantity if he so wished. The contract, in that case, applies retrospec- tively to the 750 tons, even though, when that delivery was requested and made, there was no contract. That, in my view, would be the result in law, provided it could be shown that it was the parties' intention, when they made the contract, that the anticipatory dehvery of the 750 tons should be subject to the subsequently agreed contractual terms. That, I believe, illustrates Mr. Littman's contention in the present case and I think that it is correct. Therefore, in my judgment, Mr. Parker's main point, which he argued with great force and persuasiveness, [His Lordship then considered proposition (iv). He held that its requirements were satisfied on the facts of the case, snd that this was not a case where signature of a formal agreement was a condition precedent to the coming into existence of a contractual relationship. He continued : ] I conclude, therefore that a con- tract came into existence between the parties on April 11, 1960, for the carrying out by the plaintiffs of the civil engineering work for the Trawsfynydd Nuclear Power Station, at least substantially on the terms set up by the defendants in their points of defence; and that that contract was intended by the parties to be retro- spective to govern their relationship from the inception of the work, and that there is no reason why, as a matter of law, that retrospective intention should not be effective. In my judgment, the plaintiffs are contractually bound to continue the work and are entitled to be paid on the basis of a contract and not on the basis of a quantum meruit. Order accordingly. Solicitors. Clifford-Turner & C.; Slaughter & May. [QUEEN'S BENCH DIVISION] * EDWARDS v. SKYWAYS LTD. Contract--Formation--Intention to create legal relationship--Meeting between employers and trade union -- Intention to agree -- Promise by employers to make " ex gratia " payment to employees leaving through redundancy--Whether employees a legally enforceable right to payment--" Ex gratia." The board of an airline company by resolution empowered its secretary " in his discussions with the British Air Lime Pilots " Association to agree should circumstances require to the pay- " approximating to the company's contributions for each member " of the pension and superannuation fund." A meeting subse- quently took place between representatives of the association and of the company, there being five or six representatives on each side. At that meeting the principle was accepted that "pilots declared " redundant and leaving the company would be given an ex gratia " payment equivalent to the company's contribution to the pension " fund. They would, of course, be entitled to a refund of their the assooiation's " Newsletter." The plaintiff a pilot employed by the company, was declarsd redundant and left the company's service- Having been informed by the assistant secretary of the company of the approximate amount of what his pension would be if he chose to draw it, and of what he would receive on a refund of his contributions and the ex gratia payment, he informed the company on April 18, 1962, that he had decided to take the refund and the ex gratia payment. On May 2, 1962, the company paid the plaintiff the amount of his own contributions, and on the following day the board resolved to rescind its previoua decision to make ex gratia payments to redundant aircrew. In an action by the plaintiff to recover the amount of the ex gratia payment, in which, although it was conceded there was consideration for the company's promise, the company contended that he had no legally enforceable right to it:-- Held, (1) that where, as here, an agreement was reached in the course of business relations, and there was an intention to agree, there was a heavy onus on the party alleging that it was not intended to give rise to legal obligations (post, p. 355). Rose and Frank Co. v. J. R. Crompton & Bros. Ltd. [1923] 2 K.B. 261 considered. (2) That the words " ex gratia " in a promise to make a pay- ment, although indicating that pre-existing legal liability was not admitted, did not carry a necessary or even probable implication that the promise was intended to be without legal effect (post, p. 356) ; and, there being no special circmustances whereby such an implication could be given to the words, the company had failed to establish that the parties affirmatively intended not to enter into legal relations in respect of the company's promise to pay (post, p. 357). The plaintiff, therefore, was entitled to recover the con- tributions paid by the company to the fund for him. [Reported by TIMOTHY RYLAND, Esq., Barrister-at-Law.] ACTION. The following statement of facts is taken from the judgment: The plaintiff, Captain Peter John Edwards, was employed as an aircraft pilot by the defendant company, Skyways Ltd., from June, 1955, until March 31, 1962, with the rank of first officer for the first few months, and thereafter as captain. His terms of employment provided for three months' notice of termination On January 26, 1962, the company, being in financial difficulty and not having sufficient work to continue to employ all its staff, wrote a letter to the plaintiff, at the same time sending similar letters to other persons. The plaintiff was told that it would be " necessary to declare a redundancy of approximately 15 per cent. " of our pilot strength " and he was given three months' notice. He was offered alternative employment either as a captain based at Lympne Airport with a subsidiary company (which would have involved him in moving his home) or as a first officer on the com- pany's four-engined fleet (which would have involved reduction of pay and status). The question of the threatened redundancy was taken up with the company by the British Air Line Pilots Association, to which the plaintiff belonged. The association took the view that certain procedure which had been agreed in 1948 in the National Joint Council with regard to redundancies had not been observed by the compsny. A meeting took place between representatives of the associa- tion and representatives of the company on February 8, 1962. It was not in dispute that the representatives of the association were the duly authorised agents of the plaintiff, and that the represen- tatives of the company had full authority from that company in respect of all that was done and agreed at that meeting affecting the plaintiff. Two days before the meeting, on February 6, at a meeting of the board of directors of the company, a resolution had been passed in these terms: "The board approved that the secretary be em- " powered in his discussions with the British Air Line Pilots " Association to agree should circumstances require to the payment " to redundant aircrew members of an ex gratia amount approxi- " mating to the company's contributions for each member of the " pension and superannuation fund." It appeared that the company realised that the association would be seeking to secure some form of compensation for its members who were being declared redundant and that it was accordingly authorising the secretary, in advance, to deal with the question when it arose. The secretary of the company, David John Davies, himself drafted the resolution. It was based on what had been done at the time of an earlier redundancy in the compsny in 1959, when, after discussions with the association, the company had paid sums to redundant aircrew stag, the sums being at any rate closely related in mount to the total superannuation contributions made by the compsny in respect of the particular redundant employee. At the meeting on February 8, the company's representatives included amongst others, the secretary, and Denis Taylor Lees, the personnel officer. The association's included, amongst others, Follows, who was then the secretary, and Captain Clink, the chairman of the association's local committee with the company, who was also an employee of the company. The plain- tiff himself was not present. So far as relevant to the issues in the action, there was no real dispute on any matter of substance as to what took place at the meeting. The substance was accurately summarised in a docu- ment headed "Notes," which was prepared the next morning by Follows with the assistance of Captain Clink on the basis of manuscript notes made during the meeting. Megaw J. found that everyone present at the meeting thought that all major difficulties had been resolved and that various matters of principle had been agreed. One of the matters discussed and agreed was that the plaintiff (and there were other pilots in a similar position) would have been entitled under his terms of service, if he left his employ- ment with the company for any reason other than dismissal for misconduct, to take a paid-up pension, that was, a pension which would, without further contribution being made by anyone, have become payable when he reached the normal retiring age stated in the pension scheme. It would have been calculated by refer- ence to the total contributions paid, up to date, by himself and by the company on his account. Alternatively, the plaintiff would have been entitled to withdraw his own contributions in cash. Follows had in mind what had happened in the 1959 redundancy when the company had agreed to pay, and had paid, redundant pilots sums of money equivalent, at least broadly, to the company's pension contributions in respect of them, in addition entitled to withdraw. He therefore at the meeting asked that similar financial compensation should be paid by the company on this occasion. Davies, on behalf of the compant, having already in anticipation received his board's authority quickly and readily agreed. That agreement was recorded as follows in the " Notes " : " The following general principles were then accepted in relation " to the redundsncy and consequential matters " ; and then, after certain other matters, there appeared : " Pilots declared redundant " and leaving the company would be given an ex gratia payment " equivalent to the company-s contribution to the pension fund. " They would, of course, be entitled to a refund of their own " contributions to the fund." The pilots affected were informed of the various decisions and agreements in a publication called " Newsletter," addressed by the association to its members on February 9. The agreement as to the company's contributions was there recorded as : " After " considerable discussion, the following points were agreed between " the company and the association: . . . (4) To those pilots who are " finally declared redundant, the company will make an ex-gratia " payment equivalent to their (the company's) own contributions " to the provident or pension scheme. " There was reason to believe that Davies, the company's secretary, saw that " Newsletter,' and did not challenge the accuracy of what was there recorded. His own account of what he said on the point at the meeting was: " Having the board's " authority, I said we would make ex gratia payments approxi- " mating to the company's contributions for those pilots who " chose to take their contributions rather thsn paid-up pension " policies," and it was probable that his recollection was right when he said that he himself used the words "approximating to." Both that phrase and " equivalent to " may have been used during the discussion but no one attached any particular signi- ficance to the point. Davies agreed that " equivalent to " was a reasonable interpretation of what he had said. Lees agreed that everyone left the meeting with a clear impression that the company would pay an amount equal to the company's contribution. Megaw J. was satisfied that that was the substance of what was under- stood and agreed when the meeting ended. The plaintig, not desiring to accept the company's offer of continuing employment with the various disadvantages involved, sought and obtained other employment to begin on April 1, and the company agreed that he should leave their service on March 31, before the full three months' notice had run. On April 15, 1962, the plaintig wrote to the assistant secretary of the company asking for information to enable him to make up his mind about the option between, on the one hand, his undoubted legal right to take the paid-up pension, and, on the other hand, the right which it had been agreed that he should have, to withdraw his own contributions and receive what he described as : " The amount of the ex gratia payment which the " company proposes to make in the event of my taking the cash refund. " The assistant secretary replied on April 17, giving him approximate figures : a paid-up policy of about #180 per annum at the age of 50; his own contributions of approximately #630 less tax of approximately #60; and " the ex gratia payment " will be approximately half as much again as your own contribu- " tion, but as this is purely ex gratia, there is no question of tax." The following day the plaintiff wrote to the assistant secretary telling him how he had decided to exercise what he believed to be his option: I have decided to take the cash refund of my " contributions, with the company's ex gratia payment." The plaintiff said in evidence that he could not be sure whether he would have exercised the option the same way if he had not thought that the company were going to pay him that which they had agreed to pay in respect of their own contribu- tions; he would certainly have thought much more deeply about it, but he might still have decided to take the immediate cash provided by the refund of his own contributions. On May 1, 1962, the company sent the plaintiff a cheque for #609 ls. In respect of his own contributions which the plaintiff accepted in the belief that a further sum was to follow. On May 2, 1962, the day after that payment had been made, the board of directors of the company met and passed another resolution in these terms : " It was resolved that the company's previous " rescinded because of the large number of staff involved and in " view of the position that the company's contributions to the " scheme which were returnable to the trustees could not, under " the rules of the scheme, be utilised directly by the company. " Mr. Rylands and Mr. Davies would draft a letter to the staff " concerned explaining the position and Mr. Davies would arrange " with the insurance company for an extension of the option period " to be made for all aircrew members who had already opted for " cash so that they could reconsider their decision." Further payment was not made to the plaintiff, and he brought this action claiming an account of the contributions by the company to the superannuation fund in respect of him and, relying on an agreement reached at the meeting on February 8, 1962, alternatively, on a promise contained in the letter to him of April 17, 1962, payment to him of a sum equal to that mount, alternatively, the like sum as damages for breach of contract. The company, inter alia, contended that the words used at the meeting to the effect that it would make an ex gratia payment represented a statement of intention only and denied that they created any legal relationship or that it was in breach of the alleged or any agreement. James Comyn Q.C. and J. D. F. Moylan for the plaintig. Adrian Hamilton for the company. The following cases, in addition to the cases referred to in the judgment, were cited in argument: Central London Property Trust Ltd. v. High Trees House Ltd.(1); Robertson v. Minister of Pensions (2); Combe v. Combe (3); and Thomas v. Brown.(4) Cur. adv. vult. January 21. MEGAW J. read the following judgment, which stated the facts as set out above, and continued: The issue in this action is whether, as a result of what was agreed at the meeting on February 8, 1962, the plaintiff acquired a legal right, when he decided not to accept any of the offered alternatives, 1 [1947] K.B. 130; 62 T.L.R. 559. 3 [1951] 2 K.B. 215; [1951] 1 2 [1949] 1 K.B. 227; 64 T.L.R. T.L.R. 811; [1951] a All E.R. 767, 526 [1948] 2 All E.R. 767. C.A. 4 (1876) 1 Q.B.D. 714, D.C. VOL. 1 25 (1) but to leave the company's service and withdraw his own pension contributions, to be paid by the company a sum equal to the contributions which it had paid to the pension fund on his behalf. The plaintiff says that there was a legally binding contractual right. The company says that, while there may have been a moral right, or an obligation binding in honour, there was not a legally enforceable right. [His Lordship considered the relevant correspondence and read the second resolution of the board of the company of May 2, 1962, as set out above, and continued : ] I offer no comment, except to mention the explanation given on behalf of the company. It is said that they found themselves in financial difficulties with various creditors, secured and unsecured, pressing them. Although at the time when they made the promise they intended to honour it, later they thought that in the existing financial situation they should decline to honour it because they believed that it was not legally binding, and because other creditors, with legal obligations, might have been prejudiced. The company has not gone into liquidation. The plaintig has not been paid because it was merely, as I understood the company's view, a moral obligation which it repudiated. It is not necessary for me to set out the subsequent history, since it does not affect the issue. Was there a legal obligation on the part of the company? The company admits, as I understand it, that at the meeting a promise was made on its behalf with its authority, although the actual word " promise " was not used. In the defence it was pleaded that no consideration moved from the plaintiff. That plea was expressly abandoned at the hesring. It was conceded that there was consideration. The company admits that it was its intention to carry out its promise when it was made, and that the plaintiff's representives, and the plaintiff himself, believed, and acted in the belief, that the promise would be fulfilled. Every- one, at the end of the meeting, believed that there was an agreement which would be carried out. But the company says that the promise and the agreement have no legal effect, because there was no intention to enter into legal relations in respect of the promised payment. It is clear from such cases as Rose and Frank C. v. J. R. Crompton & Bros. Ltd.1 and Balfour v. Balfour2 that there are case in which English law recognises that an agreement, in other respects duly made, does not give ride to legal rights, because the parties have not intended that their legal relations should be affected. Where the subject-matter of the agreement is some domestic or social relationship or transaction, as in Balfourr v. Balfour,2 the law will often deny legal consequences to the agreement, because of the very nature of the subject- matter. Where the subject-matter of the agreement is not 1 [1923] 2 K.B. 261. 2 [1919] 2 K.B. 571; 35 T.L.R/ 609, C.A. domestic or social, but is related to business affairs, the parties may, by using clear words, show that their intention is to make the transaction binding in honour only, and not in law; and the courts will give effect to the expressed intention. Scrutton L.J. expressed it thus, in Rose and Frank Co. v. J. R. Crompton & Bros. Ltd.(3): " Now it is quite possible for parties to come to an agreement by accepting a proposal with " the result that the agreement concluded does not give rise to " legal relations. The reason of this is that the parties do not " intend that their agreement shall give rise to legal relations. " This intention may be implied from the subject-matter of the " agreement, but it may also be expressed by the parties. In " social and family relations such an intention is readily implied, " while in business matters the opposite result would ordinarily " follow. But I csn see no reason why, even in business matters, " the parties should not intend to rely on each other's good faith " and honour, and to exclude all idea of settling disputes by any " outside intervention, with the accompanying necessity of " expressing themselves so precisely that outsiders may have no " difficulty in understanding what they mean. If they clearly " express such an intention I can see no reason in public policy " why effect should not be given to their intention." In the same case, Atkin L.J. said (4): " To create a contract " there must be a common intention of the parties to enter into " legal obligations, mutually communicated expressly or impliedly. " Such an intention ordinarily will be inferred when parties enter " into an agreement which in other respects conforms to the rules " of law as to the formation of contracts. It may be negatived " impliedly by the nature of the agreed promise or promises, as " in the case of offer and acceptance of hospitality, or of some " agreements made in the course of family life between members " of a family as in Balfour v. Balfour.(5) If the intention may be " negatived impliedly it may be negatived expressly." In the present case, the subject-matter of the agreement is business relations, not social or domestic matters. There was a meeting of minds--an intention to agree. There was admittedly, consideration for the company's promise. I accept the propositions of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one. Counsel for the plaintiff also submitted, with the support of the well-known textbooks on the law of contract, Anson and Cheshire and Fifoot, that the test of intention to create or not to create legal relations is " objective." I am not sure that I know what that means in this context. I do, however, think that there are grave difficulties in trying to apply a test of the actual intention or understanding or knowledge of the parties: especially where the alleged agreement is arrived at between a 3 [1923] 2 K.B. 261, 268. 5 [1919] 2 K.B. 571. 4 Ibid. 293. VOL. 1 25 (2) limited liability company and a trade association; and especially where it is arrived at at a meeting attended by five or six representatives on each side. Whose knowledge, understanding or intention is relevant? But if it be the " objective " test of the reasonable man, what background knowledge is to be imputed to the reasonable man, when the background knowledge of the ten or twelve persons who took part in srriving at the decision no doubt varied greatly between one and another? However that may be, the company says, first, as I under- stand it, that the mere use of the phrase "ex gratia" by itself, as a part of the promise to pay, shows that the parties contem- plated that the promise, when accepted, should have no binding force in law. It says, secondly, that even if the first proposition is not correct as a general proposition, nevertheless here there was certain background knowledge, present in the minds of every- one, which gave unambiguous significance to "ex gratia" as excluding legal relationship. As to the first proposition, the words " ex gratia," in my judg- ment, do not carry a necessary, or even a probable, implication that the agreement is to be without legal egect. It is I think, common experience amongst practitioners of the law that litiga- tion or threatened litigation is frequently compromised on the terms that one party shall make to the other a payment described in express terms as " ex gratia " or " without admission of liability." The two phrases are, I think, synonymous. No one would imagine that a settlement, so made, is unenforceable at law. The words " ex gratia " or " without admission of liability " are used simply to indicate--it may be as a matter of amour propre, or it may be to avoid a precedent in subsequent caaes-- that the party agreeing to pay does not admit any pre-existing liability on his part; but he is certainly not seeking to preclude the legal enforceability of the settlement itself by describing the obvious reasons why the phrase might have been used by the company in just such a way. It might have desired to avoid conceding that any such payment was due under the employers' contract of service. It might have wished--perhaps ironically in the event--to show, by using the phrase, its generosity in making a payment beyond what was required by the contract of service. I see nothing in the mere use of the words " ex gratia," unless in the circumstances some very special meaning has to be given to them, to warrant the conclusion that this promise, duly made and accepted, for valid consideration, was not intended by the parties to be enforceable in law. The company's second proposition seeks to show that in the circumstances here the words " ex gratia " had a special meaning. What is said is this: when a payment such as this is made by an employer to a dismissed employee the question whether it is subject to income tax in the hands of the recipient is important. It was understood by the company and by the association, and by all their respective representatives at the meeting, that if the company's payment were made as the result of a legally binding obligation, it would be taxable in the hands of the recipient; where- as, if it were to be made without legal obligation on the part of the company, it would not be taxable. It was not argued before me whether this assertion is right or wrong in law. It was said by the company that that is quite immaterial; what is material is that the parties so believed. Thus, it is said, the phrase " ex " gratia " was used, and was understood by all present to be used, deliberately and advisedly as a formula to achieve that there would be no binding legal obligation on the compsny to pay, and hence to save the recipient from a tax liability. It is said that the offer was accepted by the association with full knowledge and under- standing of these matters. Hence, it is said, the agreement by tacit consent, a consent evidenced by the use of the words " ex " gratia " against this background of common understanding, was an agreement from which legal sanction and consequences were excluded. In mu judgment, that submission also fails because the evidence falls far short of showing that this supposed background of avoid- ance of tax liability was present as an important element in the minds of all, or indeed any, of the persons who attended the meeting of February 8; or, if this be something different, in the minds of the company or of the association; or that they all, or any of them, directed their minds to the significance of the words " ex gratia " which is now suggested on behalf of the company. The question of the liability, and the possible influence thereon of the use of the words " ex gratia," may indeed have been present in some degree, and as one element, in the minds of some of the persons present at the meeting. That, however, is far from sufficient to establish that the parties--both of them--affirmatively intended not to enter into legal relations in respect of the com- pany's promise to pay. Lastly, the company say that, even if the agreement were otherwise in all respects a binding agreement, it is not enforceable because its terms are too vague. This is founded on the sub- mission that the precise words used by Davies at the meeting were " approximating to "; that these precise words are a part of the agreement; that they leave a discretion to the company; that therefore there is no enforceable agreement, and they can refuse to pay anything. I have already indicated my conclusion on the evidence as to what was indeed agreed at the end of the meeting. If this be right, there is nothing in this point. Even if it were wrong, I do not think that English law provides that in such circumstances the plaintiff would be entitled to nothing. At most " approximating to," if that were the contractual term, would on the evidence connote a rounding off of a few pounds downwards to a round figure. If a contract for the sale of goods is valid and binding when it provides for " about 1000 tons in " seller's option," or " 1000 tons, up to 10 per cent more or " less in buyer's option," it would seem hard to justify treating such a contract as this as a nullity, and I do not think that the law so requires. I do not have to consider a further issue of alleged failure to mitigate damages, as this was expressly abandoned by the com- pany at the hearing. February 26. The court was informed that the plaintiff's damages had been agreed at #880. Judgment for the plaintiff for #880 with costs. Solicitors: Evan Davies & Co., McKenna & Co. [QUEEN'S BENCH DIVISION.] TAYLOR v. ALLON. Road Traffic -- Third party insurance -- Driving uninsured -- Insurer admittedly on risk--Cover note issued after c1piration of policy-- New insurance company engaged -- Whether extended cover note Sufficient cover--Whether extended cover note arising by offer and acceptance--Whether any acceptance--Whether offence committed-- Road Traffic Act, 1960 (8 & 9 Eliz. 2, c. 16), s. 201. Contract--Formation-Offer and acceptance--Motor vehicle insurance-- Issue of corer note pending renewal of policy--Whether accepted by assured. The defendant's motor car was insured under a policy expiring on April 5, 1964. On April 16 he was insured under a temporary cover note for 30 days from a second insurance company. He was also in possession of a temporary cover note from his old insurance company purporting to cover him for a period commencing on and including April 6, when his old policy expired. The defendant used the car on a public road on April 15 and was charged with using a motor car on a road when there was not in force in relation to the user of the vehicle such a policy of insurance and such security in respect of third party risks as complied with Part VI of the Road Traffic Act, 1960, contrary to section 201 of that Act. (1) The justices, considering that the extended cover note from the old insursnce company was not supported by consideration, and despite the evidence that the old insurance company considered themselves liable in the event of an accident, rejected this evidence and con- victed the defendant. [Reported by TIMOTHY RYLAND, Esq., Barrister-at-Law.] 1 Road Traffic Act, 1960, s. 201: " to the user of the vehicle by that "(1) Subject to the provisions of this " person or that other person, as the " Part of this Act, it shall not be " case may be, such a policy of insur- " lawful for a person to use or to " ance or such a security in respect of " cause or permit any other person to " third-party risks as complies with " use, a motor vehicle on a road " the requirements of this Part of this " unless there is in force in relation " Act. . . ." On appeal by the defendant on the ground that the old insurance company's extended cover note was valid:-- Held, that in order to comply with the provisiona of the Act a valid insurance for the purposes of the section had to arise from an enforceable and effective contract ; and that the contract, if any, contained in the temporary cover note must have arisen from offer and acceptance. Accordingly, the extended cover note must be treated as an offer to insure for the future, but it was neceseary for the defendant to show at the least that he had taken out his motor car knowing of the extended cover note and in reliance upon it. Since he had failed to do so, there could be no valid acceptance and his appeal would be dismissed. CASE STATED by Langbaurgh North, North Riding of Yorkshire, justices sitting at South Bank. On April 23, 1964, an information was preferred by the prosecutor against the defendant that he did on April 15 1964, on Peel Street, South Bank, use a motor car when there was not in force in relation to the user of the vehicle such a policy of insurance or such a security in respect of the third party risks as complied with Part VI of the Road Traffic Act, 1960, contrary to section 201 of the Road Traffic Act, 1960. The justices heard the information on May 14 and 29, 1964 and found the following facts: The defendant was using a motor car on April 15, 1964, on Peel Street, South Bank. The defen- dant's solicitor produced a temporary cover note issued to the defendant by the Federated Employer's Insurance Association Ltd. (hereinafter referred to as " the old insurance company ") for a period of 15 days commencing from and including April 6, 1964. The defendant paid to the old insurance company a premium for extra payment to the old insurance company for that temporary cover note. The old insurance company considered that the defendant was covered in respect of such insurance as was neceasary to comply with the requirements of Part VI of the Road Traffic Act, 1960 by reason of the issue of this temporary cover note for the period stated therein, and would have met a claim against the defendant of that nature arising during the stated period. The defendant's solicitor also produced a tem- porary cover note issued to the defendant by the Fire Auto and Marine Insurance Co. Ltd. (hereinafter called " the new " insurance company ") for a period of 30 days commencing from and including April 16 1964. That document stated that the defendant had paid the sum of #25 6s. 6d. to the new insurance company and the justices were of the opinion that he had no intention of renewing his insurance with the old insurance company. It was contended on behalf of the defendant that the premium paid by him to the old insurance company for the year ending April 5 1964, constituted a valuable consideration for the grant of the temporary cover note; that, whether or not there was valuable consideration for the grant of the temporary cover note, the old insurance company, having issued it, would be liable to indemnify the defendant in respect of the liability which it pur- ported to cover; that in any event the old insurance company would in fact have accepted a duty to indemnify the defendant in respect of the liability which the temporary cover note purported to cover, thereby avoiding the mischief at which the Act was aimed, and that in those circumstances there was in force at the material time in relation to the user of the vehicle in question such a policy of insurance in respect of third party risks as complied with Part VI of the Road Traffic Act, 1960. It was contended on behalf of the prosecutor that a contract of insurance was only enforceable against the old insurance company if the defendant had given valuable consideration; that the defendant had not given a valuable consideration for the temporary cover note, that past consideration was no considera- tion, that the old insurance company was not therefore liable to indemnify the defendant in respect of the liability which the temporary cover note purported to cover, and that in consequence there was not in force at the material time in relation to the user of the vehicle in question such a policy of insurance in respect of third party risks as complied with Part VI of the Road Traffic Act, 1960. The justices were advised that the validity of the insurance contract was for them to decide, and that they were not bound by the evidence of the old insurance company's representative; further, that the issue of a cover note purporting to extend the period of insurance already granted formed the basis of a fresh contract and as such must be supported by fresh consideration. The justices could find no evidence of such consideration and accordingly were of the opinion that the contentions of the prose- cutor were correct and they therefore convicted the defendant and fined him #2. The question for the opinion of the High Court was whether the temporary cover note issued to the defendant by the old insurance company was such a policy of insurance in respect of third party risks as complied with Part VI of the Road Traffic Act 1960 and was in force at the material time in relation to the user of the vehicle in question. Christopher Young for the defendant. J. Deby for the prosecutor. The following cases were cited in argument: Carnill v. Rowland (2); Edwards v. Griffiths (3); Mumford v. Hardy.(4) LORD PARKER C.J. This is an appeal by way of case stated 2 [1953] 1 W.L.R. 380: [1953] 1 4 [1956] 1 W.L.R. 163; [1956] 1 All E.R. 486, D.C. 3 [1953] 1 W.L.R. 1199; [1953] 2 All E.R. 874, D.C. from a decision of justices for the North Riding of Yorkshire sitting at South Bank who convicted the defendant if using a motor car on a road when there was not in force in relation to the user of the vehicle such a policy of insurance and such a security in respect of thurd party risks as complied with Part VI of the Road Traffic Act, 1960, contrary to section 201 of that Act. The justices in the event, in my judgment quite rightly, fined him a nonunal amount, some #2. The short facts were these. The defendant was found using the motor car on a road on April 15, 1964. In fact he had been insured by an insurance company called the Federated Em- ployers' Insurance Association Ltd., the policy expiring on April 5. On April 16 he obtained a temporary cover note for 30 days from a fresh insurance company, and there is a finding by the justices that on the expiration of the old policy he never intended to renew it with the old insurance company. The case is not very illuminating; we have been told that the defendant never gave evidence, but at some stage the solicitor appearing for him pro- duced a temporary cover note from the old insurance company, purporting to cover him for 15 days commencing from and including April 6, when the insurance policy expired. Accord- ingly, on April 15 when he used the vehicle, that extended cover was on the face of it in force. The justices quite rightly came to the conclusion that tge insurance which had to be in force for the purposes of section 201 must be an effective and enforceable contract of insurance. The question at the trial was whether that extended cover by the old insurance company was enforceable or not. A representative of the insurance company gave evidence and informed the court that the insurance company considered themselves liable, and in the case of an accident would have paid. Notwithstanding that, the justices came to the conclusion that they were not bound by that evidence, and that the extended cover was not supported by any consideration, was therefore unenforceable, and accordingly that the offence was made out. In this court Mr. Young has made a number of submissions. He savs in the first place that a " policy of insurance " which are the words in section 201, is defined by section 216 of the Act in this form: " 'policy of insurance' includes a covering note "; and he maintains that a covering note in the form in question which had been current for a number of years when the Act of 1960 was passed was clearly intended by the legislature to be in the same position as a policy of insurance. For my part I cannot accede to that submission. Once one realises that " insurance " means insurance pursuant to an enforceable contract, then it seems to me that " covering note " referred to in the definition clause must itself be a covering note which is enforceable as a contract. He next submits that having regard to the evidence given by the insurance company, the mischief which section 201 of the Act is designed to guard against did not arise. because in Vol. 2. 41 the event of an accident the insurance company would have paid. In that connection Mr. Young refers to a number of authorities where this court, in deciding whether the terms of a particular policy covered the insured at the time, has in the case of ambiguity used words to the effect that since the insurance company had stated they would pay, the mischief which the Act was designed to guard against was, as it were, cured. Let me say at once that as I understand it all those were cases where there was a valid contract of insurance. The question was: what does it mean? As I understand the various judgments, without referring to them, the court was saying: since such a contract would have to be construed contra proferentem and therefore against the insurance company, valuable guidance was given by the evidence of the insurance company's representa- tive that they assumed the liability. None of those cases go anything like the length of saying that when there is doubt as to whether there is an enforceable contract, the insurance company can give any help to the court on the matter. The third submission which he makes is the submission which has given rise to the longest argument and the greatest difficulty in this court. He submits that the covering note is a good con- tract in that there must be implied a promise to pay for such cover, a promise to pay for such cover in so far as it is not absorbed, as it were, by the renewal premium when paid. He puts the matter in a slightly different form also by assuming a case in which the insurance company claimed a declaration that the cover note was invalid, when, he submits, the assured could well say that having acted on the representation in the' cover note, the insurance company was estopped from claiming that it was invalid. The case does not exhibit the cover note in question, but with the consent of counsel on both sides the court has been supplied with the original and invited to look at it. It takes the form of a motor renewal notice referring to the number of the policy and the due date for the renewal premium namely April 6. It sets out the annual premium and the credit in respect of a no-claims bonus. It goes on to state that the " renewal premium for the " above mentioned policy is due for payment on the date stated " and should be remitted to the agent named hereon who will " deliver the new certificate of motor insurance and official " renewal receipt." It explains that a certificate under the Road Traffic Act cannot be issued until the premium has been paid, and it states that it is an offence against the Act to use a motor vehicle on a road without a certificate. Finally it says: " The " object of the covering note on the reverse side of this notice is " to protect you under the Road Traffics Acts should the certificate " not be delivered to you by the due date. Please, therefore, " retain this notice in your possession until you receive the " Temporary cover note. Insurance is hereby granted in terms " of the policy referred to in this notice for a period of 15 days " commencing from and including the due date referred to in " this notice, but only in respect of what I may call quite generally third party insurance, " subject othervise to the terms, " exceptions and conditions of the said policy, and in accordance " with the particulars of the certificate of motor insurance relating " to the said policy up to the said due date, and provided that " an insurance cowering the aforesaid liability haa not been " effected with any other authorised insurer." Bearing in mind that a valid insurance for the purposes of the section must arise from an enforceable contract, it seems to me that the contract, if any, contained in the temporary covering note must arise by offer and acceptance. It is conceded that the policy that expired had no provisions for extended cover, and accordingly this document sending this temporary covering note must in my judgment be treated as an offer to insure for the future. It may be, although I find it unnecessary to decide in this case, that there can be an acceptance of such an offer by conduct and without communication with the insurance company. It may well be, as it seems to me, that if a man took his motor car out on the road in reliance on this temporary cover, albeit that there had been no communication of that fact to the insur- ance company, there would be an acceptance, and that the contract so created would contain an implied promise by the insured to pay, either in the renewal premium when that was paid, or if it was not paid, for the period for which the temporary cover note had, as it were, been accepted. I find it unnecessary in the present case to decide that matter, and for this reason, that it seems to me that the defendant must at any rate go to the length of saying that he knew of the temporary cover and that he took out his motor car in reliance on it. In fact as I have already said the defendant never gave any evidence at all. Further, from the justices' clerk's notes, which again we have been allowed to refer to, it appears that when he was stopped by the police and asked to produce his insurance certificate. he produced the old certificate of insurance which expired on April 5 and he also produced the cover note from the new insurance company which commenced on April 16. When the police pointed out that therefore on April 15 he was not covered he not only did not refer to this temporary cover note but he said then that he had been negotiating a change of insurance companies, and did not realise that it, presumably the original certificate, had run out. It was only at the hearing, and I think at the second hearing, that this temporary cover note, this extended cover, was produced by the defendant's solicitor. In those circumstances it seems to me that the defendant has never gone to the length of showing that he knew of the tem- porary cover, that he acted in reliance on it, and thereby had accepted the offer contained in it. I think that the justices came to a correct decision in law I would dismiss this appeal. MARSHALL J. I agree. WIDGERY J. I agree. Solicitors: Mr. J. B. Izod for Mr. D. C. Haslam, Middles- brough; Gush, Phillips, Walters & Williams. [COURT OF APPEAL] * ROBOPHONE FACILITIES LTD. v. BLANK Contract--Formation--Offer and acceptance--Long-term hiring of goods -- Agreement only to become binding by signature on owner's behalf--Whether acceptance notified to hirer--Whether binding contract--Whether appeal lies from county court on Contract--Penalty--Hire, contract of--Hire of equipment for fixed period--Premature termination of contract by hirer--Provision in damages Whether penalty. Court of Appeal--Argument not raised below--County court--Appeal from--Point of law not taken in county court Not to be taken in Court of Appeal. Damages--Hire, contract of--Sale of goods principles--Hire of equip- ment for fixed period--Premature termination of contract by hirer--Provision in contract for half total rentals payable to be paid as liquidated damages--Whether penalty--Discount for damages in lump sum--Measure of damages. The plaintiffs were distributors of telephone-recording machines manufactured by an associated company. On June 4, 1965, a salesman of the plaintiffs called on the defendant, an accountant, who said he wished to hire one of the machines. The salesman produced a printed form of rental agreement and filled in the period of hire as seven years and the hire rent as #17 11s. per quarter. The defendant signed the space for the hirer and told the salesman that he wanted the equipment quickly. No one signed for the plaintiffs. On the back of the form there were 15 printed terms, including clauses that the hirer would enter into such agreement as the Postmaster-General might require in relation to the installation, that the hirer would pay the hire rent and continue the hiring for the period of hire and that the agreement should become binding on the plaintiffs only clause 10 the agreement might be terminated forthwith by the plaintiffs (a) if required in writing by the Postmaster-General or (b) if the hirer committed any breach of the terms. By clause 11 if the agreement were to be terminated under clause 10 (a), the hirer was to be liable to pay the rentals up to the date of actual termination, but if the agreement was terminated for any other reason whatsoever, then the hirer should pay to the company all rentals accrued due " and also by way of liquidated or agreed damages a sum equal to 50 per cent. of the total of the rentals which would thereafter have become payable." On June 9, 1965, the salesman took Post Office appllcation forms for permission to instal the machines to the defendant for signature. The defen- dant signed the forms with a modification. On June 15, after telephoning to the plaintiffs three times to ask when the machine was coming, the defendant wrote to their salesman saying that in view of the failure to notify him whether the " provisional agree- ment " was accepted, he wished him " to consider the matter cancelled." On June 29, the defendant cancelled his instructions to the Post Office for the installation of the machine. On July 8, 1965, the plaintiffs issued a writ against the defen- dant claiming #245 14s. under clause 11. The case was remitted to the county court and the plaintiffs amended so as to claim " alternatively damages." The defendant appeared in person in the county court. Evidence was given, inter alia, by a company secretary for the plaintiffs that a machine cost #105 to manu- facture that the cost of installation was #3, the cost of removal #2 and the cost of maintenance (#14 a year for seven years) #98, a total of #208, and that as the total rental receipts over the seven years would have been #491 8s., the plaintiffs had in fact lost #283 8s. There was no note of any cross-examination of that witness. The form of rental agreement of June 4 was produced bearing a signature on behalf of the plaintiffs but no evidence was given as to when it was signed. Judgment was given for the plaintiffs for #245 14s. On appeal by the defendant, who, inter alia, raised the point that since the plaintiffs had never notified him of their accep- tance, there was no concluded contract: -- Held, dismissing the appeal (Lord Denning M.R. dissenting), (1) that although there was no express evidence that the plaintiffs' acceptance of the offer of the defendant made by his signing the before he purported to cancel it on June 16, the only reasonable inference was that their salesman did so either before or when he gave the defendant the Post Office forms for signature, an act which was only consistent with the plaintiffs' acceptance of the contract. Per Lord Denning M.R. The document of June 4, although called an agreement, was only an offer. It could be revoked by the defendant at any time before it was accepted by the plain- tiffs (post, p. 1432D). Until the plaintiffs notified the defendant of their acceptance, the agreement was not complete; it was provisional (post p. 1432G). Per Diplock L.J. The rule is well settled that there is no right of appeal from the county court upon a point of law which was not raised and submitted to the county count judge at the trial Dimmock [1915] 1 K.B. 662 is no exception: the question of law was there raised at the trial (post, p. 1441B--C). (2) That on the evidence the plaintiffs' loss was more than the sum recoverable under clause 11 of thc agreement, which was a genuine pre-estimate of the plaintiffs' loss and so recoverable as liquidated damages. Per curiam. In assessing damages in such a case, a discount must be given for immediate receipt of a lump sum as damages. Interoffice Telephones Ltd. v. Robert Freeman Co. Ltd. [1958] 1 Q.B. 190; [1957] 3 W.L.R. 971; [1957] 3 All E.R. 479, C.A. applied. Per Lord Denning M.R. Clause 11 may be fair enough when when the agreement has, as here, only lasted ten days. It cannot be regarded as a genuine pre-estimate of loss. It is a penalty and cannot be recovered. The actual loss suffered by the plaintiffs would depend on the state of the market (post, p. 1436A--D). Per Diplock L.J. The court should not be astute to descry a " penalty clause " in every provision of a contract which stipu- lates a sum to be payable by one party to the other in the event of a breach by the former (post, p. 1447E). Pacta sunt servanda is still a useful principle of English law which applies (post, p. 1449G). APPEAL from Judge Sir Alun Pugh at Bloomsbury County Court By a writ dated July 8 1965 the plaintiffs Robophone Facilities Ltd claimed against the defendant, M. Blank, an accountant and tax consultant, the sum of #245 14s. The statement of claim alleged that by an agreement of June 4, 1965, between the parties, the defendant agreed to hire from the plaintiffs certain equipment for sevcn years at the rent of #17 11s. per quarter; that by clause 11 thereof, in the event of the contract being terminated by the defendant's breach the defendant would pay to the plaintiffs all rentals accrued due and also by way of liquidated or agreed damages a sum equal to 50 per cent. of the total of the rentals which would thereafter have become payable; that the defendant failed to take delivery of the equipment or to pay any of the hire rentals and by a letter from the plaintiffs to the defendant dated June 29 1965, the plaintiffs terminated the agreement, and that #245 14s was 50 per cent of the rentals which would have been due under the agreement The case was remitted to the Bloomsbury County Court and the statement of claim amended to claim "alternatively damages." At the hearing in the county court on January 10, 1966, the defendant appeared in person. Judge Sir Alun Pugh gave judgment for the plaintiffs for #245 14s., "the lower of the two alternative sums claimed by them." The defendant appealed, claiming, inter alia, that no agreement existed arid hence no breach was effected." The facts are fully stated in the judgments. The defendant appeared in person. R L Johnson for the plaintiffs The cases cited in argument are referred to in the judgments. Cur. adv vult June 27 The following judgments were read. LORD DENNING M.R. We have become used to hire-purchase agreements in these courts. We have in this case a new kind of agreement, a long-term hiring of gcods at a fixed rental. A few weeks ago we heard a case about a juke-box which was let for a fixed term of four years. Now we have a telephone-recording machine which was let for a fixed term of seven years. In these long-term agreements (unlike a hire-purchase agreement) the hirer has no option to determine the agreement; nor has he any option to purchase. He is bound irrevocably for a period of years by all the terms printed on the back of the printed form without any of the protection given by the Hire-Purchase Act, 1965: and at the end of the period the machine does not belong to him. It still belongs to the people who let it out to him. The facts of this case are startling. The plaintiffs say that the machine cost them #105 to manufacture. A salesman called on a customer and got him to sign a printed form agreeing to hire it for seven years. Eleven days later before the machine was delivered or installed, the customer repented and cancelled it. They accepted the cancellation and did not deliver it. Yet he has been ordered to pay damages of #245 14s. in respect of a machine he has never seen and which the plaintiffs can relet to an one else Some profit! I confess that I should be sorry if the law allows them to recover it. So I will consider the case in detail The plaintiffs are a company called Robophone Facilities Ltd. They are associated with a company called Robophone Ltd. who have brought out an electric machine. It is used in connection with telephones. It is something of a " robot." It operates when there is no one in the house to answer a telephone call. When someone telephones, this machine tells the caller that the house- holder is out but that it will take a message. The caller speaks 250 messages. When the householder comes in, he can play the tape back and hear the messages. The machine can only be con- nected to the telephone with the consent of the Postmaster- General. Robophone Ltd. have an agreement with him under which they agree not to sell the machine to the subscriber, and to maintain it in good condition, arid agree also to indemnify the Crown against any damage that may be done. Robophone Ltd. distribute the machine through the plaintiffs. On June 4, 1965, a salesman from the plaintiffs called on the defendant, Mr. Blank, who is an accountant and tax consultant. Mr. Blank said he wished to hire a Robophone machine of a model called the " Secretary." The salesman produced a printed form of rental agreement. He filled in some of the blanks. On the front of the form he Wed in the period of hire as " seven years ": and the hire rent as " #17 11s." per quarter. On the back of the to be insured by the hirer. There were two spaces for signature, one for the hirer, the other for the plaintiffs. Mr. Blank signed the space for the hirer. But no one signed for the plaintiffs. Mr Blank told the salesman that he wanted the equipment quickly. The salesman said he would get in touch with the General Post Office so as to get it installed as quickly as possible. On the back of the form there were 15 printed terms which are much relied on by the plaintiffs. I must draw attention to eight of them: " 1. The hirer . . . undertakes to enter into and observe such agreement, if any, as the Postmaster-General may require in relation to the installation. . . . 3. The hirer shall pay to the company, on installation of the Robophone, hire rent for the first quarter and shall thereafter pay quarterly by banker's order punctually hire rent so long as this agreement shall continue. 4. The hirer agrees to continue the hiring for the period of hire. . . . 7. The hirer shall insure the same at his own cost in the joint names of the company and the hirer for the sum of #300 at least. 8. The company undertakes to maintain the Robophone in good repair arid working con- dition. . . . 10. This agreement may be terminated forthwith by the company (a) if required in writing by the Postmaster- General...or (b) if the hirer shall have committed any breach of the terms herein contained. . . . 11. In the event of this agreement being terminated under the provisions of paragraph the date of actual termination only, but if this agreement shall be terminated for any other reason whatsoever, then the hirer shall not be entitled to any credit or allowance in respect of any payments made by him under the terms of this agree- ment but shall thereupon pay to the company all rentals accrued due and also by way of liquidated or agreed damages would thereafter have become payable....14. This Agree- ment shall become binding on the company only upon acceptance thereof by signature on their behalf." It is clear that that document, although called an agreement, was only an offer. It could be revoked by Mr. Blank at any time before it was accepted by the plaintiffs: see Financings Ltd. v. Stimson.1 In order to become binding, someone duly authorised would have to sign it as accepted on behalf of the plaintiffs: arid, moreover, their acceptance would have to be communicated to Mr. Blank. The general rule undoubtedly is that, when an offer is made. it is necessary, in order to make a binding contract, not only that it should be accepted but that the acceptance should be notified: see Carhill v. Carbolic Smoke Ball Co.,2 per Lindley L.J.3; Entores Ltd. v. Miles For East Corporation,4 per Parker L.J.5 Clause 14 does not dispense with the necessity of notification. Signing without notification is not enough. It would be deplorable if it were. The plaintiffs would be able to keep the form in their office unsigned, and then play fast and loose as they pleased. Mr. Blank would not know whether or not there was a contract binding them to supply or him to take. Just as mental acceptance is not enough: Felthouse v. Bindley,6 nor is internal acceptance with the company's office. In this very case we know that the plaintiffs signed it sometime or other (for it was produced at the trial com- plete with signature), but we do not know when the plaintiffs signed it. No evidence was given on the point. In the circum- stances I think that until the plaintiffs notified Mr. Blank of their acceptance, the agreement was not complete. It was, in the words of Mr. Blank himself, provisional. Meanwhile the salesman got on with the preliminaries in anticipation of an agreement being concluded. He got from the Post Office application forms for permission to instal the machine. He took them to Mr. Blank. One form contained an application for switch 2A for Robophone Answering/Recording Machine. 1 [1962] 1 W.L.R. 1184; [1962] 3 4 [1955] 2 Q.B. 327; [1955] 3 All E.R. 386, C.A. W.L.R. 48; [1955] 2 All E.R. 493. 2 [1893] 1 Q.B. 256. C.A. 3 Ibid. 262. 5 [1955] 2 Q.B. 327, 336. 6 (1862) 11 C.B.N.S. 869. Mr. Blank signed this application. Another form contained special conditions requiring Mr. Blank to indemnify the Crown against any damage. On this document Mr Blank added in his own hand- writing a modification that he would inderruify the Crown " pro- viding that the contingencies are safeguarded properly by effective insurance." I see no reason why Mr. Blank should not make this modification. He was hot bound at this stage to anyone. He was not bound by clause 1 of the company's printed form. He signed the Post Office form and dated it June 9, 1965. He sent these forms back to the salesman, who made no comment and forwarded them to the Post Office. It appears that the Post Office were unwilling to agree to Mr. Blank's modification, and they never did agree to it. Everything was clearly still in the stage of negotiation. In the next few days Mr. Blank telephoned three times to the plaintiffs asking when the machine was coming. He spoke to a lady but got no satisfactory reply. In consequence he decided not to proceed with the purchase of the Robophone machine. He entered into negotiation with a rival concern for a " Telstar " telephone-answering machine. On June 15, 1965, he wrote this letter to the salesman of Robophones- In view of your failure to notify me as to whether the provisional agreement is accepted, I wish you to consider the matter cancelled. I telephoned on there different days but received none of the promised reply." Mr. Blank in that letter took the very point which he has since taken, namely, that he had never been notified of any acceptance by the plaintiffs: that on this account there was no binding con- tract and that he was entitled to revoke his offer and consider the matter cancelled. On June 16, 1965, the salesman replied: " Wish to thank you for your letter dated June 15. 1965, which I read with considerable surprise and bewilderment. On June 4 at approximately 3.00 p.m. you signed a rental agreement for the supply, installation and maintenance for a Secretary' Robophone for a seven years contract. As per clause 1 of the Rental Agreement I applied on your behalf to the telephine manager for the supply of a switch 2A to be installed b the G.P.O Engineers. You signed the necessary G.P.O. form, which was received on June 9, 1965, by the telephone manager and passed to therelevant department on June 11, 1965. After inquiries with the G.P.O. I am told that the Terminus Sales have granted ' priority ' instructions . . . and the switch 2A should be installed within the next few days. . . . For good orders sake, and as to avoid any possible misunderstanding, I would like to state that the rental contract you signed on June 4, 1965, is for a duration of seven years and any breach thereon to clause 11 which I am certain the company intend to enforce at all times. Your reference, my acceptance of a provisional agreement is completely foreign to me arid I would appreciate an explanation of such matters, so far completely unknown to me." The salesman seems to have regarded Mr. Blank as bound when he signed the document on June 4, 1965. That was not correct. He was not bound until the company had signed the acceptance and notified him of it. So far as I can see, they never did so. On June 29, 1965, Mr. Blank replied, saying he had nothing further to add. He also cancelled his instructions to the telephone manager of the G.P.O. for the installation in connection with Rodophones. On June 29, 1965, the plaintiffs wrote to Mr. Blank: "We now understand that you have firmly refused to instal the Robophone, arid thereby cause yourself to be in breach of our rental agreement. We therefore give you notice that the agreement is terminated forthwith, and call upon you pursuant to clause 11 to pay the sum of #245 14s., being for the agreed period of hiring." On July 8, 1965, the plaintiffs issued a writ against Mr. Blank claiming #245 14s. under clause 11, and applied for summary judgment. Master Jacob gave leave to defend and remitted the matter to the county court. The plaintiffs amended so as to claim " alternatively damages." On February 8 1966 the case was heard. Mr. Blank appeared in person. The judge gave judgment against him for #245 14s. He appealed to this court and here again appeared in person. I wish he had been represented because he has been unable to put his case as well-as it should have been. I do not think, however, that he should suffer on that account. The first question is whether there was any concluded agree- ment at all, seeing that the plaintiffs never notified Mr. Blank of their acceptance. This very point was taken by Mr. Blank in his letter of June 15, 1965, and must have been present to the judge's mind. Mr. Blank cross-examined the salesman upon it and put it to him that the agreement was only provisional. Mr. Blank has put it in the forefront of his notice of appeal and a further document that he has submitted arid I think we ought to entertain it. I realise no reference to it but this is not fatal : see Abrahams v Dimmock.(7) I think it is a good point. The plaintiffs never notified him of their acceptance: and, before they did so, he cancelled. I would allow the appeal on this ground alone. In case I am wrong on this point, I proceed on the footing that there was on June 4, 1965, a concluded agreement which Mr. Blank repudiated on June 15, 1965. Then comes the second point: What are the damages recoverable for his breach? The plaintiffs have never delivered the machine. It is available for reletting to another hirer. Yet they say that (apart from clause 11) they have lost a sum of #283 8s. The plaintiffs' secretary sought to justify this figure by this calculation: If Mr. Blank had honoured his agreement, the plainiffs would have delivered the machine to him. He would have retained the machine for seven years. The plaintiffs would have received #491 8s. in all by way of rentals over the seven years. The machine would then have been of little or no value. The plaintiffs would have expended only #208, made up as follows: 7 [1915] 1 K.B. 662; 31 T.L.R. 87. # Cost of manufacture of the machine ... ... 105 Cost of installation ... ... ... ... ... 3 Cost of removal ... ... ... ... ... 2 Cost of maintenance (#14 per annum for seven years) 98 ----- #208 ----- The plaintiffs would thus, he said, have recceived #491 8s. and expended #208 and had a profit of #283 8s. This was more than the sum under clause 11, under which they only got 50 per cent. of #491 8s., that is, #245 14s. Similarly, whenever there was a breach by the hirer, it was said that the loss of profit by the plaintiffs would exceed the sum payable under clause 11. So it was argued that the sum was liquidated damages and not a penalty. The plaintiffs' calculation of damages The calculation of the plaintiffs seems to me to be quite wrong- Their loss of profit is nothing like #283 8s. The errors are threefold: First, they say that they have lost the future rentals for seven years (#70 4s. a year), less the annual maintenance (#14 a year). They multiply these figures by seven. That gives a loss of #491, less #98, giving a result of #393 8s. They do not give any discount for the fact that the damages would be payable in cash down at once. Credit must be given for this: see Interoffice Telephones Ltd. v. Robert Freeman Co. Ltd.(8) They have given none. Secondly, they say that the cost of manufacture was only #105. But on our questioning this figure, counsel told us that this was the cost of labour and materials only. It did not include anything for overheads, patent royalties or manufacturers' profit. (The plaintiffs, it seems, were distributors, not manufacturers.) In order to get at their loss of profit, it is not right to give credit only for labour and materials. They ought to give credit for the value of the machine itself. Thirdly, they have failed to take into account the value of the machine itself. They have not given any credit for the fact that they still have the machine. It is available for letting to another hirer. They should give credit for its realisable value: see Inter- office case.(9) They have given no evidence on this point. All we know is that the salesman told Mr. Blank it should be insured for #350. 1 do not suggest, of course, that they should give credit say what the true figure should be. The plaintiffs have given no material on which their real damage can be calculated. 8 [1958] 1 Q.B. 190, 195; [1957] 9 [1958] 1 Q.B. 190, 192, 196. 3 W.L.R. 971; [1957] 3 All E.R. 479, C.A. Penalty or liquidated damages Turning now to clause 11, the Plaintiffs claim half the unpaid rentals. That may be fair enough when the agreement has lasted four or five years. But it is most unfair when the agreement has, as here, only lasted 10 days. It bears every mark of a penalty. It applies indiscriminately to widely differing circumstances: see the Interoffice case.(10) And it ignores two considerations which are essential to any measurement of the owner's loss: first, the compensation is paid immediately instead of over seven years; and, secondly, the plaintiffs have in hand the machine itself, available for letting to another hirer: see Campbell Discount Co. v. Bridge,(11) per Lord Radcliffe.(12) 1 am quite sure that the plain- tiff's loss, in many cases, is nowhere near half the unpaid rentals. So much so that it cannot be regarded as a genuine pre-estimate of loss. It is a penalty and cannot be recovered. The actual damage The actual damage suffered by the plaintiffs would depend on the state of the market. I will take three instances: 1. If these machines were a great success, so much so that the plaintiffs could not fulfil all the demands for them and there was a waiting list of customers, then the plaintiffs would not suffer any damage from Mr. Blank's repudiation. They would be able to relet the machine at once at the same rental. Their damages would be nominal. 2. If these machines were not a success, so much so that they were a drug in the market, and the plaintiffs had an unlimited stock of them which no one wanted, then they would suffer a good deal of damage from Mr. Blank's repudiation. They would not be able to relet this machine to anyone else. They would have lost the profit which they would have made if the hiring had continued for seven years, without any countervailing benefits from reletting. 3. If the machines were a sound commercial venture, and the plaintiffs, as good traders, carried sufficient stock to meet current demands, and no more 8adjusting their orders to their manufac- turers accordingly), then the plaintiffs would not suffer much damage from Mr. Blank's repudiation. They could take this machine back into stock, and relet it in a few weeks to one of their customers at the same rental; and when they came to pass their next order to their manufacturers, they would order one less would be the loss of rental for the few weeks pending the reletting to another customer. The recoverable damage Such being the possible variations in actual damage, we have 10 [1958] 1 Q.B. 190. 12 [1962] A.C. 600, 625. 11 [1962] A.C. 600; [1962] 2 W.L.R. 439; [1962] 1 All E.R. 385, H.L.(E). to apply the rule in Hadley v. Baxendale.(13) We have to ask what are the damages which may fairly and reasonably be considered as arising naturally, i.e., according to the usual course of things, from the breach. In my opinion the damages are those under heading (3) above. The circumstances set out under headings (1) and (2) are special circumstances which cannot reasonably be supposed to be within the contemplation of the parties unless they were known to both. Mr. Blank was not told by the salesman anything about the stock held by the plaintiffs. He was, I think, entitled to assume that if one of their machines was not accepted or was returned, they would take it back and relet it. The only loss recoverable by the plaintiffs is the loss due to the few weeks it would take them to find another hirer. There is no evidence that they had to pay commission to the agents, or anything of that kind. I know that a different result was reached in Interoffice Tele- phones v. Robert Freeman Co. Ltd.(14) But that case is distinguish- able. There was evidence there that the plaintiffs held a sufficient stock to meet any demand. There was no such evidence here. Furthermore, the plaintiffs there did give credit for the fact that the machine, when returned, was avaiiable for letting to another hirer. But, apart from these crucial facts, there seems to have been little attention to the impact of the rule in Hadley v. Baxendale.(15) I do not think, according to the usual course of things, a distributor holds so large a stock that he can supply all demands over a long period of years. He only holds a sufficient stock to meet current demands. When a machine is returned, he should be able to relet it and give credit accordingly. I notice that in the Interoffice Telephones case,(16) Parker L.J. said that(17): " . . . the defaulting party must contemplate that damages will vary according to the state of the market, including the question of supply and demand." I doubt this. I do not think that he must contemplate that the supplier will have an unlimited stock. He need only contemplate that the supplier will have enough stock to meet current demands: so that, in the ordinary way, he will be able to take the goods back into stock and relet or resell them, as the case may be. In this case I think the damages should be limited to the few weeks which it would take the plaintiffs to relet their machine. I would allow this at three months and assess the damage at #17 11s. Conclusion In my judgment there was no concluded contract between the plaintiffs and Mr. Blank, and on that ground alone the plaintiffs fail. If I am wrong on this point, I would reduce the damage to #17 11s. 13 (1854) 9 Exch. 341. 16 [1958] 1 Q.B. 190. 14 [1958] 1 Q.B. 190. 17 Ibid. 202. 15 9 Exch. 341. HARMAN L.J. The difficulty of this case has been greatly enhanced by reason of the fact that the defendant did not choose to enlist professional help. The result has been that on several issues the facts are very obscure arid the plaintiffs' assertions have not been tested by proper cross-examination. The plaintiffs sued the defendant for damages for breach of a contract said to be contained in a document of June 4, 1965. made between them and the defendant whereby they are expressed to let to the defendant on hire arid he to take a telephone-answering machine for a period of seven years at a rent of #17 11s. a quarter. The plaintiffs sued for the loss of their bargain. The first question, therefore, is whether there was a contract. On the face of the document sued on, it appears to be a contract signed by both parties, but condition 14 indorsed on the plaintiffs upon acceptance by signature on thcir behalf. This signature it bears. This point never arose at the county court and no inquiry was made as to when the plaintiffs signed the document. Apart from that, there was no express evidence that the plaintiffs' acceptance was communicated to the defendant before he purported to cancel it on June 16. It did, however appear that the plaintiffs' representative on or about June 9 called on the defendant ana produced the further documents necessary to for hiin to sign to obtain the Post Office approval. It seems to with upon the footing that the plaintiffs had accepted the defendant as hirer of the machine and this, I think, made the contract complete. The defendant has objected that thc agreement was only " provisional," but in saying that he did not allude to the question of acceptance by the plaintiffs, but to that of acceptance by the Post Office, arid his allegation has been throughout that there was no binding agreement until the Post Office accepted his terms, which accroding to him it did not do before repudiation. It appears to be the fact that the defendant added some term to the form he signed which was not acceptable to the Post Office, and this caused some delay. In my judgment, however, the defendant cannot rely on this, for the first term indorsed on the contract document obliges the defendant to observe such agree- ment as the Postmaster-General may require and he was, therefore, bound to accept the Post Office terms. It appears that the defen- dant did at some time or other sign documents put forward on behalf of the Post Office, but he alleges that he did this in connec- tion with the other machine which he ordered and this matter was never cleared up. In my judgment there was no such delay provisional in the sense that it was dependent on Post Office assent. Moreover, in my judgment in the state of the evidence we are bound to hold that the document of June 4, 1965, did become a binding contract. The defendant's next point was that he did not accept the conditions indorsed on the document. This would, I suppose, be a plea of non est factum and is not open to an educated man like the defendant. Moreover, there was evidence which the judge accepted that the defendant knew of and accepted the indorsed conditions. The next question is, therefore, what was the proper measure of damages for the plaintiffs, who arc in the circumstances in my opinion entitled to sue for the loss of their bargain. The measure is that stated by Lord Haldane in British Westinghouse Electric & Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd.,(18) where he says (19) : " There are certain broad principles which are quite well settled. The first is that as far as possible he who has proved a breach of a bargain to supply what he contracted to get is to be placed as far as money can do it in as good a situation as if the contract had been perfprmed." Apparently the master considered that there was an arguable point as to whether the so-called agreed damage was in truth a genuine estimate and therefore enforceable as liquidated damages or whether clause 11 of the conditions amounted to a penalty. If it did, the result would be that the plaintiffs were relegated to recovering such damages as they could prove. In the county court no mention whatever is made of this question of damages or penalty. What the judge did was to hear the evidence tendered by the plaintiffs as to the actual damage arising out of the loss of the bargain. This the plaintiffs did by calling their secretary, who gave evidence that, if the judge accepted it, amounted to more than the agreed damages. If this were right, no question of penalty arose, for it is only when the agreed damage is disproportionately more than the actual damage suffered on any breach that the question of penalty arises. The plaintiffs' evidence on this topic, if accepted, showed the damages to be #285, which was more than the agreed damages, that is to say, #243. The judge accepted this evidence and held therefore that the agreed damages of #243 were recoverable and no question of penalty arose. In my judgment there is one obvious flaw in the reasoning as to loss because no discount is allowed for the fact that the plaintiffs are to recover the whole of their instalments at once instead of them being spread over seven years. I can see no other mistake in the assessment of loss and the defendant did not cross-examine on the subject. The calculation, except as to discount, appears to be in accordance with the decision of this court in Interoffice Telephones v. Robert Freeman Co. Ltd.(20) It is said that the sum of #105 allowed against the damage as being the prime cost of manufacturing the machine was far too little and this figure should have been #350, at which the defendant was bound to insure. I see no warrant for this. The 18 [1912] A.C. 673. 20 [1958] 1 Q.B. 190. 19 Ibid, 689. plaintiffs were either themselves the manufacturers or a wholly owned subsidiary of the manufacturers. Moreover, they were precluded by their contract with the Post Office from selling the machines and could only dispose of them on hire. Their witness ordered and this must be accepted. so that the cost to them was the replacement of one machine. The figure of #105 said to be the cost of manufacture was not probed by cross-examination and must, therefore, I think be accepted. On their evidence they could have manufactured one more machine at no more than that expense: see the reasoning of Lord Sumner (then Hamilton L.J.) in In re Vic Mill Ltd.(21) As a result, the only mistake is the failure to discount the total receipts. I do not see how this could have amounted to more than a sum which would still leave the loss somewhere near the agreed figure. The plaintiffs' evidence that the machine by the expiration of seven years would be of no value must also be accepted and therefore no figure in this respect should appear in the calculation. The result is that in the absence of any proper cross-examina- tion the plaintiffs proved their bargain and the loss of it and that loss was no more than the agreed damage. This was not a case where a fixed figure of damage is assessed for all circumstances. It was graduated to correspond with the passage of time between the making of the contract and its breach and it seems to me that that makes clause 10 (2) a proper estimate of the damages to be anticipated from the breach and that therefore the plaintiffs are entitled to succeed. I would dismiss the appeal. DIPLOCK L.J. This is an appeal by an appellant in person from a judgment given upon the trial of the action in the Blooms- bury County Court at which the appellant, who was defendant in the action, gave evidence on oath and was disbelieved by thr county court judge. There is no transcript of the evidence--only the note of the judge himself, which are concise and, it is reasonable to assume, limited to those parts of the evidence which were relevant to the issues which were raised by the parties before him. One must therefore be on one's guard against the temptations (1) to base conclusions upon facts stated in this court by the appellant but not supported by evidence at the trial which was accepted by the county court judge, (2) to assume that if it had been more closely probed, the plaintiffs' evidence at the trial, accepted as credible by the county court judge and unchanged in cross-examination, might have been qualified in some respect which would give us some plausible ground for allowing the appeal, and (3) to allow the appeal upon a point of law not raised by the defendant at the trial because the judge's note does not record some piece of evidence which would only have been relevant if that point of law had been raised. 21 [1913] 1 Ch. 465, 470. Having so warned myself, I like Harman L.J., would dismiss this appeal, but as to do so involves differing regretfully from the Master of the Rolls upon a number of points, I will explain as briefly as I can why I cannot accept his reasoning. We cannot allow the appeal upon the ground that the plaintiffs did not communicate their acceptance of the contract to the defendant before he repudiated it upon June 15, 1965. He did no traise this point of law in the county court: nor can I see any trace on the judge's note that he cross-examined on it. He took until his application was accepted by the Postmaster-General. It was this contention that he was putting forward in his letter of June 15 cited by the Master of the Rolls and in his notice of appeal to this court. The rule is well settled that there is no right of appeal from the county court upon a point of law which was not raised and submitted to the county court judge at the trial unless the point goes to jurisdiction or illegality (see Smith v. Baker & Sons Ltd.,22 cf. Snell v. Unity Finance Co. Ltd.,23), Abraham v. Dimmock " is no exception : the question of law was there raised at the trial. It would not be right that a party should succeed in an appeal because evidence which would have been relevant only to a point which was not taken at the trial was never tendered or, if given, was, understandably, not noted by the county court judge. In the present case, although there is no note of any answer by the plaintiffs' salesman specifically stating that he told the defendant before June 15 that the plaintiffs had accepted the contract, the only reasonable inference from the evidence which does appear upon the judge's note is that he must have done so between June 4 and 9 either before or when he revisited the defendant to hand him the Post Office forms for signiture--an act which was consistant only with the plaintiffs' acceptance of the contract. This makes it unnecessary to express any view as to the exact moment at which a contract is made where a written offer contains an express stipulation that the contract is to become binding on the offeree only when his signature is affixed or as to whether thc offer can be withdrawn after signature but before the fact of signiture has been communicated or as to when the offer lapses. For my part, I should not wish to express any opinion, even obiter, upon these interesting questions of law without hearing argument arid I explicitly refrain from doing so. But there are other and difficult questions of law involved in the case as to the measure of damages for breach of a contract of hire of chattels-and as to penalty clauses. These are open to the defendant, for they were raised at the trial, but he himself appearing in person was not capable of arguing them and it accordingly behoved the court to take them on his behalf. To be thus compelled to assume during the hearing, at least in part, the role of advocate but to resume, in arriving at the final judg- ment and, and in my own case, a period for cool reflection. I must confess that at the conclusion of the hearing I, like the Master of the Rolls, thought that the justice of the case required and the law permitted that this appeal should be allowed. But cool reflection and arithmeticul exercises have convinced me otherwise. The plaintiffs claimed and the county court judge awarded them liquidated damages calculated in accordance with condition 11 of the contract. The real issue on this appeal is whether they were entitled to that sum. It is not contended that as a matter of construction condition 11 does not apply in the circumstances of this case. The plaintiffs are accordingly entitled to recover a sum culculated in accordance with condition 11 unless condition 11 is a " penalty clause " and the damages which would have been recoverable by them at common law, apart from that con- dition, would have been less than the sum culculated in accordance with condition 11. In Interoffice Telephones v. Robert Freeman Co. Ltd.25 the Court of Appeal laid down the principles upon which damages should be assessed at common law for breach by the hirer of a contract for the hire of chattels where the supply of such chattels exceeds the demand. The county court judge was referred to this case and, subject to one error, he assessed the actual loss sustained by the plaintiffs in accordance with the principles there laid down. He deducted from #491 8s., the sum of the gross rents payable by quarterly instalments over seven years the total cost of main- tenance during that period at #14 per annum, viz. #98, and the value to the plaintiffs of the undelivered machine, which he assessed at its cost to them of #105. He also deducted #5 for the cost of installation and removal which were not incurred. This left him with a net figure of actual loss of #283 8s., which was greater than the sum of #245 14s. calculated in accordance with condition 11. It was therefore unnecessary for him to determine whether condition 11 was a " penalty clause " or not, and he gave judgment for the lesser sum. His assessment of the actual loss sustained by the plaintiffs has been criticised by the Master of the Rolls upon three grounds. With the second and third of those grounds I find myself unable to agree. The plaintiffs' business consisted of manufacturing machines and turning them to account exclusively by letting them on hire to telephone subscribers. Their agreement with the Postmaster- Generaral precluded them from selling machines to telephone sub- scribers and there was accordingly no market for sale. The judge, I think we must accept, was satisfied on the evidence that their 25 [1958] 1 Q.B. 190. facilities for manufacture exceeded, and were likely to continue to exceed, the demand from potential hirers. They were in effect, in the position of a riding-stable proprietor who has in his stable, customers to ride them. What the plaintiffs gained in money's worth by not having to deliver the machine to the defendant was the value to them of having available a machine to deliver to their next customer instead of having to manufacture a new machine for that purpose. This is the same as the cost to them of manufacturing a new machine. To deduct both value and cost would be to make the same deduction twice. The actual figure of deduction for cost of manufacture is also criticised. The #105 represents, as we were informed by counsel for the plaintiffs, the prime cost of the machine, i.e., the cost of labour and materials only, whereas it is suggested it should have included allowances for patent royalties, overheads and manufacturers profits. I do not think that this objection is open to us in this court. There was no evidence that any patent royalties were payable to third parties or that the overhead expences of the manufacturers would be increased by one penny if one more machine were manufactured. If this were to be contended, the matter should have been probed in cross-examination. There is nothing surprising, for instance, in the overhead expenses of a business of this kind remaining constant notwithstanding that 10,001 machines are produced instead of 10,000, and we have no evidence as to the plaintiffs' output. As regards manufacturers profit, the evidence as it appears on the judge's note was that the plaintiffs did manufacture the machines. This was not chal- lenged at the trial and cannot in my view be displaced by an inference drawn from one of the documents in the material before us with which neither the plaintiffs' witness at the trial nor the plaintiffs' counsel at the hearing of the appeal was given any opportunity of dealing. But I do agree that the county court judge overlooked the necessity, to which attention was drawn in Interoffice Telephones Ltd. v. Robert Freeman Co. Ltd..i25 of applying to his figure of #283 a discount for immediate receipt of lump sum by way of damages instead of quarterly instalments of gross rentals under the contract. The Court of Appeal in Interoffice Telephones Ltd. v. Robert Freeman Co. Ltd.25 did not state how the appropriate sum by way of discount was to be assessed. But it is a fairly simple matter of arithmetic, and taking average interest rates over the seven years at 5 per cent. per annum and discounting at simple interest, it assessed by the judge ought to be reduced to #225. This is less than the sum culculated in accordance with clause 11 and it is accordingly necessary for us to determine whether that condition is a "penalty clause" or not. 25 [1958] 1 Q.B. 190. That involves (1) considering to what breaches of contract it applies and (2) deciding whether a sum calculated in accordance with the condition represents a genuine pre-estimate of the actual loss which the plaintiffs would sustain in consequence of every such breach. The relevant part of the clause is expressed to apply " if this agreement shall be terruinated for any . . . reason what- soever." As it goes on to provide in that event for payment for " liquidated or agreed dariages " by the hirer, the generality of its application is no doubt restricted to cases where the agreement has been terminated as a result of a breach of contract by the hirer. But subject to this limitation it in my view applies to any termination of the contract which results from the company's exercising a right of rescission accruing to them in consequence of an antecedent breach of contract by the hirer. That indeed is the only way in which a breach of contract by the hirer can the contract, entitles the innocent party to elect to do so. Whenever a contract of hire of this kind is prematurely terminated, the difference in the owner's position in terms of money as a consequence of the breach which results in its termination is that instead of receiving the instalments of rent during the unexpired period of the contract and the return of the chattel at the end of that period, he receives no further rrut but is saved the cost of maintenance of the chattel during the unexpired period of the contract and recovers the machine at the date of its premature determination. In addition, where the contract is ter- minated before the chattel is delivered, he is saved also the cost of installation and removal, but this is only #5. Except for the small cost of installation and removal, this loss can be expressed as a percentage of the rent for the unexpired period of the contract. In assessing the owner's loss there must be deducted from each instalment of rent for the unexpired period of the contract the cost of maintenance of the chattel during the period in respect of which the instalment was payable Credit must also be given for the difference between the value of the machine at the date of its premature determination and the value which it would have had at the end of the period of the contract, i.e., the depreciation in value of the chattel during the unexpired period of the contract. If one assumes straight-line depreciation during the period of the contract, this will be proportional to the outstanding period of the contract and, like the cost of main- tenance, can be expressed as a percentage of the outstanding instalments of rent. The profit element in each instalment of rent is thus the gross amount of the instalment less deductions for maintenance and depreciation which can be expressed as percentages of that gross amount. In the present case the evidence was that the annual cost of maintenance was #14, which is 20 per cent. of the sum of the four quarterly instalments totalling #70. According to the evidence, the value of the chattel at the beginnig of the contract was #105 and at the end of seven years was nil. The annual depreciation was accordingly #15 or about 21 per cent. of the gross annual instalments. The profit rent was accord- ingly about 59 per cent. of the gross rent and this is the measure of the owner's loss during the unexpired period of the contract resulting from its premature termination. But this profit rent which would have been rereived by instal- ments over the unexpired period of the contract is to be recom- pensed by a lump sum in money payable at once and the owner will in addition have received in money's worth the depreciated value of the machine which he would othervise have recovered over the unexpired period of the contract in the depreciation element in the gross rent. Allowance must be made for this accelerated receipt in money or money's worth. The appropriate discount to be applied to both the profit element in the gross rent (viz., 59 per cent.) and the depreciation element (viz., 21 per cent.) is a matter of mathematicul calculation and varies with the unex- pired period of the contract. At interest rates of 5 per cent. and discounting at simple interest (which is more realistic than com- pound interest) it is about 15 per cent. when that period is seven years and falls progressively to about 2 per cent. when that period is one year. In this case, where the unexpired period is seven years, there must therefore be deducted from the profit rents amounting to 59 per cent. of the gross rentals a sum equal to 15 per cent. of 80 per cent. of the gross rentals, viz., 12 per cent. thereof. The measure of damages expressed as a percentage of the gross rentals for the unexpired period of the contract is therefore about 47 per cent. of those gross rentals. This formula for ascertaining the actual loss sustained by the plaintiffs as a result of the premature deterruination of the con- tract leads to the conclusion that the amount of the loss lies within a range of 47 per cent. to 58 per cent. of the gross rents for the unexpired period of the contract, the percentage increasing progressively as the unexpired period decreases. It is also relevant to bear in mind that any assessment of the actual loss must at best be only approximate. It requires a prediction of what would have been the future cost of maintenance of the particular machine. Since such machines are prone to obsolescence on the appearance of a new model, straight-line depreciation is unlikely to occur throughout the term of the contract. The calculation of the appropriate discount for acceleration is dependent upon a predic- tion of future interest rates arid the assumption that the rates and structure of taxation and the value of money will remain unchanged. These are just the circumstances in which it would seem to be sound business sense, for parties entering into such a contract and envisaging the possibility of its determination on the hirer's breach, to take steps to avoid the uncertainty, the difficulty and the experise of proving in a court of law the actual loss sustained in that event by agreeing in advance upon an easily ascertainable sum to be paid by the hirer whixh represents a reasonable estimate of the probable loss which the other party would sustain. As pointed out in the recent case of Czarnikow Ltd. v. Koufos,26 the parties to a contract may expressly stipu1ate not only what will be what I there called their primary obligations and rights under the contract, i.e., those which are discharged by performance of the contract, but also what will be their secondary obligations and rights, i.e., those which arise upon non-performance of any prirrury obligation by one of the parties to the contract. Of these secondary obligations and rights, the commonest is the obligation of the non-performer to make to the other party and the corresponding right of such other party to claim from the non-performer reparation in money for any loss sustained by the other party which results from the failure of the non-performer to perform his primary obligation. But the right of parties to a contract to make such a stipula- tion is subject to the rule of public policy that the court will not enforce it against the party in breach if it is satisfied that the stipulated sum was not a genuine estimate of the loss likely to be sustained by the party not in breach, but was a sum in excess of such anticipated loss and thus, if exacted, would be in the nature of a penalty or punishment imposed upon the contract-breaker. Where the court refuses to enforce a " penalty clause " of this nature, the injured party is relegated to his right to claim that lesser measure of damages to which he would have been entitled at common law for the breach actually committed if there had been no penalty clause in the contract. I make no attempt, where so many others have failed, to rationalise this common law rule. It seems to be sui generis. The court has no general jurisdiction to re-form terms of a con- tract because it thinks them unduly onerous on one of the parties ---otherwise we should not be so hard put to find tortuous con- structions for exemption clauses, which are penalty clauses in reverse: we could simply refuse to enforce them. Again, it is by no means clear that " penalty clauses " ere simply void like covenants in unreasonable restraint of trade. There are dicta either way, arid in Callulose Acetate Silk v. Widnes Foundry Lord Atkin28 expressedly left open the question whether a penalty clause in a contract, which fixed a single sum as payable upon breach of a number of different terms of the contract, some of which breaches may occasion only trifling damage but others damage greater than the stipulated sum, would be treated as imposing a limit on the damages recoverable in an action for a breach in respect of which it operated to reduce the damages which would otherwise be recoverable at common law. But how- ever anomalous it may be, the rule of public policy that the court will not enforce a " penalty dause " so as to permit a 26 [1966] 2 W.L.R. 1397. 28 [1933] A.C. 20, 26. 27 [1933] A.C. 20; 48 T.L.R. 595. party to a contract to recover in an action a sum greater than the measure of damages to which he would be entitled at common law is well established, and in these days when so often one party cannot satisfy his contractual hunger a\ la carte but only at the table d'ho^te of a standard printed contract, it has certainly not outlived its usefulness. Nevertheless the courts would be doing an ill turn to those whom the rule about " penalty clauses " is designed to protect if they were to apply it so as to make it impracticable for parties to agree at the time when they enter into a contract upon a fair and easily ascertainable sum to become payable by one party to another as compensation for the loss which the latter will sustain as a consequence of its breach. It is good business sense that parties to a contract should know what will be the financial consequences to them of a breach on their part, for circumstances may arise when further performance of the contract may involve them in loss. And the more difficult it is likely to be to prove arid assess the loss which a party wiIl suffer in the event of a breach, the greater the advantages to both parties of fixing by the terrus of the contract itself an easily ascertainable sum to be paid in that event. Not only does it enable the parties to know in advance what their position will be if a breach occurs and so avoid litiga- tion at all, but if litigation cannot be avoided, it eliminates what may be the very heavy legal costs of proving the loss actually sustained which would have to be paid by the unsuccessful party. The court should not be astute to descry a "penalty clause" in every provision of a contract which stipulates a sum to be payable by one party to the other in the event of a breach by the former. clause" lies upon the party who is sued upon it The terms of the clause may themselves be sufficient to give rise to the inference that it is not a genuine estimate of damage likely to be suffered but is a penalty. Terms which give rise to such an inference arc discuased in Lords Dunedin's speech in Dunlop Pneumatic Tyre Co. v. New Garage & Motor Co.(29) But it is an inference only and may be rebutted Thus it may seem at first sight that the stipulated sum is extravagantly greater than any loss which is liable to result from the breach in the ordinary course of things, i.e., the damages recoverable under the so-called " first rule " in Hadley v. Baxendale.;(30) This would give rise to the prima facie inference that the stipulated sum was a penalty. But the plaintiff may be able to show that owing to special circumstances outside " the ordinary course of things " a breach in those special circum- stances would be liable to cause him a greater loss of which the stipulated sum does represent a genuine estimate. In the absence of any special clause in the contract, this enhanced loss due to the existence of such special circumstances would not be recover- able at common law from the defendant as damages for the breach under the so-called " second rule " in Hadley v. Baxendale(30) 29 [1915] A.C. 79, 87. 30 9 Exch. 341. unless knowledge of the special circumstances had been brought home to the defendant at the time of the contract in such a way as to give rise to the inference that the defendant impliedly under- took to bear any special loss referable to a breach in those special circumstances: see Asquith L.J.'s explanation of British Colum- bia Saw Mill Co. v. Nettleship,31 contained in Victoria Laundry (Windsor) v. Newman Indiistries Coulson & Co 32 The basis of the defendant's liability for the enhanced loss under the " second rule " in Hadley v. Baxendale 33 is his implied undertaking to the plaintiff to bear it. His actual knowledge of the special circumstances is relevant as one of the factors from which his undertaking can be implied. The second factor is also necessary, viz., that he should have acquired this knowledge from the plaintiff, or at least that he should know that the plaintiff knew that he was possessed of it at the time the contract was entered into and so could reasonably foresee at that time that an enhanced loss was liable to result from a breach. Where both these factors are present, the defendant's conduct in entering into the contract without disclaiming liability for the enhanced loss which he can foresee gives rise to the implication that he under- takes to bear it. But such an undertaking need not be left to implication; it can be express. If the contract contained an defendant's liability for the loss actually sustained by the plaintiff that the defendant did not know of the special circumstances And so if at the time of the contract the plaintiff informs the defendant that his loss in the event of a particular breach is likely to be #X by describing this sum as liquidated damages in the terms of his offer to contract, arid the defendant expressly undertakes to pay #X to the plaintiff in the event of such breach, the clause which contains the stipulation is not a " penalty clayse " unless #X is not a genuine and reasonable estimate by the plaintiff of the loss which he will in fact be likely to obtain. Such a clause is in my view enforceable whether or not the defendant knows what are the special circumstances which make the loss likely to be #X rather than some lesser sum which it would be likely to be in the ordinary course of things. In the present case the sum stipulated to be paid under the liquidated damages clause is payable only upon a breach by the defendant which leads to termination of the contract and its amount is dependent upon the date of terruination. It is 50 per cent. of the rents which would have becomee payable during the unexpired period of the contract. 31 (1868) L.R. 3 C.P. 499. 33 9 Exch. 341. 32 [1949] 2 K.B. 528, 538; 65 T.L.R. 274; [1949] 1 All E.R. 997, C.A. As I have endeavoured to show, a reasonable estimate of the actual loss likely to be sustained by the plaintiffs as a result of premature determination of the contract ranges between some 47 per cent. of the aggregate rents for the unexpired period of the contract if it is terminated at the beginning of the seven-year period to some 57 per cent. of the aggregate rents for the unexpired period if it is terminated in the last year of the seven- year period, but such estimate is dependent upon a number of factors incapable of precise prediction and can never be more than approximate within fairly wide limits. In choosing 50 per cent. of the aggregate rents for the unexpired period as the amount of the liquidated damages payable by the defendant upon termina- tion of the contract in consequence of his breach, the parties have selected a readily ascertainable figure which is reasonably close to the actual loss likely to be occasioned to the plaintiffs so far as it is capable of prediction, and if this figure will tend to operate slightly to the advantage of the plaintiffs if the contract is terminated early in its life, it will tend to operate rather more heavily to the advantage of the defendant if it is terminated late in its life. I see no reason in public policy why the parties should not enter into so sensible an arrangement under which each know where they stand in the event of a breach by the defendant, and permit, much less compel, me to hold that this clause is a " penalty clause " and so unenforceable by the courts. In these circumstances I do not find it necessary to consider whether in the absence of clause 11 we should have been bound by the decision in Interoffice Telephone Ltd. v. Robert Freeman Co. Ltd.(34) to award as damages to the plaintiffs the measure of damages laid down in that case in spite of the defendant's lack of actual knowledge that supplies of the machine exceeded the demand. In the present case there is clause 11, and pacts sunt servanda is still a useful principle of English law which in my view applies. For my part, I would dismiss the appeal. Appeal dismissed with costs. Leave to appeal to House of Lords refused. Solicitors: Field, Roscoe & Co. A. H. B. 34 [1958] 1 Q.B. 190. [QUEEN'S BENCH DIVISION] *J. H. MILNER & SON v. PERCY BILTON LTD. Solicitor -- Retainer -- Termination -- Non-contentious business Legal work likely to extend over years--Development of building site--" Understanding " that all legal work should be carried out by plaintiff solicitors-- Whether entire contract--Whether retainer terminable by client by notice. The plaintiff solicitors were employed by clients in connection with a building agreement concerning the development of a London building site by them and the defendants, a company engaged in property development. On March 11, 1959, the solicitors wrote to the defendants confirming the basis of the agreement and added: " May we please take this opportunity of placing on record the understanding that all the legal work of and incidental to the completion of the development and the grant of the leases shall be carried out by us." A letter on behalf of the defendants dated March 12, 1959, stated in reply: "I see that you have tied up the legal work and, of course, it has never been agreed and I do not like tying it up unless it has been agreed. I am quite prepared, however, to accept it in relation to this particuJar property." The solicitors thereafter did certain legal work connected with the property, and other legal work in connection with fringe properties closely surrounding the relevant site : for each item of work done a separate bill was rendered and was paid at the time. On August 31, 1962, in answer to disposing of flats on the site the defendants wrote to them : " As you already know we have our own legal department now and they are dealing with all matters in connection with the sale of these flats. I regret, therefore, we are unable to instrnct you to act on this," and again on November 5, 1962: " it is now desirable for the legal work relating to the leasing of flats . . . to be carried out by our own company solicitor." The solicitors alleged that the defendants in failing to employ them were in breach of contract and claimed damages. The defendants denied that there was any agreement with the solicitors, and pleaded, alternatively, that if there was any agreement it was an implied term thereof that it could be determined by notice, and that it had been so determined. Held, (1) that the letters of March, 1959, did not create a legally enforceable agreement (post, pp. 1586G--157A). (2) That if there was an agreement to retain at all, it was not an entire contract (post, p. 1588B--c); that the defendants were entitled to terminate such retainer at any time on giving notice to that effect to the plaintiffs; and that the defendants by their letter of August 31, 1962, alternatively by their letter of November 5, 1962, did so terminate the contract (post, pp. 1588H--1589A). ACTION. The defendants, Percy Bilton Ltd., were a company of property developers. From 1946 or thereabouts, Mr. Lyon, one of the parties in the plaintiff firm of solicitors, ahd been acting for a [Reported by HOOSEN COOVADIA, ESQ., Barrister-at-Law.] Mr. and Mrs. Bomberg, who were in the same line of business as the defendants. The Bombergs were thus old clients of the plaintiff firm and in October, 1958, the Bombergs became interested in the Great Cumberland Place site near Marble Arch the free- holders of which Portman Estates (who had leased the site to Seymour Properties Ltd.), arid the Bombergs, and the defendants, were together in negotiation with Seymour Properties Ltd. At the same time negotiations were going on between the Bombergs and the defendants : they were intending to form a company called Glenhazel House Ltd., broadly speaking, to take over and develop this particular Great Cumberland Place site. The first direct contact between the plaintiffs and the defen- dants came in a letter of October 30, 1958, from the defendants to the plaintiffs saying: " In association with Mr. J. Bomberg we have been negoti- ating the lease for property as mentioned above near Marble Arch. . . . When you receive the neressary documents, we shall be glad if you will confer with our Mr. Bond at this office along with Mr. Bomberg, if there are any observations requiring elucidation." On March 5, 1959, there was a meeting between Mr. Lyon of the plaintiff firm, the Bombergs, and Mr. Bilton and Mr. Bond representing the defendants, and there was a long discussion as to the share the Bombergs should have in that proposed venture. It seemed from Mr. Lyon's attendance note dated March 5, 1959, setting out the substance of the discussion, that the Bombergs were anxious to retain a substantial share of the venture, whereas Mr. Bilton and Mr. Bond were trying to keep their participa- tion to a minimum, but it was certainly contemplated that Glenhazel House Ltd. would erect some 74 flats on the site for letting. At that interview nothing was said between Mr. Lyon and the defendants as to the plaintiffs' being given any legal work in connection with the development, or the subsequent leases, and so far as the defendants were concenced there was no sort of agreement or understanding between them and Mr. Lyon in that connection. On March 11. 1959, Mr. Lyon wrote to the defendants: "With reference to our interview on the 5th instant with Mr. Percy Bilton, we are writing to confirm the basis of the agreement between you and Mr. and Mrs. Bomberg. . . . May we please take this opportunity of placing on record the understanding that all the legal work of and incidental to the completion of the development and the ant of the leases shall be carried out by us. " We shall be glad if you will acknowledge receipt of this letter, as we feel sure that the position can be satisfactorily dealt with by correspondence rather than formal agreement." On March 12. 1959, Mr. Bilton, wiiting as chairman of Percy Bilton Ltd., answered that letter of Mr. Lyon's. He agreed the items concerning the Bombergs with one slight alteration, and continued: "I see that you have tied up the legal work and, of Vol. 1 107 (2) course, it has never been agreed and I do not like tying it up unless it has been agreed. I am quite prepared, however, to accept it in relation to this particular property." The next letter, 12 days later, was dated March 24, from Mr. Lyon to Mr. Bilton. After dealing with the amendment to an item of the Bomberg agreement he added: "I note what you say with regard to the legal work. Mr. and Mrs. Bomberg gave me to understand that this was verbally agreed at the outset. and 1 thought it opportune to refer to it in my letter. We are pleased to note that you accept it in relation to this particular property." Thereafter, the plaintiffs in fact did certain work: and there was some further legal work in connection with some properties closely surrounding the relevant site. For all those items separate bills were rendered and those were paid at the time. On August 28, 1962. nearly three-and-a-half years after the letters of March, 1959, the plaintiffs wrote to the defendant: " We understand from the agents that it is hoped to have the first flats ready by the end of the year. " Has the stage yet been reached when we should cull for the lease pursuant to clause 2 of the building agreement? We would appreciate your observations and instructions. " We presume that you have considered the precise method of disposing of the several flats and we shall be glad to discuss this with you also. We did, of course, give preliminary consideration to this in Nvember, 1958, and we have referred to the memorandum prepared at the time dated November 17, 1958." The answer to that, dated August 31, 1962, signed by Mr. Bond on behalf of the defendants, read: " As you already know we have our own legal department now and they are dealing with all matters in connection with the sale of these fiats. 1 regret, therefore, we are unable to instruct you to act on this develop- ment." Subsequent correspondence followed, one letter being dated September 3, 1962, and written by Mr. Fitzgerald, from the plaintiffs to the defendants: " In the absence from the office of my partner, Mr. Lyon, my attention has been drawn to his letter to your company dated the 28th ultimo and your company's reply of the 31st ultimo. " I feel sure that when your company wrote their letter to my firm on the 31st ultimo they overlooked the agreement made between your company and my firm, which agreement is contained in letters passing between us dated March 11, 1959 and March 12, 1959," and asking the defendants to look into the matter. On November 5, 1962, Mr. Bilton, from the defendants, wrote to Mr. Fitzgerald: " Originally, when Mr. and Mrs. Bomberg had an interest in the above development, as you were at that tince acting on their behalf, we instructed you so far as the legal work was concerned in connection with this development. " Since then (1959), however, two events have occurred, namely, Mr. and Mrs. Bomberg's interest has been acquired by one of our companies and, in addition, we have established our own legal department. " I am sure you will agree that the changes in circum- stances mentioned above are such that it is now disirable for the legal work relating to the leasing of flats in Bilton Towers to be carried out by our own company solicitor. I am sorry we did not write to you specifically on this change but I rather presumed that you would have realised the department on various matters." By their statement of claim dated September 13, 1963, as amended, the plaintiffs claimed damages totalling #10,812 10s. for alleged breach of contract by the defendants' failure to employ the plaintiffs as their solicitors in connection with the legal work involved in the selling and letting of flats in Bilton Towers arid other work incidental to the completion of the development of that property by the defendants. They contended that by their letter of March 12. 1959, the defendants bound themselves by contract to employ the plaintiffs for all legal work of and incidental to the completion of the site's development and the grant of the leases ad that thereafter the defendants had no right to dispense with the plaintiffs' services. The defendants by their defence, as amended and re-amended, denied that there was any agreement with the plaintiffs as alleged, and pleaded alternatively that if there were any such agreement it was an implied term thereof that the agreement could be determined by notice, and that the agreement, if any, was so determined by notice in writing. Conrad Dehn for the plaintiffs. D. J. Turner-Samuels for the defendants. In addition to the cases referred to in the judgment the follow- ing were cited in argument: Emmens v. Elderton1; Hawkes v. Cottrell2; Rees v. Williams3; In re Galland4; Court V. Berlin5; Underwood, Son & Piper v. Lewis6; In re Wingfield abd Blew (Solicitors)7; Watts v. Official Solicitor8; Warmingtons v. Mc- Murray9; Thomas v. Hammersmith Borough Council10; Francis v. Kuala Lumpur Councillors. Cur. adv. vult. FENTON ATKINSON J. The master's order is that liability shall be determined first, so that I am not concerned directly with damages and that has not been argued, and so I refrain from comment, however tempting certain comments might be, on the side of this claim. Various points arise. The two I propose specifically to deal with are these : was there a legally enforceable agreement con- tained in the letters of March 11 and 12, 1959, with the possible addition of the letter of March 24? Secondly, if there was, had the defendants the right to terminate the retainer of the solicitors, as they purported to do, without committing any breach of contract? Mr. Dehn argued that although in Contentious business a client has long had the right to terminate his solicitors' retainer at any time and now has a statutory right to do so, he has no similar right in the case of non-contentious business or certainly in such non-contentious business as we are concerned with in this case. So I return to the letter of March 11, 1959. This is a letter being written by a solicitor to a layman, a prospective client, at a time when there is no existing agreement between them what- ever for employment in legal business and no understanding whatever between them to that effect; but the solicitor is clearly seeing the chance of some very profitable legal business for his firm and anxious to obtain it. So Mr. Lyon writes: " May we please take this opportunity of placing on record the understanding that all the legal work of and incidental to the completion of the development and the grant of the leases shall be carried out by us." Well, he is placing on record an understanding. It did not in fact exist at all. 1f he had said in that letter: We offer to enter into a binding legal contract and do all the legal work of and incidental to the completion of the development and the grant of the leases arid furthermore you will appreciate that it will be a term of that contract that you cannot thereafter dispense with our services until all the work is completed, however long that may take." I should have thought it was quite plain that the defendants would not have agreed and equally plain that Mr. Lyon knew that, or at least had a very shrewd suspicion to that effect, and it appears to me that he quite deliberately used this somewhat vague and equivocal language in his letter and that he did so on this basis: that if that was accepted by Mr. Bilton, without demur, he, Mr. Lyon, reckoned he would then have an agreement in his pocket. I must say I would be sorry if I felt bound to hold that he had succeeded in his desire. If instead of using the vague word " under- standing," he had said: " We understand it is your pit intention to instruct us as and when matters arise," and Mr. Bilton had accepted that, clearly there would have been no legal claim arising when the defendants decided to make other arrangements, and in my judgment that was in truth the result of these letters. Mr. Lyon deliberately uses the word " understanding," which, whatever it may mean, means something quite different from a binding legal contract and I think that, at the most, these letters achieved something in the nature of a gentleman's agreement, or extracted from Mr. Bilton confirmation of a present intention on his part to instruct Mr. Lyon to do this legal work as and when it arose. To seek to hold the defendants to more than that is, in my view, not legally well founded and it is quite unnecessary to consider in any way whether it would be ethically laudable or desirable to do so. Then I pass on to the second point if I am wrong on the first. If there was a contract, was there a right here to terminate? In contentious business it has long been held that the client has the right to terminate a solicitor's retainer at any time and there are statutory provisions to that effect in the Solicitors Act, 1957. I have heard in this case an elaborate and sustained argument from Mr.Dehn, accompanied by citations of all authorities that great industry could discover, and I am very grateful to him for his submissions and most able argument in every way. He says that the same principle does not apply to non-contentious business of this description and he says that his clients are in just the same position as an estate agent employed to sell a particular house. or an architect employed to produce the plans for a new town hall or something of that sort, and if, before the work is done, the client chooses to vary his instructions, then the solicitor, of course, cannot claim to do the work against the client's will but he is entitled forthwith to claim damages. In this context, in my view, it is necessary first to distinguish between an entire contract and a non-entire contract. For a definition of an entire contract I have tunced to Cordery on Solicitors, 5th ed. (1961), p. 94, under the heading " Termination of retainer." The paragraph starts in this way : " Before considering the ways in which a retainer may be terminated it is necessary to consider whether the retainer work for which the retainer was given and therefore one which cannot be terruinated before completion. " A retainer may be said to be an ' entire contract' where the client cannot receive the benefit of the consideration until the contract is completed. Thus, under a retainer to sue for damages for breach of contract the client cannot get any benefit until judgment has been obtained so that the solicitor should not be entitled to tax his costs until he has either obtained the judgment or lost the suit, for ' If a shoemaker agrees to make a pair of shoes, he cannot offer you one shoe, and ask you to pay one-half the price.1 And again. on the sale of a house the client does not get any benefit (normally) uritil thc s~e is complc~ ~ ~ coim- pletion of the sale is a condition precedent to the solicitor It may well be the law that, if the client retains a solicitor to act for him on the sale of a particular house, or, as in one of the authorities. a gas-works, and later seeks to terminate that retainer before the work has been completed, the solicitor can sue for damages, just as the estate agent who has been employed to sell a particular house can sue for damages if his authority is with- drawn; or the archictect, engaged to produce plans for the town hall. can sue for damages if his instructions are cancelled before the work is completed. But that does not seem to me to be this case. In my judgment, if this was an agreement at all, it was not an entire contract. It was an agreement to employ the solicitors in work of a certain class, which might extend over a period of years and involve legal work of various kinds, but it was a clear contemplation on both sides that bills would be rendered and paid as the matters proceeded; there would be no question of the solicitors' having to wait for payment until they completed the whole of the lettings of these flats; and of course the client was getting benefit as matters proceeded. So, what is the position as to the termination of retainer where there is no entire contract? The view expressed in Cordery on Solicitors, 5th ed. (1961), p. 96, is that in such a case one of the ways in which a retainer may be determined, without giving rise to a breach of contract, is "by discharge by the client in the absence of any agreement to the contrary," and that, among other things, would cover the case, for example, where a solicitor had been employed to act in certain matters for some particular fixed period of time. for one year or any given period; and I refer to Sir Thomas Lund's article on solicitors in 36 Halsbury's Laws of England, 3rd ed. (1961) p. 69, para. 98, where he is considering the period of retainer, and the view there expressed is ". . . that a term will also be implied enabling the client to withdraw the retainer at any time," and authorities are quoted in a footnote, all of which, I think, have been referred to by counsel. 1n note (k) this appears : "If a contract is entire. then, unless a term is implied before the time for performance is completed or has arrived gives the other Party a right of action "; and there is a referenoe there to a well-known case of estate agents' commission--George Trollope & Sons v. Martyn Brothers.(2) The note goes on: " This principle is applicable to a contract of retainer as to other contracts, but there is not, it is believed, any reported instance of a claim for damages having been advanced upon the withdrawal by the client of an indefinite retainer." I understand the reference there to indefinite retainer to cover the case where there is a retainer but there is not an entire contract; and those passages read from Cordery on Solicitors and from Halsbury's Laws are the view that in fact I have taken of this case. In my judgment, this not being an entire contract, I think that the clients were entitled to terminate the retainer at any time on giving notice to that effect to the plaintiffs. I do not think 2 [1934] 2 K.B. 436. that any question on length of notice arises. I think they were entitled at any time to write and say: "We have changed our minds, we have got our own legal department and we will not contract, I think the defendants had a right to terininate it, as they did by their letter of August 31, 1962; alternatively by their letter of November 5, 1962. The views I have expressed on Samuels' further point as to the effect, if any, upon this contract of the retirement in 1962 of two partners in the plaintiffs' firm. I confess that at first blush I found his submissions were startling but at least if Mr. Dehn, at some future date, can satisfy the Court of Appeal that I am wrong, on either or both of the two points on which I have decided this case, Mr. Turner-Samuels will have the opportunity to argue that matter and, maybe, receive a much more sympathetic response than perhaps he did counsel, as one would expect, were a1mcd with all thc authorities, For the reasons I have given I think this claim fails and the Judgment for the defendants. Solicitors : Milners. Murry & Gaskell; B. Turner-Samueis. [COURT OF APPEAL] GORE V. VAN DER LANN Practice--Stay of proceedings--Fraud--Allegation of fraud on third party--Pensioner granted free bus pass by corporation-- Condition excluding liability for injury--Pensioner injured-- Claim against bus conductor alleging negligence--Application by corporation to stay proceedings--Whether corporation's interest sufficient for relief--Supreme Court of Judicature (Consolidation) Act, 1925 (15 & 16 Geo. 5, c. 49), s. 41--County Courts Act, 1959 (7 & 8 Eliz. 2, c. 22), s. 103. Road Traffic--Public service vehicle--Contract for conveyance--Free pass to pensioner--Condition excluding liability for infury-- Whether contract void--Road Traffic Act, 1960 (8 & 9 Eliz. 2, c. 16), s. 151. Contract--Parties--Enforcement by third party--Passenger travelling on corporation bus on free pass--Conditions exempting corpora- tion from liability for injury to passenger--Passenger's action against bus conductor--Whether corporation entitled to stay proceedings--Whether contract between corporation and passen- ger void--Supreme Court of Judicature (Consolidation) Act, 1925 (15 & 16 Geo. 5, c. 49), s. 41--Road Traffic Act, 1960 (8 & 9 Eliz. 2, c. 16), s. 151. The Liverpool Corporation issued free passes to old-age pensioners for use on their buses. The plainiff, on April 24, 1963, applied for such a free pass an application form which provided : " In consideration of my being granted a free pass on the buses of Liverpool Corporation, I undertake and agree conditions overleaf, which have been read to or by me prior to signing." The conditions included, inter alia: " The pass is issued and accepted on the understanding that it merely constitutes . . . a licence to the holder to travel on the Liverpool Corporation's buses, . . . subject to the conditions that neither the Liverpool Corporation nor any of their servants or agents responsible for the driving, mana- gement, control or working of their bus system are to be liable to the holder . . . for . . . injury . . . however caused." On November 7, 1965, the plaintiff fell whcn attcmpting to board a Liverpool Corporation bus. She claimed damages against the bus conductor alleging that the accident was due to his negligence. The defendant fled a defence denying negligence and, in the alternative, relied on the conditions subject to which the Judicature (Consolidation) Act, 1925,(1) to stay all further pro- ceedings in the plaintiff's action on the ground that it was a condition of the plaintiff's free pass that the corporation's servants should not be liable for injury to her, that the corpora- tion would be obliged to satisfy any judgment obtained against the defendant, and that the plaintiff, in bringing the action, was acting so as to defraud the corporation. The registrar and, on appeal, the county court judge dismissed the application. On appeal the corporation submitted that the plaintiff's free pass constituted a licence subject to conditions, and that having regard to the plaintiff's acceptance of those conditions, the prosecution of the action against the conductor amounted to a fraud on the corporation which should be restrained by injunction. It was contended on behalf of the plaintiff that the acceptance by the corporation of the plaintiff's application constituted " a contract for the conveyance of a passenger in a public service vehicle " which was rendered void by section 151 of the Road Traffic Act, 1960.(2) 1 Supreme Court of Judicature contravention of which all or any (Consolidation) Act, 1925, s. 41 : part of the proceedings in the cause " No cause or proceeding at any or matter have been taken, may time pending in the High Court or apply to the High Court or the the Court of Appeal shall be re- Court of Appeal, as the case may strained by prohibition or injunction be, by motion in summary way, but every matter of equity on which for a stay of proceedings in the an injunction against the prosecu- cause or matter, either generally, or tion of any such cause or proceeding so far as may be necessary for the might formerly have been obtained, purpose of justice, and the Court whether unconditionally or on any shall thereupon make such order as terms or conditions, may be relied shall be just." on by way of defence thereto: Pro- 2Road Traffic Act, 1960, s. 151 : vided that--(a) Nothing in this Act " A contract for the conveyance of shall disable either of the said a passenger in a public service courts if it thinks fit so to do from vehicle shall, so far as it purports to directing a stay of proceedings, in negative or restrict the liability of any cause or matter pending before a person in respect of a claim which it; and (b) Any person whether a may be made against him in respect party or not to any such cause or of the death of, or bodily injury to, matter, who would formerly have the passenger while being carried been entitled to apply to any court in, entering or alighting from the or who may be entitled to enforce, conditions with respect to the en- by attachment or otherwise,any forcement of any such liabiliy be judgment decree, rule or order, in viod" Held, (1) that in the absence of any contractual obligation on the part of the corporation to indemnify the defendant against his liability in tort to the plaintiff, the corporation had no interest entitling them to relief under section 41 of the Supreme Court of Judicature (Consolidation) Act, 1925 (post, pp. 366DE, 367F--G, 369B). Dicta of du Parcq L.J. in Cosgrove v. Horsfall (1945) 62 T.L.R. 140, 141; (1946) 175 L.T. 334, C.A. considered. (2) (Harman L.J. declining to express an opinion). That all the elements of contract were present when the plaintiff, by sign- ing the application form, accepted the corporation's offer to carry her free on its buses subject to the conditions specified, and such a contract negativing liability was rendered void by section 151 of the Road Traffic Act, 1960, and, accordingly, the corporation had no ground for seeking to prevent the plaintiff from prosecut- ing her action (post, pp. 365F--H, 368D--E--G) Wilkie v. London Passenger Transport Board [1946] 1 All ER 650. 63 TLR 115. [1947] 1 All ER 258 C.A. distinguished. Per Wilmer L.J. The provision that the employees of the corporation are not to be liable for any injury or loss cannot be construed as a promise given to the corporation by the free pass holder not to institute proceedings against an employee (post, P. 366A-B). Per Salmon L.J. A contractual promise by the plaintiff not to sue the corporation's servant cannot be implied (post, p. 369A). APPEAL from Judge Stansfield at Liverpool County Court. The following statement of facts is taken from the judgment of Wilmer L.J. The Liverpool Corporation has for some years been in the habit of issuing free passes for use on their buses to elderly persons in receipt of what is now called a " retirement pension." On April 24, 1963, the plaintiff, Mrs. Margaret Gore, who was a lady then nearly 79 years old, applied for the issue of such a free pass, and for that purpose signed a printed form supplied by the corporation, which provided as follows : In consideration of my being granted a free pass for use on the buses of Liverpool Corporation, I undertake and agree that the use of such pass by me shall be subject to the conditions overleaf, which have been read to or by me prior to signing." The " conditions overleaf " included the following: " (4) The pass is issued and accepted on the understanding that it merely constitutes and grants a licence to the holder and subject to the conditions that neither the Liverpool Corpora- tion nor any of their servants or agents responsible for the driving, management, control or working of their bus system, are to be liable to the holder or his or her representative for loss of life, injury or delay or other loss or damage to property however caused. (5) The pass is issued and accepted on the further understanding that the pass-holder, whenever he or she makes to board and is travelling on the corporation's buses during permitted hours or on journeys for which the pass may be used, shall be deemed on every such occasion to be making use of his or her pass and to be travelling free and subject to the conditions of travel imposed by such pass until such times as he or she tenders and pays a proper fare for the joumey or in other manner expressly indicates to the conductor or other duly appointed representative of the corporation that he or she does not intend to make use of his or her free pass for the occasion or journey in question. In response to her application the plaintiff was duly issued with a free pass, described as a pensioner's pass, on the back of which was indorsed the following clause: " Not transferable. Issued subject to the conditions of grant set out in the written form of application previously made and signed by the pass-holder and to the by-laws and regulations of the corporation and upon the express condition that the corporation and their servants shall be under no liability, either contractual or otherwise, to the pass-holder when boarding, alighting from or being carried on corporation vehicles. W. M. HALL, General Manager." On November 7, 1965, the plaintiff was boarding a bus at an authorised stop when, as the bus moved off, she fell and was dragged along the ground, sustaining injury. She brought an action in the Liverpool County Court against the conductor, Hendrick Van Der Lan, alleging that the accident was due to his negligence in ringing the bell and causing the bus to move off while she was in the act of boarding, and in failing to take proper precautions for her safety. The defendant filed a defence denying negligence, and relying in the alternative on the conditions subject to which the plaintiff's free pass was issued. The material allegations were as follows: " (7) In particular the said pass or licence was issued and accepted on the understanding that it merely constituted and granted a licence to the plaintiff to travel on the Liverpool Corporation's buses with and subject to the condition that neither the Liverpool Corporation nor any of their servants or agents responsible for the driving, management, control, for injury or other loss or damage however caused. (8) The defendant, the conductor of the said motor bus, was a servant of the defendants (sic) of the class referred to in the said term or condition or understanding. His Lordship read paragraph 8 of the defence as it was drafted, although it was plain that the Liverpool Corporation were not defendants in the suit. Liverpool Corporation in obtaining such undertaking from the plaintiff. (10) By reason of the foregoing the plaintiff is not entitled to bring these proceedings or to succeed in these proceedings against the defendant in an circumstances whatsoever." On the same day as the defence was Wed a summons was issued on behalf of the Liverpool Corporation applying for an order that all further proceedings in the plaintiff's action be stayed. The grounds of the application were that it was a condition of the plaintiffs free pass that the servants of the corporation, including the defendant, shotild not be liable for injury to the plaintiff; that obtained against the defendant, and that in the premises by bringing this action the plaintiff was acting so as to defraud the corporation. The Supreme Court of Judication (Consolidation) Act, 41 of the Supreme Court of Judicature (Consolidation) Act, 1925. By section 103 of the County Courts Act, 1959, it is provided that in any case not expressly provided for by or in pursuance of that Act, the general principles of practice in the High Court may be adopted and applied to proceedings in a county court. The corporation's application was dismissed by the registrar and on appeal by Judge Stansfield. Neither appeared to have stated any reasons and it was complained by counsel for the corporation that he was never really given a chance to develop his argument. The corporation appealed. I. H. Morris Jones for the Liverpool Corporation. Rose Heilbron Q.C. and David L. Bulmer for the plaintiff. The following cases, in addition to those referred to in the judgments, were cited in argument : Genys v. Matthews 3; Beswick v. Beswick4; Hirachand Punamchand v. Temple 3; Alderslade v. Hendon Laundry 6; Adler v. Dickson.7 Cur. adv. vult. November 29. The following judgments were read. WILMER L.J. stated the facts as set out above and oontinued: The case for the corporation is that the plaintiff's free pass constituted no more than a licence which was granted subject to conditions. It has been contended that the plaintiff, having accepted the benefit of the licence, must also accept the conditions subject to which it was issued, and is therefore bound, as against the corporation, by the condition that neither the corporation nor its servants are to be liable for injury caused to her. The corporation is therefore entitled, under proviso (b) to section 41 of the Judicature Act, to an order restraining the prosecution of the plaintiff's action against the defendant. In support of this 3 [1966] 1 W.L.R. 758; [1965] 3 6 [1945] K.B. 189; 61 T.L.K. 216; All E.R. 24. [1945] 1 All E.R. 244, C.A. 4 [1966] Ch. 538; [1966] 3 7 [1955] 1 Q.B. 158; [1954] 3 W.L.R. 396; [1966] 3 All E.R. 1, W.L.R.. 696; [1954] 3 All E.R. 397, C.A. C.A. 5 [1911] 2 K.B. 330; sub nom. Punamchand Shrichand & Co. v. Temple, 27 T.L.R. 430, C.A. contention we were referred to White v. Harrow,(1) which was cited as an instance of a case where a person, not a party to the action, successfully invoked in his contract eith the plaintiff to obtain an injunction restraining the prosecution of an action brought by the plaintiff against the defendant in breach of the terms of that contract. We were also referred to a dictum of du parcq L.J. in Cosgrove v. Horsfall,(2) where the circumstances were similar to those of the present case, in that the action was brought by the holder of a free pass against an employee of the London Passenger Transport Board. du Parcq L.J. in that case clearly envisaged the possibility of the board applying for the very form of relief now sought by the Liverpool Corporation. He said 3: " I will express no opinion on the question, which Mr. Comyns Carr told us he had considered, whether the board could have applied successftilly to stay the present action under section 41 of the Supreme Court of Judicature Act, 1925: see especially proviso (b). We are not now concerned with the rights of the board, but it must not be assumed that if the plaintiff caused it to suffer loss by a breach of the condition it was without remedy and is now necessarily without redress." Subsequent to the hearing before the judge, and for the pur- poses of this appeal, the following facts were agreed between the parties: (1) That the application for the free pass was the plaintiff's application, and the signature on the form was her signature; (2) That at the time when the free pass was issued, the defendant, the conductor of the bus, was not in the employment of the corporation; (3) That the conductor's purported ratification of the action of the corporation in issuing the free pass, subject to the conditions attached thereto, was not signed till May 10, 1966, that is, after action brought. It was conceded before us by counsel for the corpomtion that the conditions, subject to which the pass was issued, would be apt to afford protection against liability for injury even though the injury was caused by negli- gence. It was also conceded that, having regard to the decision of this court in Cosgrove v. Horsfal,4 which was in terms approved by Viscount Simonds in Midland Silicones Ltd. v. Scruttons Ltd.,(5) the defendant in this action could not succeed in his defence, in so far as this is based on the conditions subject to which the free pass was issued. But it has been argued that, having regard to the plaintiffs acceptance of the conditions imposed, the prose- cution of the present action against the conductor amounts to a fraud on the corporation and an abuse of the process of the court, which should consequently be restrained by injunction. On behalf of the plaintiff it has been contended that the effect of the plaintiff's application and its acceptance by the corporation 1 (1902) 85 L.T. 677. 4 62 T.L.R. 140. 2 (1945) 62 T.L.R. 140; (1946) 5 [1962] A.C. 446; [1962] 2 175 L.T. 334, C.A. W.L.R. 186; [1962] 1 All E.R. 1 3 62 T.L.R. 140, 141. H.L.(E.). was to constitute " a contract for the conveyance of a passenger in a public service vehicle," which is rendered void by section 151 of the Road Traffic Act, 1960. [His Lordship read the section and continued: ] If this contention is well founded it is obvious that, assuming negligence on the part of the conductor, it effectively demolishes any possible defence to the plaintiff's claim, not only by the conductor but also by the corporation itself. In the circumstances it is tempting to ask why the plaintiff's advisers have seen fit to adopt the tortuous procedure of suing the conductor when there would have been an equally good claim against the corporation. Be that as it may, however, it is plain that if the plaintiff's contention be well founded, the corporation can have no possible ground for seeking to interfere with the prosecution of the present action against the conductor. In reply to this contention counsel for the corporation relied on the decision of Lord Goddard C.J. and of Lord Greene M.R. in this court in Wilkie v. London Passenger Transport Board,(6) as authority for the proposition that the issue by a transport authority of a free pass subject to conditions does not constitute a contract between the holder and the authority, but amounts to no more than the grant of a revocable licence with the condition that, while it is being enjoyed, certain consequences are to follow. ln that case a free pass, which was expressed to be subject to conditions similar to those in the present case, was issued as a matter of routine by the transport board to one of its employees. The employee had the misfortune to sustain personal injuries while attempting to board a bus. He thereupon brought an action against the transport board, who relied in their defence upon one of the conditions subject to which the pass was issued. The point was taken on behalf of the employee that the condition attached to the pass was void under section 97 of the Road Traffic Act, 1930, the equivalent of section 151 of the Act of 1960. Lord Goddard C.J. said with regard to this contention (7): " That depends upon whether there was here a contract for the conveyance of a passenger in a public service vehicle. The short answer to this point is that the pass was issued, in my opinion, as a mere privilege or licence. It was no part of the contract of employment that a pass should be issued." In the Court of Appeal Lord Greene M.R. dealt with the point as follows (8): I agree that the giving or receiving of this pass cannot be regarded as a contract for the conveyance of a passenger. It was said that the contract for conveyance is to be found in the giving and receiving of the pass, the contract being of this nature : ' We, the London Passenger Transport Board, agree to carry you free on our buses on the terms that you agree to give up what would otherwise have been your 6 (1946) 62 T.L.R. 327; [1946] 1 7 [1946] 1 All E.R. 650, 652. All E.R. 650; (1947) 63 T.L.R. 115; 6 [1947] 1 All E.R. 258, 260. [1947] 1 All E.R. 258, C.A. common law rights.' I think the short answer to that is that the question depends on the true construction of the pass and to regard it as having any contractual force is entirely to misinterpret it. There is no contractual animus to be found in relation to it. It is clearly nothing but a licence subject to conditions, a very common form of licence, e.g a licence to a neighbour to walk over a field, provided he does not go with a dog. You cannot spell such a thing as that as being a contract: I will let you go across my field in consideration of you, as a contracting party, agreeing not to take your dog.' In other words, looking at this document shortly and sensibly, it contains no intention to contract. It is the mere grant of a revocable licence subject to a condition that, while the licence is being enjoyed certain consequences shall follow. That is not contractual, but is a term or condition of the licence, and if anyone makes use of the licence he can only do so by being bound by the condition. That seems to me arg en on ion Wilkie's case,9 being a decision of this court, is binding upon us unless it is distinguishable. I have found the question one of no little difficulty, but I have come to the conclusion, not without some hesitation, that the present case is to be distinguished. The case were quite different from those in which the pass in Wilkie's case9 was issued. There the pass was issued to an employee of the board as a matter of course as one of the privileges attaching to his employment. There was certainly nothing contractual about it; there was, as Lord Greene M.R. said, no contractual animus. In the present case, on the other hand, the pass was issued, not to an employee, but to a stranger, and only in response to a written application. By the terms of the application which she signed the plaintiff specifically undertook and agreed that the use of the pass should be subject to the conditions: The very wording of that which the plaintiff signed was couched in the language of contract. It appears to me that all the elements of contract were present. By signing and submitting her application, the plaintiff, as I see it, was accepting the offer of the corporation to carry her free upon its buses subject to the conditions specified. Each party gave good consideration by accepting a detriment in return for the advantages gained. Unlike Wilkie's case,6 the facts of the present case do in my judgment reveal a contractual animus. This conclusion is, of course, fatal to the corporation's application. If, as I think, there was a contract, it is clearly rendered void by section 151 of the Road Trffic Act, 1960. There can, therefore, be no obstacle in the way of the plaintiff prosecuting an action for negligence, whether against the cor- poration or against its employee. The corporation can have no possible ground for seeking to interfere with the plaintiff's right to prosecute her action. That is sufficient to dispose of the appeal. But I think it right to add that, even if I had thought that the issue of the free 9 [1947] 1 All E.R 258 VOL. 2 24 pass amounted to no more than the grant of a licence subject to conditions, I should still have arrived at the same conclusion so far as this application is concerned. It is true that the conditions accepted by the plaintiff when she accepted the offer of a free pass included a provision that the employees of the corporation were not to be liable to her for any injury or loss. But I cannot construe this provision as a promise by the plaintiff not to institute proceedings against an employee. If the corporation desired such a promise from a holder of a free pass, they could have said so in clear and unambiguous terms. In my judgment the conditions are to be construed strictly against the corporation who put them forward. It is not enough to say that a promise not to sue the employee is to be implied. At the best for the oorpora- tion, the condition relied on is ambiguous, and any ambiguity must be resolved in favour of the plaintiff. In these circumstances the corporation has not satisfied me that it has any justification for interfering with the plaintiff's prima facie right at common law to bring proceedings against the conductor whom she accuses of negligence. On this ground also I am of opinion that the judge came to the right conclusion, and that the appeal should be dismissed. Since preparing this judgment I have had the advantage of reading the judgment about to be delivered by Harman L.J. I should desire to express my concurrence with his view that, since it has not been shown that there was any contract between the corporation and the conductor rendering the corporation liable in law to indemnify the conductor, there is no ground upon which the corporation could be held to have an interest entitling them to relief under section 41 of the Judicature Act, 1925. On this ground also, in addition to those which I have already set out, I am satisfied that the corporation's application was rightly dismissed. HARMAN L.J. The facts of this case and the relevant docu- ments or their effect have been fully stated by Willmer L.J. and I shall not repeat them. The action was one by a passenger in one of the Liverpool Corporation's buses against the conductor of the bus, who was, of course, a servant of the corporation, for damages arising out of his negligence in the conduct of the bus. In that action the corporation has intervened by motion or summons in a similar way to stay the action, and the question before us is whether such a motion can be entertained. It is based on section 41 of the Judicature Act, 1925, which forbids the old practice of restraint of actions by prohibition or injunction subject to the proviso (b) that any person who would formerly have been entitled to apply to any court to restrain the prosecution of an action may apply to the High Court by motion in a summary way for a stay of proceedings in the action. This section is applied to county courts by virtue of section 103 of the County Courts Act, 1959. The question, therefore, is whether before the Judicature Act of 1873 the corporation would have been entitled to apply to res- train the action. This would have been done by a bill in Chancery. The ground stated is that the prosecution of the action would be a fraud on the corporation, and the fraud alleged apparently is that, if the action succeeded and damages were obtained against the conductor, the corporation would in some way be liable to indemnify him. It is here in my judgment that the case breaks down, for I do not see how the corporation could be liable in law for what would be a tort of its servant. The motion is said to be supported by a decision of du Parcq L.J. in Cosgrove v. Horsfall. (10) where he suggested that the corporation might in somewhat similar circumstances obtain redress under section 41; but as I read the judgment that is only suggested on the footing that the corporation could be shown to have been in danger of suffering damage by the supposed breach by the plaintiff of the condition attached to her free pass. du Parcq L.J. said this (11): " The London Passenger Transport Board may well be entitled to some redress against the plaintiff, though, before expressing a positive opinion on this matter, I should wish to know what claim they make and what answer to it the plaintiff may have. The board are not a party to these proceedings. They may be entitled to recover daarmages, and if they were shown to have suffered loss through the plainiff's breach of the condition of the circumstances might be such that the damages would be more than nominakl. I will express no opinion on the question, which Mr. Comyns Carr told us he had considered, whether the board could have applied success- fully to stay the present action under section 41 of the Supreme Court of Judicature Act, 1925; see especially proviso (b). We are not now concerned with the rights of the board, but it must not be assumed that if the plaintiff caused it to suffer loss by a breach of the condition it was without remedy and is now necessarily without redress. I doubt, however, whether the board is in any way affected by what the plaintiff has chosen to do." There is no suggestion in the instant case that there is any con- tract between the corporation and the conductor making the corporation liable for the torts of the latter, and in its absence I cannot see that the corporation is liable at law and, if not I think section. This seems to me to be in accordance with the opinion expressed in the passage I have read. In these circumstances I am of opinion that the judge below was right in refusing the corporation's application. I do not think that the question of the applicability of section 151 of the Road Traffic Act, 1960, arises. I therefore propose to express no opinion on the difficult question whether the free pass constituted a contract between the plaintiff and the corporation, or whether it was merely a licence subject to a condition having no contractual effect. 10 62 T.L.R. 140. 11 Ibid. 141. SALMON L.J. I agree with both the judgments which have been delivered. For my part I have little doubt but that there was a contract between the plaintiff and the corporation. The plaintiff signed an application for a pass on one of the corporation's printed forms, the very language of which is calculated to impress upon an applicant that she is entering into a legally binding agreement with the corporation: " In consideration of my being granted a free pass for use on the buscs of Liverpool Corporation, I undertake and agrce that the use of such pass by me shall be subject to the conditions overleaf." I need not repeat the conditions, which have been read by Willmer L.J.; they undoubtedly negative the liability of the corporation and their servants in respect of any injury which the passenger may sustain whilst being carried in or boarding or alighting from the corporation's buses. They clearly apply to any negligence on the part of the corporation or their servants, for there is nothing else to which they could apply. The issue of the pass depended upon the applicant signing the form to which I have referreds. In my judgment there was a contract between the applicant and the cor- poration that, in consideration of the applicant agreeing to be bound by the stated conditions, the corporation agreed to carry her free on their buses until such time as it cancelled the pass. Section 151 of the Road Trffic Act, 1960, enacts that any such conditions purporting to negative or restrict liability shall be void. The corporation relies upon Wilkie v. London Passenger Transport Board.12 That no doubt is a binding authority on this court. But the facts, though similar, were in reality different. Whether or not there is a contractual animus must depend largely upon the true construction of the documents from which that animus is to be inferred. In Wilkie's case12 the carriers did not, as here, require the passenger to sign a form which clearly indicated that the passenger was entering into an agreement by which he would be legally bound. This court found that on the facts and documents of that case there was no contractual animus. In the present case there was in my view such an animus, and accordingly section 151 is fatal to the corporation's appeal. Even had there been no contract in the present case, I would have come to the clear conclusion that the corporation must fail. In order for the corporation to obtain the relief which it claims, it would be necessary for it to show (as Harman L.J. points out) that, before the Judicature Act, 1873, it would have been entitled to apply to the court in Chancery to restrain the plaintiff from bring- ing her action against the defendant. In order to succeed, the corporation would have had to establish that the action was a fraud upon the corporation either (1) because the plaintiff had agreed with the corporation for good consideration not to bring 12 [1947] 1 All E.R. 258. * PARTRIDGE v. CRITTENDEN Animal--Bird--Protection--" Offers for sale "--Advertisement under classified advertisements "--" bramblefinch cocks, bramble- finch hens, 25s. each "--Whether offer for sale--Whether invita- tion to treat Bird with easily removable ring--Whether close ringed" --Protection of Birds Act, 1954 (2 & 3 Eliz. 2, c. 30), s. 6 (1) (a). The appellant inserted an advertisement in a periodical, " Cage and Aviary Birds " for April 13, 1967, containing the blefinch hens . . . 25s. each," which appeared under the general [Reported by HOOSEN COOVADIA, ESQ., Barrister-at-Law.] heading " classified advertisements." In no place was there any direct use of the words " offers for sale." In answer to the advertisement, T. wrote, enclosing a cheque for 25s., and asked that a hen be sent to him. The hen arrived wearing a closed ring which could be removed without injury to the bird. The appellant was charged with unlawfully offering for sale a bramblefinch hen contrary to section 6 (1) of the Protection of Birds Act, 1954.(1) The justices were of the opinion that the hen, being a bird included in schedule 4 to the Act of 1954, was not a closed-ringed specimen bred in captivity because it was possible to remove the ring, convicted him. On appeal, the appellant contending that his advertisement was merely an invitation to treat and not an offer for sale, and that the mere fact that it was possible to remove the ring from the bird's leg did not mean that it was not of a closed-ring specimen : -- Held, allowing the appeal, that while " close-ringed " in section 6 (1) (a) of the Act meant ringed by a complete ring which was not capable of being forced apart or broken except by damaging it, so that the bird in question was not a closed- ring specimen (post, p. 1208c); the advertisement inserted by the appellant under the title " classified advertisements " was not an offer for sale but merely an invitation to treat; and that, accordingly, the appellant was not guilty of the offence charged. Fisher v. Bell [1961] 1 Q.B. 394; [1960] 3 W.L.R. 919; [1960] 3 All E.R. 731, D.C. and dicta of Lord Herschell in Grainger & Son v. Gough 11896] A.C. 325, 334, H.L.(E.), applied. Per Lord Parker C.J.: There is business sense in construing advertisements and circulars, unless they come from manufac- turers, as invitations to treat and not offers for sale (post p. 1209G). CASE STATED by Chester Justices. On June 19, 1967, an information was preferred by the prosecutor, Anthony Ian Crittenden, on behalf of the R.S.P.C.A., against the appellant, Arthur Robert Partridge, that he did unlawfully offer for sale a certain live wild bird, a brambling, being a bird included in schedule 4 to the Protection of Birds Act, 1954, of a species which is resident in or visits the British Isles in a wild state, other than a close-ringed specimen bred in cap- tivity, contrary to section 6 (1) of the Act of 1954. The justices heard the information on July 19, 1967, and found the following facts. On April 13, 1967, there appeared in the periodical " Cage and Aviary Birds " an advertisement inserted by the appellant containing, inter alia, the words " Quality British A.B.C.R. . . . bramblefinch cocks, bmmblefinch hens, 25s. each." By letter to the appellant dated April 22, 1967, Thomas Shaw Thompson of Hoole, Chester, requested the dispatch to himself of an A.B.C.R. bramblefinch hen as advertised in " Cage and Aviary 1 Protection of Birds Act, 1954, to this Act of a species which is s. 6 (1): " If, save as may be author- resident in or visits the British Isles ised by a licence granted under sec- in wild state, other than a close- tion 10 of this Act, any person sells, ringed specimen bred in captivity offers for sale or has in his posses- . . . he shall be guilty of an offence sion for sale--(a) any live wild bird. against this Act." being a bird included in schedule 4 Birds " and enclosed a cheque for 30s. On May 1, 1967, the appel- lant dispatched a bramblefinch hen which was wearing a closed ring to Mr. Thompson in a box by British Rail. Mr. Thompson received the bird on May 2, 1967. The box was opened by Mr. Thompson in the presence of the prosecutor. Mr. Thompson attempted to and was, in fact, able to remove the ring without injury to the bird. Even taking into account that the bird had travelled from Leicester in a box on British Rail its condition was rough, it was extremely nervous, had no perching sense at all and its plumage was rough. A bramblefinch or brambling, as it is also called, was a bird included in schedule 4 to the Act of 1954. The expression " close- ringed " was nowhere defined nor was there any universally recom- mended size ring for a bramblefinch. The ring was placed on the bird's leg at the age of three to 10 days at which time it was not possible to determine what the eventual girth of the bird's leg would be. It was contended by the appellant that there was no offer for sale in the county of Chester as alleged since the advertisement in " Cage and Aviary Birds " was merely an invitation to treat; and that an offence was not committed under section 6 (1) of the Act of 1954 merely because it was possible to remove the ring from the bird's leg. It was contended on behalf of the prosecutor that the advertise- ment was an offer for sale in Chester; and that a bird was not a close-ringed specimen bred in captivity if it was possible to remove the ring from its leg. The justices were of opinion that the advertisement was an offer for sale in Chester on April 22, 1967, and that the brambling so offered for sale by the appellant was not a close-ringed speci- men bred in captivity because it was possible to remove its ring. They accordingly found the case proved and fined the appellant #5, and ordered him to pay #5 5s. advocate's fee and #4 9s. 6d. witnesses' expenses. The question for the opinion of the court was whether the justices were right in law in holding that the advertisement was an offer for sale in Chester on May 1, 1967, and that a bird was not a close-ringed specimen bred in captivity within the meaning of the Act of 1954 if it was possible to remove the ring from its leg. C. J. Pitchers for the appellant. Michael Havers Q.C. and D. T. Lloyd-Jones for the prosecu- tor. The following cases, in addition to those referred to in the judgment, were cited in argument: Rooke v. Dawson2; Harris v. Nickerson3; Carlill v. Carbolic Smoke Ball Co.4; and Spencer v. Harding.5 2 [1895] 1 Ch. 480. 4 [1892] 2 Q.B. 484; [1893] 1 3 (1873) L.R. 8 Q.B. 286. Q.B. 256, C.A. 5 (1870) L.R. 5 C.P. 561. the bird was not a close-ringed specimen bred in captivity, because it was possible to remove the ring. Before this court Mr. Pitchers for the appellant, has taken two points, first, this was not an offer for sale and, secondly, that the justices' reason for finding that it was not a close-ringed bird was plainly wrong because the fact that one could remove the ring did not render it a non-close-ringed bird. It is convenient, perhaps, to deal with the question of the ring first. For my part I confess I was in ignorance, and in some state of confusion, as to the real meaning and effect of this partictilar phrase in the section, and I express my indebtedness to Mr Havers, for the prosecutor, for having made the matter, as far as I am concerned, perfectly clear. I would say it one was looking for a definition of the phrase " close-ringed " it means ringed by a complete ring, which is not capable of being forced apart or broken except, of course, with the intention of damaging it. I contrast a closed-ring of that sort--it might take the form, I suppose, of an elastic band or of a metal circle ring--with the type of ring which sometimes exists which is made into a ring is a ring which can be undone and is not close-ringed. In this case what is contemplated, according to Mr. Havers, and I accept it, is that with a young bird of this sort between three and ten over its claws, which are obviously brought together so as to admit the passage of the ring, and it is then permanently on or around the bird's leg, and as it grows, it would be impossible to take that ring off because the claws and the like would have rendered a repetition of the earlier manoeuvre impossible. Therefore, approaching the matter this way, I can well under- stand how the justices came to the conclusion that this was not a close-ringed specimen, because they cotild take the ring off. If that were the only issue, I shotild not find any difficulty in upholding their decision. But the real point of substance in this case arose from the words " offer for sale," and it is to be noted in section 6 of the Act of 1954 that the operative words are "any person sells, offers for sale or has in his possession for sale." For some reason which Mr. Havers for the prosecutor has not been able to explain, those responsible for the prosecution in this case chose, out of the trio of possible offences, the one which could not succeed. There was a sale here, in my view, because Mr. Thompson sent his cheque and the bird was sent in reply; and a completed sale. On the evidence there was also a plain case of the appellant having in possession for sale this partictilar bird. But they chose to prosecute him for offering for sale, and they relied on the advertisement. A similar point arose before this court in 1960 dealing, it is true, with a different statute but with the same words, in Fisher v. Bell.(2) The relevant words of section 1 (1) of the Restriction of Offensive Weapons Act 1959, in that case were: "Any person who . . . offers for sale . . . . (a) any knife. . . ." Lord Parker C.J., in giving judgment said 3: " The sole question is whether the exhibition of that knife in the window with the ticket constituted an offer for sale within the statute. I confess that I think that most lay people and, indeed, I myself when I first read the papers, would be inclined to the view that to say that if a knife was displayed in a window like that with a price attached to it was not offermg it for sale was just nonsense. In ordinary language it is there inviting people to buy it, and it is for sale: but any statute must of course be looked at in the light of the general law of the country." The words are the same here "offer for sale," and in my judgment the law of the country is equally plain as it was in regard to articles in a shop window, namely that the insertion of an advertisement in the form adopted here under the title " Classi- fied Advertisements " is simply an invitation to treat. That is really sufficient to dispose of this case. I should perhaps in passing observe that the editors of the publication Criminal Law Review had an article dealing with FIsher v. Bell (4) in which a way round that decision was at least contemplated, suggesting that while there might be one meaning of the phrase " offer for sale " in the law of contract, a criminal court might take a stricter view, partictilarly having in mind the purpose of the Act, in FIsher v. Bell (4) the stocking of flick knives, and in this case the selling of wild birds. But for my part that is met entirely by the quotation which appears in Lord Parker's judgment in Fisher v. Bell, that(5) " It appears to me to be a naked usurpation I would allow this appeal and quash the conviction. BLAIN J. I agree. LORD PARKER C.J. I agree and with less reluctance than in Fisher v. Bell,6 and Mella v. Monahan 7 I say " with less reluc- and circtilars, unless they indeed come from manufacturing there is business sense in their being construed as invitations to treat and not offers for sale. In a very different context in Grainger & Son v. Gough 6 Lord Herschell said dealing with a price-list(9): " The transmission of such a price-list does not amount to an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract to supply that quantity. If it were so, the merchant might find himself involved in any 7 [1961] Crime L.R. 175, D.C. 8 [1896] AC, 325, 9 Ibid 334. number of contractual obligations to supply wine of a particu- lar description which he would be quite unable to carry out his stock of wine of that description being necessarily limited." It seems to me accordingly that not only is it the law but common sense supports it. Appeal allowed with costs. Solicitors : R. G. Frisby & Small, Leicester; Rex Taylor & Meadows, West Kirby. [COURT OF APPEAL] *JONES v. PADAVATTON 1968 Nov. 1 1, 12, 13, 29 Danckwerts, Salmon and Fenton Atkinson L.JJ. Contract--Formation--Intention to create legal relationship--Un- certainty--Inter-family arrangement--Mother's offer to main- tain adult daughter whilst latter studied for professional quali- ficatiion--Subsequent provision of house for use of daughter-- Whether terms too vague and uncertain to be enforceable-- Whether family arrangement without intention of creating legally binding contract. A mother made an arrangement with her daughter, who was employed as a secretary in the United States of America, that if the daughter would give up her employment in order to read for the Bar in England, the mother would provide her with maintenance at the rate of 200 dollars a month. The daughter accordingly gave up her job, came to England and entered upon her studies for the Bar, and the mother provided her with main- tenance at the rate of #42 a month. That arrangement was subsequently varied, and under the varied arrangement the mother provided a house in which the daughter could reside. A dispute arose between the mother and daughter concerning the occupancy of the house and the mother took out a sum- mons in the county court claiming possession of the house after having given her daughter a notice to quit. The county court judge refused to make the order sought on the gorund that the daughter was entitled to remain in occupation under the terms of the varied arrangement which he held to be a legally binding contract. On appeal by the mother: Held, allowing the appeal, that although members of a family might enter into legally binding contmcts in regard to family affairs there was a presumption against such intention. [Reported by R. W. LUCIE-SMITH, ESQ., Barrister-at-Law.] and that on the facts the arrangements in relation to the house were made without contractual intent and were family arrange- ments; accordingly, the daughter had no defence to the mother's claim for possession of the house. Balfour v. Balfour [1919] 2 K.B. 571, C.A. considered. The following cases are referred to in the judgments : Balfour v. Balfour [1919] 2 K.B. 571, C.A. Parker v. Clark [1960] 1 W.L.R. 286; [1960] 1 All E.R. 93. Shadwell v. Shadwell (1860) 9 C.B.N.S. 159. The following additional cases were cited in argument : Golay's Wilt Trusts, In re [1965] 1 W.L.R. 969; [1965] 2 All E.R. 660. Reid v. Zoanetti [1943] S.A.S.R. 92. Ward v. Byham [1956] 1 W.L.R. 496; [1956] 2 All E.R. 318, C.A. APPEAL from Judge Dow at Clerkenwell County Court. The facts are fully stated in the judgment of Danckwerts L.J. A. Charles Sparrow Q.C. and Keith E. Evans for the plaintiff. George B. H. Dillon Q.C. and Terence L. Cullen for the defendant. DANCKWERTS L.J. This is an action between mother, Mrs. Violet Lalgee Jones, and daughter, Mrs. Ruby Padavatton, and one which is really de- plorable. The points of difference between the two parties appear to be comparatively small, and it is distressing that they could not settle their differences amicably and avoid the bitterness and expense which is involved in this dispute carried as far as this court. Both mother and daughter came from Trinidad and appear to be of East Indian descent. At the opening of the story in 1961-62 the mother was resident in Trinidad. The daughter (who had been married to, and divorced from, a Mr. Wyatt) was living in a flat in Washington, D.C., in the United States, and was employed at a satisfactory salary, with pension rights, in the Indian Embassy in Washington. She had one child by her marriage, a boy called Tommy. She had been on holiday with her mother to England in 1957. A suggestion was made that she might go to England in order to read for the Bar in England and, if she became a qualified barrister, then to go to Trinidad and practise as a lawyer there. There is a dispute as to which of the two parties initiated the idea, but the daughter gave evidence very strongly suggesting that it was her mother's idea. She points to her very satisfactory job with the Indian Embassy in Washington and her flat and claims to have been unwilling to go to England, and to have been induced by extreme pressure. Her mother intimated that if her daughter would go and read for the Bar as suggested, she would provide maintenance for her at the rate of 200 dollars a month. Unfortunately, the mother (Mrs. Jones) was thinking in West Indian dollars, in which 200 dollars was equal to #42 a month, and the daughter living in Washington, was thinking in U.S.A. dollars, in which 200 dollars were equal to #70. The two were plainly not ad idem then, but the daughter, when she received only #42 per month, seems to have accepted that sum without anything much in the way of protest. Anyhow, the daughter was entered with Lincoln's Inn as a student, and the necessary fees were paid by a Mr. Agimudie, a lawyer in Trinidad, as Mrs. Jones's agent. Mr. Agimudie in a contemporary letter assured the daughter that, of course, maintenance would be provided for her. So the daughter went to England in November, 1962, and entered upon her studies for the Bar. She took her son, Tommy, with her. The precise terms of the arrangement between mother and daughter were difficult to discover completely. There is no doubt that the daughter gave consideration for a promise by her mother to provide maintenance at the rate of #42 per month so long as she was reading for the Bar in England by giving up her job and her other advantages in Washington, and by read- ing for the Bar. But various incidental matters appear newer to have been thought out at all. There were no terms recorded in writing, no sort of businesslike statement of the parties' respective obligations, not even of how long the mother was to go on paying if the studies were prolonged or un- successful. In fact the daughter has passed all the examinations in Part I except one, but Part II is still to be taken. The question therefore arises whether any binding legal contract was intended, or whether this was simply a family arrangement in which one member of the family relies on a promise given that person to carry out the promise. But such an arrangement is not in- tended to create actionable legal rights. The situation so far has been called " step one." In 1964 a new element was introduced. The daughter was experiencing some disoomfort in England. She, with Tommy, was occupying one room in Acton, for which she had to pay #6 17s. 6d. per week. In 1964 the mother made a proposal that she should buy a house in London of some size so that the daughter and Tommy could live in a room or in rooms in the house, and the rest of the house could be let off to tenants, and the rents would cover expenses and provide maintenance for the daughter and Tommy in place of the #42 a month. It is not clear whether Mrs. Jones had in mind a profitable investment in England, or wished to avoid the inconvenience of remitting #42 a month to England, or whether she simply had in mind the difficulties that her daughter was experiencing. At any rate, a house, No. 181, Highbury Quadrant, was found, which was conveyed into Mrs. Jones s name. The price was #6,000 and moneys were provided by Mrs. Jones in several sums for this. But there were also expenses of the purchase, as well as other expenses, and furniture, as it was desirable that the tenancies should be of furnished rooms. The moneys provided by Mrs. Jones were insufficient to provide for all these things; until furniture was provided, there could be no tenants. The purchase was completed in December, 1964, and the daughter and Tommy went into occupation on January 31, 1965. Somehow money was found to buy furniture, and tenants began to arrive in February, 1965. The aughter had a power of attomrny from hce mothFe. There was, of course, no written agreement and lots of incidental matters remained open: in what order were the rents to be applied; were outgoings to be paid first or did the daughter's maintenance come first? There was a doubt whether the daughter's rights were confined to one room, or could she occupy several? In fact she occupied not only one room but also a kitchen, and a so-called storeroom where various things were stored, but Tommy went into occupation on January 31, 1965. Somehow money was arises: was there any legally binding contract or was it just an informal family arrangement? The daughter had been married on January 6, 1965, to a Mr. Padavanon, who is a lecturer at the London School of Economics, I understand, but it is not clear what part he has played in these matters. The new arrangement, or the varied old arrangement, whatever it may be, continued until November, 1967. The mother, who had also visited England in 1963, came again to England in August, 1967. Mrs. Jones, it should be observed, has never received any money from the rents of the house, and she was paying substantial interest on a mortgage on property in Trinidad by which she had raised money for the purchase of the house. There was a most peculiar incident when, on Mrs. Jones's arrival in Eng- land she was driven to the house by Mr. Rawlins, her solicitor, and could not get in. But nothing really depends on that. Mrs. Jones, who had complained that she could not get any accounts from her daughter, had consulted English solicitors, and before this a sum- mons by the mother against the daughter had been taken out claiming pos- session of the house, and particulars of claim were delivered dated July 4, 1967. Of course, the house is the property of Mrs. Jones. The mother (Mrs. claim dated August 11, 1967, had been delivered, which was amended on February 21, 1968. In these are set out the daughter's version of the arrange- ments made between the parties, and she counterclaims #1,655 16s. 9d., which the daughter claims she has paid in respect of the house, and ought to and dismissed the claim for possession. He gave judgment on the counter- claim in favour of the daughter and referred the matter to the registrar. I do not find the grounds of the county court judge's decision easy to under- stand. He regarded both mother and daughter as very respectable wit- nesses, and he acoepted the daughter's story in regard to the arrangements between them. Before us a great deal of time was spent on discussions as to what were the terms of the arrangements between the parties, and it seemed to me that the further the discussions went, the more obscure and uncertain the terms alleged became. The acoeptable duration of the daughter's studies was not finally settled, I think. There was a lack of evidenoe on the matter, and the members of the court were induced to supply suggestions based on their At any rate, two questions emerged for argument: (1) Were the arrange- ents (such as they were) intended to produce lLegall binding agfreeents, or were they simply family arrangements depending for their fulfilment on good faith and trust, and not legally enforceable by legal proceedings? (2) Were the arrangements made so obscure and uncertain that, though intended to be legally binding, a court could enforce them? Mr. Dillon argued strenuously for the view that the parties intended to create legally binding contracts. He relied upon the old case of Shadwell v Shadwell (1860) 9 C.B.N.S. 159 and Parker v. Clark [1960] 1 W.L.R. 286. Mr. Sparrow argued on the mother's behalf for the contrary view that there were no binding obligations, an that if there were they were too uncertain for the court to enforce. His stand-by was Balfour v. Balfour [1919] 2 K.B. 571. The principles involved are very well discussed in Cheshire and Fifoot on Contract, 6th ed. (1964) at pp. 94-96, Of course, there is no difficulty, if they so intend in members of families entering into legally binding contracts in regard to family affairs. A competent equity draftsman would, if properly instructed, have no difficulty in drafting such a contract. But there is possibly in family affairs a presumption against such an intention (which, of course, can be rebutted). I would refer to Atkin L.J.'s magnificent exposition of the situation in regard to such arrangements in Balfour v. Balfour [1919] 2 K.B. 571, 578-580. There is no doubt that this case is a most difficult one, but I have reached a conclusion that the present case is one of those family arrangements which depend on the good faith of the promises which are made and are not intended to be rigid, binding agreements. Balfour v. Balfour was a case of husband and wife, but there is no doubt that the same principles apply to dealings between other relations, such as father and son and daughter and mother. This, indeed, seems to me a compelling case. Mrs Jones and her daughter seem to have been on very good terms before 1967. The mother was arranging for a career for her daughter which she hoped would lead to success. This involved a visit to England in conditions which could not be wholly foreseen. What was required was an arrangement which was to be financed by the mother, and was such as would be adapt- able to circumstances as it in fact was. The operation about the house was, in my view, not a completely fresh arrangement, but an adaptation of the mother's financial assistance to her daughter due to the situation which was found to exist in England. It was not a stiff contractual operation any more than the original arrangement. In the result, of course, on this view, the daughter cannot resist her mother's rights as the owner of the house to the possession of which the mother is entitled. What the position is as regards the counterclaim is another matter. It may be that at least in honesty, the daughter should be reimbursed for the expenditure which she had incurred. In my opinion, therefore, the appeal should be allowed. SALMON L.J. I agree with the conclusion at which my Lord has arrived, but I have reached it by a different route. The first point to be decided is whether or not there was ever a legally binding agreement between the mother and daughter in relation to the daughter's reading for the Bar in England. The daughter alleges that there was such an agreement and the mother denies it. She says that there was nothing but a loose family arrangement which had no legal effect. The onus is clearly on the daughter, There is no dispute that the parties entered into some sort of arrangement It really depends upon (a) whether the parties intended it to be legally binding, and b) if so, whether it was sufficiently certain to be enforceable. Did the parties intend the arrangement to be legally binding? This question has to be solved by applying what is sometimes (although perhaps unfortunately) called an objective test. The court has to consider what the parties said and wrote in the light of all the surrounding circumstances and then decide whether the true inference is that the ordinary man and women, speaking or writing thus in such circumstances, would have intended to create a legally binding agreement. Mr. Sparrow has said, quite rightly, that as a rule when arrangements are made between close relations, for example, between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship This is not a presumption of law, but of fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection. This has all been explained by Atkin L.J. in his celebrated judgment in Balfour v. Balfour [1919] 2 K.B. 571, 578--580. There may, however, be circumstances in which this presumption, like all other presumptions of fact, can a rebutted. Mr. Dillon has drawn our attention to two cases in which it was 1Shadwell v. Shadwell (1860) 9 C.B.N.S. 159 and Parker v. Clark [1960] 1 W.L.R. 286. The former was a curious case. It was decided by Erle C.J. and Keating J. (Byles J. dissenting) on a pleading point, and depended largely upon the true construction of a letter written by an uncle to his nephew. I confess that I should have decided it without hesitation in accordance with the views of Byles J.; but this is of no con- sequence. Shadwell v. Shadwell laid down no principle of law relevant to what we have to decide; it merely illustrated what could never, I think, to seriously doubted, namely, that there may by circumstances in which arrangements between close relatives are inteded to have the force of law. In the pre~tsencase thc eounty court judge having had thc edv~tange f seeing the mother and daughter in the witness-box, en~tirey afccepted the daughter's version of the facts. He came to the conclusion that on these very special facts the true inference must be that the arrangement between the parties prior to the daughter's leaving Washington were intended by both to have contractual force. On the facts as found by the county court judge this was entirely different from the ordinary case of a mother promising her daughter an allowance whilst the daughter read for the Bar, or a father promising his son an allowance at university if the son passed the necessary examinations to gain admission. The daughter here was thirty-four years of age in 1962. She had left Trinidad and settled in Washington as long ago as 1949. In Washington she had a comfortable flat and was employed as an assistant accountant in the Indian Embassy at a salary of $500 a month (over #2,000 a year). This employment carried a pension. She had a son of seven years of age who was an American citizen, and had, of course already begun his education. There were obviously solid reasons for her staying where she was. For some years prior to 1962, however, her moter, who lived in Trinidad, had been trying hard to persuade her to throw up all that she had achieved in Washington and go to London to read for the Bar. The mother would have been very proud to have a barrister for a daughter. She also thought that her plan was in the interest of her grandson, to whom she was much attached. She enviaged that, after her daughter had been called to the Bar, she would practice in Trinidad and thereafter presumably she (the mother) would be able to see much more of her daughter than formerly. The daughter was naturally loth to leave Washington, and did not regard her mother's suggestion as feasible. The mother, however, eventually persuaded the daughter to do as she wished by promsing her that, if she threw up her excellent position in Washington and came to study for the Bar in England, she would pay her daughter an allowance of $200 a month until she had completed her studies. The mothers attorney in Trinidad wrote to the daughter to confirm this. I cannot think that either intended that if, after the daughter had been in London, say, for six months, the mother dishonoured her promise and left her daughter destitute, the daughter would have no legal redress. In the very special circumstances of this case, I consider that the true inference must be that neither the mother nor the daughfter could have intended that the daughter should have no legal right to receive, and the mother no legal obligation to pay, the allowance of $200 a month. The point was made by Mr. Sparrow that the parties cannot have had a contractual intention since it would be unthinkable for the daughter to be able to sue the mother if the mother fell upon hard times. I am afraid that I am not impressed by this point. The evidence which the county court judge accepted showed that the mother was a woman of some substance, and prior to the agreement had assured her daughter that there would be no difficulty in finding the money. The fact that if, contrary to everyone's expectation, the mother had lost her money, the daughter would have been unlikely to sue her throws no light on whether the parties had an intention to contract. The fact that a contracting party is in some cir- cumstances unlikely to extract his pound of flesh does not mean that he has no right to it. Even today sometines people forbear from mercy to enforce their undoubted legal rights. The next point made by Mr. Sparrow was that the arrangements between the mother and daughter in 1962 were too uncertain to constitute a binding contract. It is tme that the mother said $200 a month without stipulating whether she meant West Indian or U.S. dollars. Obviously she meant West Indian dollars. The daughter says that she thought her mother meant U.S. dollars. This point does not, however, appear to have given rise to any difficulty. For two years from November 1962 until December 1964 the mother regularly paid her daughter #42, the equivalent of 200 West Indian dollars, a month, and the daughter accepted this sum without demur. Then it is said on the mother's behalf that the daughter's obligations are not sufficiently stated. I think that they are plain, to leave Washington, with all that entailed, come to London and genuinely study for the Bar there. If the daughter threw up her studies for the Bar, maybe the mother could not have recovered damages, but she would have been relieved of any obligation to continue the allowance. Then again it is said that the duration of the argreement was not specified. No doubt, but I see no difficulty in implying the usual term that it was to last for a reasonable time. The parties cannot have contemplated that the daughter should go on studying for the Bar and draw the allowance until she was seventy, nor on the other hand that the mother could have discontinued the allowance if the daughter did not pass her examination within, say, eighteen months. The promise was to pay the allowance until the daughter's studies were completed, and to my mind there was a clear implication that they were to be completed within a reasonable time. Studies are completed either by the student being called to the Bar or giving up the unequal struggle against the examiners. It may not be easy to decide, especially when there is such a paucity of evidence, what is a reasonable time. The daughter, however, was a well educated intelligent woman capable of earning the equivalent of over #2,000 a year in Washington. It is true that she had a young son to look adter, and may well (as the judge thought) have been hampered to some extent by the worry of this litigation. But, making all allowances for these factors nd any other distraction, I cainnt tthin tha a $reasoablcet~imeoculd possibly exceed five years from November 1962, the date when she bean her studies. It follows, therefore, that on no view can she now in November 1968 be entitled to anything further under the contract which the county court judge, rightly I think, held that she made with her mother in 1962. She has much of Part I of the Bar examination still to pass, and necessary the final has not yet even beg attempted. During a visit to England in 1964 the mother found that her daughter was living in one room in Acton costing #6 17s. 6d. a week This rent represented about three-quarters of the daughter's total income. The mother therefore hit upon the idea of buying a house in London in which the daughter could live more comfortably and cheaply than in Acton. The rest of the house was to be let off in fumished rooms or fiats, and after paying the outgoings the daughter was to pay herself the maintenance and remit any balance that there might be to her mother in Trinidad. This scheme, so long as it lasted, provided a convenient method of paying the #42 a month due under the 1962 agreement. Accordingly, the mother acquired No. 181, Highbury Quadrant for #6,000 or so in December 1964. The daughter moved in in the following month, furnished and equipped the house largely by hire purchase, and tenants began to arrive in February 1965. The county court judge has concluded that in December 1964 the original contract between mother and daughter was varied, or a new contract was entered into whereby the daughter acquired the right to stay on in her mother's house indefinitely, whether the mother liked it or not. I am afraid that I cannot accept this conclusion. It was for the daughter to make out such a variation or new contract. In my view she totally failed to do so. There is no evidence that the mother bargained away her right to dispose of her house, or to evict her daughter (who was a mere licensee) whenever she wished to do so. The evidence shows that all the arrange- ments in relation to the house were very vague and made without any contractual intent. By this arrangement the mother was trying primarily to help her daughter, and also perhaps to make a reasonable investment for herself. When the mother brought the arrangement to an end (as she was entitled to do at any time) she would, of course, have to go on paying #42 a month as long as the 1962 agreement lasted. There is no evidence to suggest that the mother intended the daughter ever to have more than the equivalent of 200 British West Indian dollars a month after December 1964. Nothing was said as to how much the daughter might pay herself out of the rents for maintenance. Certainly she would have to debit herself with some reasonable figure in respect of her accommodation: no doubt some- thing less than the #6 17s. 6d. a week that she had been spending in Acton. but not less, I should think, than about #5 a week. This would leave about #22 a month to be deducted from the rents for maintenance up till November 1967 when in my view the 1962 agreement ran out. In fact for nearly four years, that is, from December 1964 until today, the mother has not received a penny from the daughter in respect of No. 181, Highbury Quadrant nor, in spite of repeated requests, any proper accounts. I am not at all surprised that the mother's patience became exhausted in March of last year when she gave notice determinig her daughter's licence to remain in the house. The daughter ignored the notice and has continued in occupation with her husband and son, apparently with the intention of doing so indefinitely. She is still there. She seems to take the view (as does the county court judge) that she has a legal claim on her mother to house her and contribute to her support and that of her son and husband, perhaps in perpetuity. In this she is mistaken, and so in my judgment is the county court judge. The mother began this action for possession of No. 181, Highbury Quadrant in 1967. For the reasons I have indicated, there is in my view no defence to the action, and I would accordingly allow the appeal. The county court judge has referred the counter-claim. If this reference i pursued, it will involvesan account being meticulouWsl taken of all receipts and expenditure from December 1964 until the date on which the daughter yields up possession This will certainly result in a great waste of time and money, and can only exacerbate ill feeling between mother and daughter. With a little good will and good sense on both sides, this could and should be avoided by reaching a reasonable compromise on the figures. I can but express the hope that this may be done, for it would clearly be to the mutual benefit of both parties. FENTON ATKINSON L.J. The first question in this most unhappy case is whether the arrangement made between mother and daughter in August 1962 was intended to create a legally enforceable contract between them, or was merely one of those family or domestic arrangements where the parties at the time had no thought or intention of invoking the assistance of the courts should the arrangement not be honoured. Was the mother legally binding herself to support the daughter at the rate of #500 a year for a wholly uncertain length of time whatever changes might come about in their respective circumstances? Was the daughter assuming a contractual obligation to pursue her legal studies to successful completion whatever the diffculties she experienced, and whatever attractive alternatives might appear, such as possible marriage or well-paid employment? If the test were the giving of consideration by the daughter, the answer I would be simple. She gave up well-paid work and good living accommoda- tion, and removed herself and her son to England, where she began her studies in November 1962. But the giving of consideration by the daughter cannot decide the question whether the parties intended to make a binding contract. Atkin L.J. in Balfour v. Balfour [1919] 2 K.B. 571, 578 of the report put it in this way: " To my mind those agreements, or many of them, do not result in contracts at all, and they do not result in contracts even though there may be what as between other parties would constitute con- sideration for the agreement. The consideration, as we know, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. That is a well-known definition, and it constantly happens, I think, that such arrangements made between husband and wife are arrangements in which there are mutual promises; or in which there is consideration in form within the definition that I have mentioned. Nevertheless they are not contracts, and they are not contracts because the parties did not intend that they should be attended by legal consequences." On the other hand, I do not think that the lack of formality and precision in expressing the arrangement is necessarily an indication that no contract was intended having regard to what the court knows of the parties and their relationship. The problem is, in my view, a difficult one, because though one would tend to regard a promise by a parent to pay an allowance to a child during a course of study as no more than a family arrangement, on the facts of this case this particular daughter undoubtedly gave up a great deal on the strength of the mother's promise. In my judgment it is the subsequent history which gives the best guide to the parties' intention at the material time. There are three matters which seem to me important: (1) The daughter thought that her mother was promising her 200 United States dollars, or #70 a month, which she regarded as the minimum necessary for her support. The mother promised 200 dollars, but she had in nund 200 British West Indian dollars, #42 a month, and that was what she in fact paid from November 1962 to December 1964. Those payments were accepted by the daughter without any sort of suggestion at any stage that the mother had legally contructed for the larger sum. (2) When the arrangements for the purchase of No. 18 1, Highbury Quadrant were being discussed, and the new arrangement was made for maintenance to come out of the rents, many material matters were left open: how much accommodation was the daughter to occupy; how much money was she to have out of the rents; if the rents fell below expectation, was the mother to make up the difference below #42, or #42 less the sum saved by the daughter in rent; for how long was the arrange- ment to continue, and so on. The whole arrangement was, in my view, far too vague and uncertain to be itself enforceable as a contract; but at no stage did the daughter bring into the discussions her alleged legal right to #42 per month until her studies were completed, and how that right was to be affected by the new arrangement. (3) It is perhaps not without relevance to look at the daughter's evidence in cross-examination. She was asked about the occasion when her mother visited the house, and she, knowing perfectly well that her mother was there, refused for some hours to open the door. She said: " I didn't open the door because a normal mother doesn't sue her daughter in court. Anybody with normal feelings would feel upset by what was happening." Those answers and the daughter's conduct on that occasion provide a strong indication that she had never for a moment contemplated the possibility of her mother or herself going to court to enforce legal obligations, and that she felt it quite intolerable that a purely family arrangement should become the subject of proceedings in a court of law. At the time when the first arrangement was made, mother and daughter were, and always had been, to use the daughter's own words, " very close." I am satisfied that neither party at that time intended to enter into a legally binding contract, either then or later when the house was bought. The daughter was prepared to trust her mother to honour her promise of support, just as the mother no doubt trusted her daughter to study for the Bar with diligence, and to get through her examinations as early as she could. It follows that in my view the mother's claim for possession succeeds, and her appeal should be allowed. There remains the counterclaim. As to that I fully endorse what Salmon L.J. has said as to the manner in which that should be disposed of. Appeal allowed. Judgment for plaintiff for possession of the premises on or before March 1, 1969. Terms in judgment below as to reference of quantum in respect of counterclaim to registrar to stand. Costs of appeal and hearing below to be taxed under provisions of Third Schedule to Legal Aid and Advice Act, 1949. Leave to appeal refused. No order on cross-notice. Solicitors: D. A. Rose & Co.; Jaques & Co. [QUEEN'S N ] * FORD MOTOR CO. LTD. v. AMALGAMATED UNION OF ENGINEERING AND FOUNDRY WORKERS AND OTHERS. 1969 Mar. 3, 4, 5, 6 Geoffrey Lane J. Contract--Formation--Intention to create legal relationship-- Collective agreement between employer and trade unions-- Agreement reached by foint negotiating committee--Regulation of procedure and conditions of employment--No express pro- vision for agreement to be actionable at law--Climate of opinion adverse to enforceability--Whether intention to create legally enforceable agreement. Trade Union--Collective agreement--Unions' and employers' joint negotiating committee--Regulation of procedure and condi- tions of employment--Agreement reached against background of opinion adverse to enforceability--No expressed intention to create legal contract--Whether legally enforceable agreement. In 1955 and 1967 a company and various trade unions representing employee members made agreements for regulating the procedure for the relationship between the company and the unions and the conditions of employment for employees. The agreements were signed by members of a joint negotiating committee of the company and union representatives and also by an accredited representative of each individual union; they did not contain any clear or express provision that they were enforceable at law, were composed largely of optimistic aspira- tions, and presented practical problems of enforcement. In 1969 the company side and a majority on the union side of the committee agreed to variations of conditions of employ- ment but unions in the minority dissented and declared an official strike. The company brought against the striking unions an action for injunctions. Injunction were granted ex parte and, on an application to continue them, evidence was adduced that published reports of industrial commissions of inquiry showed that the almost unanimous climate of opinion on both sides of industry since 1954 was that no legally enforceable contract resulted from collective agreements such as those between the company and the unions. Held, discharging the injunctions, that the company had not made out a sufficient prima facie case that the agreements were legal contracts enforceable at law, for in the absence of clear and express provision making them amenable to legal action, regard must be had to the surrounding circumstances and, although concerned with commercial relationships, the wording of the agreements, their nature, and the background adverse to enforceability against which they were reached showed that the parties did not intend that they should be binding contracts at law but that they should remain in the realm of undertakings binding in honour only (post, pp. 350B, c, 356B--D. National Coat Board v. Galley [1958] 1 W.L.R. 16; [1958] 1 All E.R. 91, C.A. distinguished. The following cases are referred to in the judgment: Bradford Dyers' Association Ltd. v. National Union of Textile Workers, The Times, July 24, 1926. Brown v. Andrew (1849) 18 L.J.Q.B. 153. East London Bakers' Union v. Goldstein, The Times, June 9, 1904. Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1. Harington v. Sendall [1903] 1 Ch. 921. Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503. Holland v. London Society of Compositors (1924) 40 T.L.R. 440. Hynes v. Conlon (1939) 5 Ir. Jur. Rep. 49. May and Butcher Ltd. v. The King [1934] 2 K.B. 17n. National Coal Board v. Galley [1958] 1 W.L.R. 16; [1958] 1 All E.R. 91, C.A. New College Oxford (1566) 2 Dyer 247a. Smithies v. National Association of Operative Plasterers [1909] 1 K.B. 310, C.A. Young v. Canadian Northern Railway Co. [1931] A.C. 83, P.C. The following additionaJ cases were cited in argument : Allen v. Thorn Electrical Industries Ltd. [1968] 1 Q.B. 487; [1967] 3 W.L.R. 858; [1967] 2 All E.R. 1 137; 2 K.I.R. 853, C.A. Ardley and Morey v. London Electricity Board, The Times, June 16, 1956. Balfour v. Balfour [1919] 2 K.B. 571. Dudfield v. Ministry of Works (1964) 108 Sol. Jo. 118. Edwards v. Skyways Ltd. [1964] 1 W.L.R. 349; [1964] 1 AJ E.R. 494. Morgan v. Fry [1968] 2 Q.B. 710; [1968] 3 W.L.R. 506; [1968] 3 All E.R. 452, C.A. Rookes v. Barnard [1964] A.C. 1129; [1964] 2 W.L.R. 269; [1964] 1 All E.R. 367, H.L.(E.). Rose and Frank Co. v. J. R. Crompton & Bros. Ltd. [1923] 2 K.B. 261. Torquay Hotel Co. Ltd. v. Cousins [1969] 2 W.L.R. 289 ; [1969] 1 All E.R. 522 C.A. SUMMONS. On August 23, 1955, the plaintiffs, Ford Motor Co. Ltd. ("Fords"), made an agreement in writing (" the 1955 agreement ") with signatory trade unions for regulating the procedure for the relationship between Fords and the unions representing their adult hourly-paid operative and drafts- men employee members. The agreement provided, by clause 2, for a national joint negotiating committee (" the committee ") consisting of not more than one executive official from each of the unions and not more than an equal number of executive officials appointed by Fords, and for the committee to deal with, inter alia, wage negotiations and major con- ditions of employment, and contained clauses in the following tcrms: " 3. Shop stewards and works committees. (1) Shop stewards. (a) Fords] recognises the right of the employees to have an adequate number of representatives appointed on a craft, departmental or geographical basis to act on their behalf in accordance with the terms of this agreement. " 4. Procedure. (a) Any employee who wishes to raise any matter directly affecting his work shall first discuss it with his charge hand and/ or foreman. If, in consequence of that discussion, no satisfaction results, the employee then may make a further approach to the charge hand and/or foreman accompanied by his shop steward. If there is still no satisfaction the shop steward and employee may approach the appropriate superintendent. If the matter is not resolved the superin- tendent shall without delay report it to the personnel manager who will then arrange for a discussion between the appropriate persons concemed." The 1955 agreement was signed by two executives of Fords, by an accredited representative of each of the individual unions, and by the chairman and secretary of the union side of the committee. A similarly signed agreement in writing dated September 8, 1967 (" the 1967 agreement ") for regulating the conditions of employment for the adult hourly-paid operative employees of Fords provided for variations to be negotiated by the parties through the medium of the committee and contained clauses in the following terms: " 7. Movement of employees between jobs in the new wage structure. The statement entitled ' agreed policy concerning the movement of employees in the new wages structure ' is set out in Appendix 1. " 8. Productivity improvements. As stated in the argeement dated July 27, between the parties hereto the implementation of the new wage structure was conditional upon the completion of productivity bar- gaining in the 23 designated bargaining areas. The parties to this agreement hereby confirm their approval and ratification of the 23 domestically made productivity bargains. " 22. The achievement of efficiency of operations. The trade unions and [Fords] agree on the need: (i) to achieve efficient pro- duction by all reasonable means; (ii) for the introduction of labour- saving maclunes and methods; (iii) for [Fords] to transfer employees from one job or department to another as may be desirable having in mind continuity of employment and flow of production. It is not part of the duty of any shop steward whose constitution and duties are defined in [the 1955 agreement] to deal with such matters in the shop, but he may refer them for consideration by the works committee." On February 11, 1969, the Fords side and a majority on the union side of the committee agreed to variations in the 1967 agreement, and a notice in writing was published entitled " Negotiations on new package agreement (" the 1969 agreement "), but unions in the committee minority dissented and some employees began strike action. On February 26, 1969, by a notioe on headed notepaper of the Amalgamated Union of Engineering and Foundry Workers (" the A.E.F."), the first defendants, but signed alongside an official stamp of the Amalgamated Engineering Union ("the A.E.U."), the third defendants, the strike was made official. On that day the strike was made official also by the Transport and General Workers Union (" the T.G.W.U."), the second defendants. By writ dated February 27, 1969, Fords began an action against the A.E.F. and the T.G.W.U. for injunctions restraining the defendants from, inter alia, attempting to procure variation of the 1967 agreement other- wise than by negotiations conducted through the medium of the committee and for a mandatory injunction in the following terms: ". . . ordering the defendants and each of them to countermand any instructions or advice already issued to their members and others employed by [Fords'] factories and plants and further ordering the defendants and each of them to cancel or withdraw any notice or intimation declaring that any strike or withholding of labour at [Fords'] factories and plants is officially supported by the defendants or either of them." On February 27, 1969, on a summons ex parte by Fords, Geoffrey Lane J. in chambers granted interim injunctions restraining the defendants until March 3, 1969, in the following terms: " (1) attempting to procure the variation of [the 1967 agreement] . . . as varied by . . . [the 1969 agreement] . . . otherwise than by negotia- tions conducted through the medium of [the committee] . . . pursuant to the 1967 agreement and in accordance with [the 1955 agreement] . . . (2) causing or procuring or attempting to cause or procure a stoppage of work (whether total or partial) at [Fords] . . . and from causing or procuring or attempting to cause or procure unconstitutional strike action at [Fords] without having first carried through the agreed procedures as set out in [the 1955 agreement]. " (3) attempting otherwise than in accordance with the agreed pro- cedure set out in [the 1955 and 1967 agreements] to procure the further variation of the 1967 agreement as varied by the 1969 agree- ment and/or from coercing or attempting to coerce [Fords] and the other parties thereto to agree to further variation of the 1967 agree- ment as varied by the 1969 agreement by (a) instructing or advising their own members employed by [Fords] to cease work or to stay away from work at Fords] and/ or (b) persuading, counselling or procurring or attempting to pursuade counsel or procure any of the other trade unions parties to [the 1955, 1967 and 1969 agreements] to instruct or advise their respective members employed by [Fords] to cease work or to stay away from work at [Fords] and/or (c) per- suading or coercing or attempting to persuade or coerce members of other trade unions parties as aforesaid employed by [Fords] not to enter [Fords] factories or plants and/or to cease or stay away from work thereat." On March 3, 1969, a summons inter partes for the injunctions granted ex parte and a further injunction and the mandatory injunction to be made interlocutory until trial of the action or further order was adjourned into open court for hearing. An application by the defendants for an adjourn- ment to enable evidence to be filed was granted for seven days. By consent of the parties an application by Fords to continue the ex parte injunctions was heard inter partes on the question whether the injunctions granted and sought should be granted during the adjournment. On March 4 leave was given to Fords to add the A.E.U. as defendants to the action and summons. A question whether the Amalgamated Union of Foundry Workers was also to be joined as defendants was adjourned for future consideration. Further facts are stated in the judgffment. F. P. Neill Q.C. and Richard Southwell for Fords. Morris Finer Q.C. and Alexander Irvine for the A.E.F. and A.E.U. Peter Pain Q.C., k. W. Wedderburn and Ian Madonald for the T.G.W.U. GEOFFREY LANE J. In this matter the plaintiffs are claiming ex parte injunctions against the defendants designed in brief to prevent the defen- dants from continuing the official strike at the plaintiff's factories or from encouraging its spread, pending the hearing of an application for inter- locutory relief. This unhappy dispute arises in the following way. The plaintiffs, to whom I shall refer as Fords, have some 23 factories and plants in England and in Wales, and I think one plant in Northern Ireland. They employ some 46,000 work people, of whom, speaking in round figures, 15,000 are members of the first defendant union and 17,000 or 18,000 are members of the second defendant union. There are in all--the figure, I do not think, has been precisely proved--some 19 unions, whose members are employed by Fords. It follows as a matter of arithmetic that some of the unions involved have a comparatively tiny number of members working at Fords. Relations between Fords and the unions are regulated by a document, which has been called the Blue Book; its full official title is " Agreements and conditions of employment--hourly paid employees." That document, the Blue Book, contains basically two main agreements. They are the 1955 agreement, which is very largely concerned with pro- cedural matters, and the 1967 agreement, which is more devoted to practical matters, such as rates and hours, and so on. From clause 1 of the 1955 agreement, headed " General Principles," and by paragraph (d) of that clause, the following terms emerge: " The parties agree that, at each stage of the procedure set out in this agreement, every attempt will be made to resolve issues raised and that until such procedure has been carried through there shall be no stoppage of work or other unconstitutional action" By clause 2 of that agreement is set up the national joint negotiating committee, which figures largely in this history, and the whole of that clause runs as follows: " (a) There shall be a national joint negotiating committee which shall consist of not more than one executive official from each of the unions, which is or may become a party to this agreement and not more than an equal number of executive officials appointed by the company. (b) The national joint negotiating committee may discuss any matter affecting any of the company's factories and shall deal with wage negotiations, occupational grading, major conditions of employment and other matters which are national in application. (c) In addition, the national joint negotiating committee shall deal with any matters referred to it under the procedure set out in clause 4 and shall negotiate all agreements and variations thereto. (d)" --a clause which was added later-- " The national joint negotiating committee shall meet not less than three times in each year, such meetings to be held as far as is practicable in January, May and September." In 1967, the further agreement was reached, and the material clauses of that agreement seem to me to be clauses 21 and 25. They are as follows: " 21. Observance of existing agreements and regulations and elimination of avoidable lost time. (i) There shall be complete observance of all agreements in force between the parties (including regulations covering conditions of employment which may be in force from time to time) and (ii) Avoidable lost time shall be eliminated at the beginning and the end of the day or shift and before and after lunch time, and at the times of tea break and tea service " " 25. Variation and termination. Any variation of this agreement shall be negotiated by the parties hereto through the medium of the national joint negotiating committee. This agreement shall not be terminated until three months' notice in writing of such intention has been given by either party hereto to the other." It should be noted that each union, regardless of the size of its membership, at Fords is entitled to one vote on the national joint negotiating committee, and that is a matter of some significance, as will be seen in a moment. If one turns to page 90 of the Blue Book, one sees the form of agree- ment which every employee signs when he is taken on to Fords' payroll, and that agreement serves to incorporate in his contract of employment such of the matters in the Blue Book as apply to his conditions of work, wages and so on at the way in which they are signed at the end of each--I am now looking at the 1967 agreement: " for and on behalf of the Ford Motor Company Limited and its United Kingdom Subsidiaries, L. T. Blakeman, R. J. Ramsey." Then follows a list of all the unions who have members at Fords, and against every single name of every single union appears the signature of that union's accredited representative; and then at the very end appear the words, " Signed for and on behalf of the trade union representatives of the national joint negotiating committee, chairman, Mark Young, secretary J. Conway. The sequence of events briefly leading up to this deplorable matter was this. On about January 17 of this year Fords submitted proposals for variation of the 1967 agreement. I have no doubt that there were discussions before that, but on that date at any rate Fords' proposals were put forward. On February 3 those proposals were considered by the national joint negotiating committee ("the N.J.N.C."). On February 10 the representatives of Fords, including Mr. Blakeman, who has acted as the spokesman of Fords throughout these matters, presented to the working party which had been formed by the N.J.N.C. a revised offer of variations to the 1967 agreement. One eye was necessary had upon the govemment's policy in relation to wage increases at the time. On February 11 the trade union side of the N.J.N.C. voted by a majority-- a majority of 7 to 5--to accept Fords' proposals. On February 12 Mr. Conway, in his capacity as secretary of the trade union side of the N.J.N.C., wrote to Fords with that information. Mr. Conway's position was complicated by the fact that he, as well as being secretary of the trade union side of the N.J.N.C., was also general secretary of the first defendant trade union. The material paragraph of his letter to Mr. Blakeman, dated February 12, reads as follows: " Subject to the reservations set out above"--and he has above set out certain matters on which perhaps further discussion was needed--" the trade union side agree to accept the company's revised offer and empowered me to report this acceptance to you." On February 11 a notice was put up at Fords, signed on behalf of the company by Mr. Blakeman and signed, it is said, on behalf of the trade unions by Mr. Young, chairman of the trade union side--that of course is the trade union side of the N.J.N.C., on whose headed notepaper the notice was written--setting out, under the further heading, " Negotiations of New Package Agreement," the following assertion: " Following negotiations on the company's proposals recently com- municated to all employees the trade union side of the N.J.N.C. tonight, Tuesday February 11, 1969, agree with the company the following changes in rates of pay and conditions of employment." Thereafter, set out in numbered paragraphs, is a series of alterations to the existing contracts of employment dealing with wage increases, plans to secure income during lay off, short time working, and so on. That notice is relied upon by Fords in these proceedings as constituting, as I understand it, a valid and enforceable contract between Fords and each of the constituent union members of the N.J.N.C. On February 18 Fords sent to Mr. Conway, in his capacity as secretary of the trade union side of the N.J.N.C., a detailed document containing not only the matters which had been set out in precis form in the notice but also, it seems, a number of other terms, in particular, be it noted, the following term, which does not appear in so many words, in the notice of February 11. It runs as follows: " If a dispute still exists when the procedure has been exhausted then the trade unions individually or collectively will before taking any industrial action give a minimum of 21 days' notice in writing to the company." The interesting part about this document is that at the ad of it appear 19 spaces for the signature of the representatives of the various unions, and to that extent the document bears a close similarity to the 1955 and 1967 agreements, which are set out in the Blue Book. It is said, as will be seen in a moment, by Fords that the affixing of signatures to this 1969 document was really only a formality, that the unions were already bound by the agreement which had been reached in the N.J.N.C., and this was simply a matter of tidying up the loose ends and putting into formal terms what in effect had already been the subject of full agreement. I mention in passing the remark that Mr. Finer, for the first defendant, has made on the point, that that document, although it emanated from Mr. Blakeman from Fords, was never in fact disclosed by Mr. Blakeman either on his original application for an ex parte injunction or thereafter. It is said on behalf of Fords that it is a document which to all intents and purposes was irrelevant to these proceedings because those signa- tures were never in fact appended to it, but it is a matter which is worthy of note. On February 19 Mr. Conway wrote a letter to Fords about the disagree- ment amongst the union members of the N.J.N.C. and asked for the terms of the projected agreement to be reconsidered. It seems that the unions which were in the nunority at the N.J.N.C. decision ffwere dissatisfied. It matters not, for the purposes of this judgment, about which they were dis- tisied, but I mention in paassin that thherewas some a~nxiet about the clauses which had been called " penal clauses," whereby the holiday bene- fits and certain other matters, which were advantageous to the workmen, contained in the projected agreement would be lost if the workmen took part in unconstitutional action. On February 21 the employees at the Halewood plant began an un- official strike because they were not in agreement with the proposed variations. Then by February 25 attitudes were hardening on both sides. The trade unions wanted a reconsideration, whereas Mr. Blakeman of Fords was insisting that the 1969 agreement was valid and enforceable. The trade unions on their part were insisting that the matters were subject to review by the individual unions and that no binding agreement existed. They declined Mr. Blakeman's suggestion of a ballot on the basis that that would raise all sorts of constitutional problems under their own particular union rules. Meanwhile more and more men were coming out on strike. On February 26 the strike was made official by the first defendants, the A.E.F. There is a subsidiary matter as to whether it was the A.E.F. which made the strike official or whether it was the A.E.U. It is a matter of no great importance at this stage, because in fact the A.E.U. have now, by leave, been added as defendants. The difficulty arose because the letter making the strike official, although written on notepaper bearing the A.E.F. heading was signed alongside an official stamp, the stamp being that of the A.E.U. Perhaps it is symptomatic, if nothing else, of the whole that of the A.E.U. Perhaps it is symptomatic, if nothing else, of the whole slightly unreal situation. On the very same day the second defendants, the Transport and General Workers' Union, also made the strike official. The results of such action scarcely need any description by me. It means of course, first, that strike pay becomes payable to the members of the particular unions; and secondly, and much more important from the point of view of Fords, it means in effect that all the employees of those ever their personal feelings may be, and if they do not, serious results may of course follow for them. The result has been a massive stoppage of work at the majority of the Ford plants, causing a huge loss of revenue to Fords, and indeed to the whole country in terms of lost exports, and, just as serious, although it is somtimes unhappily lost sight of, causing I do not doubt, great unhappiness and hardship to the men on strike and even more so to their families. Last Thursday, that is to say, February 27, on an ex parte application by Fords, I granted injunctions in an endeavour to maintain some sort of stability, pending the hearing of the application for interlocutory injunctions. As it transpired, the defendants were not ready to proceed when this matter was re-opened last Monday, and a week's adjournment of the hearing of the interlocutory injunction application was granted. These proceedings then resolved themselves, by consent, into a hearing of all sides on the question whether the injuctions should be continued until the resumed hearing, and whether, in addition, the further injunctions, and particulary the mandatory injunction prayed for by Fords, should be granted during the interim period. Thus it will be seen that there are three separate stages in the relations between the parties. There is the 1955 procedural agreement, the 1967 agreement relating very largely to terms and conditions--happily called by Mr. Pain " the price list "--and then there is the 1969 agreement, which was an attempt to modify that of 1967 by introducing, on the one hand, needed--" the trade union side agree to accept the company's revised offer and empowered me to report this acceptance to you." On February 11 a notice was put up at Fords, signed on behalf of the company by Mr. Blakeman and signed, it is said, on behalf of the trade unions by Mr. Young, chairman of the trade union side--that of course is the trade union side of the N.J.N.C., on whose headed notepaper the notice was written--setting out, under the further heading, " Negotiations of New Package Agreement," the following assertion: " Following negotiations on the company's proposals recently com- municated to all employees the trade union side of the N.J.N.C. tonight, Tuesday February 11, 1969, agree with the company the following changes in rates of pay and conditions of employment." Thereafter, set out in numbered paragraphs, is a series of alterations to the existing contracts of employment dealing with wage increases, plans to secure income during lay off, short time working, and so on. That notice is relied upon by Fords in these proceedings as constituting, as I understand it, a valid and enforceable contract between Fords and each of the constituent union members of the N.J.N.C. On February 18 Fords sent to Mr. Conway, in his capacity as secretary of the trade union side of the N.J.N.C., a detailed document containing not only the matters which had been set out in precis form in the notice but also, it seems, a number of other terms, in particular, be it noted, the following term, which does not appear in so many words, in the notice of February 11. It runs as follows: " If a dispute still exists when the procedure has been exhausted then the trade unions individually or collectively will before taking any industrial action give a nunimum of 21 days' notice in writing to the company." The interesting part about this document is that at the end of it appear 19 spaces for the signature of the representatives of the various unions, and to that extent the document bears a close similarity to the 1955 and 1967 agreements, which are set out in the Blue Book. It is said, as will be seem in a moment, by Fords that the affixing of signatures to this 1969 document was really only a formality, that the unions were already bound by the agreement which had been reached in the N.J.N.C., and this was simply a matter of tidying up the loose ends and putting into formal terms what in effect had already been the subject of full agreement. I mention in passing the remark that Mr. Finer, for the first defendant, has made on the point, that that document, although it emanated from Mr. Blakeman from Fords, was never in fact disclosed by Mr. Blakeman either on his original application for an ex parte injunction or thereafter. It is said on behalf of Fords that it is a document which to all intents and purposes was irrelevant to these proceedings because those signa- tures were never in fact appended to it, but it is a matter which is worthy of note. higher wage mtes and also certain benefits, and on the other hand, as I have already mentioned, sanctions designed to minimise the likeiihood of un- official strikes by penalising as to their benefits workmen who took part in such action. I should add that I use the word "agreement" to describe the three arrangements regardless of whether those agreements are enforce- able at law or not. Three fundamental issues have emerged from this hearing. First, are these agreements or any of them enforceable at law? It is possible, I should add, at least theoretically that the answer may not be the same in the case of each of the agreements. The second question is: did the 1969 negotia- tions ever reach the stage of an agreement of any sort between Fords and the unions? Thirdly, in any event, assuming the two previous points to be decided against the defendant unions, can the injunctions stand? In other words, is there anything in the contractual arrangements between the parties, words, is there anything in the contractual arrangements between the parties, assuming them to be strictly contractual, to prevent the defendants from taking the official strike action which in fact they have taken? It must be made clear that this court is not concerned in any way with the merits of the dispute, nor is it concerned with the remoter issues which income policy. This court is not concerned with policy, nor with politics, nor with the justice of the employers' proposals, nor the employees' reactions to those proposals. It is not concerned with the question whether the interest of the influential few. It is merely concemed with the question whether the wishes of the majority of the employees are being subordinated to the self- interest of the influential few. It is merely concerned with the strict legal problems involved, regardless of their impact and regardless of their consequence. The fundamental question is of course this: assuming for the moment that there does exist an agreement in the broad sense between the plaintiffs that there does exist an agreement in the broad sense between the plaintiffs on the one hand and the two defendants on the other, are those agreements enforceable by legal process in this court or not? There is a dearth of direct authority on the point. This is perhaps hardly surprising, because most cases in this branch of the law fall plainly into one or other of two cate- gories. Either they are commercial contracts between parties at arm's parties by express provision declare that they are binding in honour only, or otherwise they are social or domestic arrangements which are equally obviously not designed to be legally binding--the type of arrangement whereby one person says to another, " I will meet you at 7.30; you bring the food; I will bring the drink "; neither party of course envisages any action in the county court if either cominodity is not forthcoming, although it would presumably be possible by express provision to make even such an agreement legally enforceable. In other words, the intention of the parties is usually obvious from the surrounding circumstances or from the express terms of the contract itself. The authorities to which I have been referred are largely of a negative nature. Mr. Neill has cited a series of cases, running in date between 1904 and 1939. They are, and I mention them for the purposes of completeness, these: first, East London Bakers' Union v. Goldstein, The Times, June 9, 1904, and also conveniently set out in Wedderburn's Cases and Materials on Labour Law (1967) at p. 272; Smithies v. National Association of Operative Plasterers [1909] 1 K.B. 310; Holland v. London Society of Compositors (1924) 40 T.L.R. 440; the Bradford Dyers' Association case, The Times, July 24, 1926; Young v. Canadian Northern Railway Co. [1931] A.C. 83, a decision of the Privy Council; and finally an Irish decision, Hynes v. Conlon (1939) 5 Ir.Jur.Rep. 49. Mr. Neill submits, if I may put his argument in precis, that the 'importance of these cases lies in the fact that no one either judge or counsel, from start to finish in these cases suggests that such agreements as these are not subject to enforcement in the court. He goes further in the Bradford Dyers' Associdion case of July 24, 1926. Having pointed out the eminence of counsel appearing in that case, he stresses the fact that although this was a case which was settled, the terms of settlement as set out show that the counsel appearing certainly believed, or so it seems, that the agreement in that case was the subject of enforcement at law. The portion of the case which he cites runs as follows: " Minutes of the order had been prepared, and they would take the form in each case that the plaintiffs and the defendants, by their res- pective counsel, admitted that the agreement of July 1, 1914 (as modi- fied by certain subsequent agreements) was of full force and effect between, and as binding upon the plaintiffs and defendants, unless and therein provided; that the defendants admitted, by their counsel, that they had committed breaches of that agreement, and that they consen- ted to judgments in the sums stated . . ." The decision in the Privy Council of Young v. Canadian Northern Railway Co. [1931] A.C. 83 was an action by a machinist who had been employed by the respondents in their shops. The headnote runs: " . . . In 1927 he received notice of dismissal on the ground of reduction of staff. He sued for wrongful dismissal, contending that a written agreement, entered into by the respondents with a labour organisation and called Wages Agreement No. 4, formed part of his contract of employment, and that under it the respondents could not dismiss him upon a reduction of staff, as they had retained men junior to him. The agreement had been applied to the appellant (who was not a member of the organisation) as to the amount of his wages, the notice given him, and in other respects; the respondents stated at the trial that they had applied the agreement to all the men employed in their shops: -- Held, that Wage Agreement No. 4 did not form part of the contract for the employment of the appellant, the fact that the respondents had applied it to him being equally consistent with the view that they had done so as a matter of policy. Further, that having regard to the tenant term by an employer could not be enforoed by action even by the That last sentence in the headnote is questioned by Mr. Neill, who says that it goes beyond what is to be found in the judgment. The maternal passage in the judgment is at p. 89, and I need read no more: " It appears to their Lordships to be intended merely to operate as an agreement between a body of employers and a labour organisation by which the employers undertake that as regards their workmen, certain unless beneficial to the workmen shall be observed. By itself company which employs him. If an employer refused to observe the rules, the effective sequel would be, not an action by any employee, not even an action by Division No. 4 against the employer for specific performance or damages, but the calling of a strike until the grievance was remedied." The words in dispute, so to speak, are " the effective sequel." So far as it is material, I incline to the view that the headnote is an accurate description of that part of the judgment, and once again, in so far as the case helps these proceedings it helps the defendants rather than the Coming to more recent decisions, National Coal Board v. Galley (1958) 1 W.L.R. 16, was an action by the National Coal Board against an individual workman, and to that extent is sharply distinguishable from the circumstances of the present case. It is, or part of it at any rate is, however, relied upon by Mr. Neill as showing that, as recently as 1957 those in the present case were enforceable at law. The passage on which he relies is part of the judgment of Pearce L.J. It reads as follows, at p. 23: " The defendant next contends that, even though the Nacods agree- ment was applicable to the defendant's employment, yet it had no contractual force, because it was too vague. It is an industrial agreement, he argues, covering a wide area, with no intention that it shall have a specific or enforceable effect. Collieries differ, and what reasonable in one will be unreasonable in another. The court But it seems to us, on a consideration of the Nacods agree- ment, that it was meant to have a binding effect. Realising the difficulties inherent in the situation, it provided for discussions, if it appeared to be working out unfairly for the deputies. To define with exactitude what are the duties of a servant is no easy task. many contracts where duties are not fully defined, as in Hillas Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503 and Foley v. Classique Coaches Ltd. (1934) 2 K.B. 1. " Mr. Gardiner also relies on the provision in clause 15 for discussion in the event of complaints. He contends that this is typical of an industrial agreement not intended to be enforceable in the courts. We do not, however, see how in principle such a pro- vision differs from that in Foley v. Classique Coaches Ltd., which provided for the price to be agreed between the parties. It may be that discussion is a condition precedent to action but once discus sion is repudiated or fails the matter falls to be determined by the courts. Moreover, the defendant is in this further difficulty. He is assessing that the agreement as a whole exists, while seeking to deny the enforcability of clause 12. If clause 12 is too vague to be enforceable the whole agreement is not legally binding on either side. . . ." That decision, however the arguments of counsel may have been stated by the court, appears to have been made simply on the basis of whether the contract was too vague to be enforced or not. Furthermore, it was a case, as I have said, where the action was between the National Coal Board and an individual workman, just as though an action might have been commenced by Fords against one of their employees based page 90 of the Blue Book. Accordingly I do not find that the decision in Galley's case [1958] 1 W.L.R. 16 provides any great assistance towards the determination of this problem. In the present case there is no express provision by the parties to provide any assistance as to their intentions. Consequently, it is necessary to look at all the surrounding circumstances to ascertain what the intention of the parties was. This, in my view, is not a case where, without further ado, the situation falls into one or other of the categories which I have mentioned previously. Consequently, one must look at all the surrounding facts in order to discover what the intentions of the parties were. On the one hand, and this is the plaintiffs Fords' case, there exists the foundations of legally enforceable contracts. There is of course ample consideration, one assumes for the purposes of this argu- ment, that there is or was agreement between the parties in the case of the 1955, 1967 and 1969 agreements. No one, say the plaintiffs, could describe these as domestic, social or family arrangements. They were hammered out, it is said--and I do not doubt that this is true-- with great difficulty and lengthy discussions between the parties, Fords on the one hand and the unions on the other, and no doubt also between the unions themselves. They were designed, it is said, to regulate the business matters of wages, working conditions, terms, penalties, and so on. To that extent, say Fords, they are clearly commercial agreements, carrying the usual sanction with such agreements, namely, recourse to the courts should there be a breach on either side. So far there can be little quarrel with those contentions, although it should perhaps be men- tioned in passing that Mr. Blakeman, the protagonist of Fords, in his original affidavit and indeed in both his affidavits, remained silent as to any intention on his part or that of Fords that these agreements should have legal effect. It is fair to add that Mr. Neill, as an explanation of that silence, says that what his or Fords' intention was at the making of the agreements is immaterial, and if not immaterial, irrelevant. However, there are other matters to be considered besides those. There is no doubt that the executive officers of Fords, Mr. Blakeman in particular, must have been aware of current attitudes and develop- ments in this field, and similarly with the executive officers of the unions-- that is their job--and there is no reason to doubt that we are dealing on either side in this case with people who are in the top rank of efficiency, expertise and knowledge of their jobs and everything that goes to make up those jobs. What then was the general state of opinion as it existed during these times? What sources were available to the parties? What sources were there which inevitably would have come into the hands of these men to shape their views, shape their opinions, and more importantly, shape their intentions when making these agreements? They are, so it happens, numerous. Mr. Neill referred me this morning to an extract from " Collective Agreements " by Professor Otto Kahn-Freund in (1942/3) 6 Modern Law Review 112, 113. He did that because a later article by Professor Kahn-Freund had already been put before me, indicating that in the professor's view these contracts were not legally enforceable, and the Modern Law Review, containing as it did an earlier article, by the same gentleman, shows that at that time quite plainly he was of an opposite point of view. I say with regard to that, that the Modern Law Review was a publication unlikely to coma into the hands either of the executives of Fords or indeed of the executives of the union. I take the point that the professor has changed his mind, but I do not take the view that the Modern Law Review of 1943 was likely to have affected the minds of the parties' officers or their predecessors in title. Coming to the present day or almost to the present day, one finds that the Report of the Royal Commission on Trade Unions and Employers' Associations, 1965-1968, [Cmnd. 3623] under the chairman- ship of Lord Donovan, deals with this matter at considerable length. I wish to make it clear at this stage that one does not of course read these publications even publications from as august a source as this, as being precedents in any way affecting the legal decision of this case; but they are, as I say, matters which, in my view, are material when one is considering the root problem, namely, the intention of the parties. I turn now to the Commission's report. It reads as follows: " 470. In this country collective agreements are not legally binding contracts. This is not because the law says that they are not contracts or that the parties to them may not give them the force of contracts. There is in fact nothing in the law to prevent employers or their associations and trade unions from giving legal force to their agreements." If I may interpolate there, one such agreement was in fact put before me, an agreement of the Boot & Shoe operatives. I continue to read: " It is true that under a statutory provision--section 4 of the Trade Union Act, 1871 (which is separately considered in Chapter XIV)-- agreements between one trade union and another cannot be ' directly ' enforced in a court of law and damages cannot be recovered for their breach. An employers' association may be a trade union in the eyes of the law, and therefore a trade union and such an employers' association could not, if they wished, make their collective agree- ment enforceable ' directly ' or through an action for damages They could however, were they so minded, make it ' indirectly ' enforce- able, and for example obtain from a court a declaration concerning the meaning of the agreement. Nor would anything in this statute stand in the way of a union and an individual employer giving their agreement the full effect of a contract and making it enforceable even ' directly ' and through actions for damages in the event of breach. The fact is that nothing of this nature normally happens. That it does not happen is not, as we have already said, due to the law. It is due to the intention of the parties themselves. They do not intend to make a legally binding contract, and without both parties intending to be legally bound there can be no contract in the legal sense. 471. This lack of intention to make legally binding collective agreements, or, better perhaps, this intention and policy that collective bargaining and collective agreements should remain outside the law, is one of the characteristic features of our system of industrial relations which distinguishes it from other comparable systems. It is deeply rooted in its structure. As we point out in Chapter III collective bar- gaining is not in this country a series of easily distinguishable trans- actions comparable to the making of a number of contracts by tvo commercial firms. It is in fact a continuous process in which differences concerning the interpretation of an agreement merge imperceptibly into differences concerning claims to change its effect. Moreover, even at industry level, a great deal of collective bargaining takes place through standing bodies, such as joint industrial councils and national or regional negotiating boards, and the agreement appears as a ' resolution ' or ' decision ' of that body variable at its will, and variable in particular in the light of such diffictilties of interpretation as may arise. Such ' bargaining ' does not fit into the categories of the law of contract." There is more to the same or similar effect, and I need only read very briefly at the beginning of pamgraph 473: "It may be alleged that none of these considerations applies to pro- cedure agreements. Nevertheless it is a generally admitted fact that even procedure agreements are not contracts, and this again for the reason that the parties to them do not intend to create legal obligations. This lack of intent is manifest from the style in which the agreements are expressed." Then finally, there is paragraph 474: " If therefore our existing collective agreements or if our existing procedure agreements were to be made into legal contracts this would have to be done by a statute attaching the force of law to the terms of a bargain contrary to the wishes of the parties." The findings of the conunission were, one observes, unanimous. Of the parties appearing to give evidence before that commission, one finds, on p. 327, that the Ford Motor Co. Ltd. gave such evidence in con- fidence. Moreover the Donovan Commission did not say that from now on such agreements are not to be enforceable at law. They seem to have assumed, rightly or wrongly, that at least for some considerable time past that had been the situation in the country. That report and those words I have read, in my view, did not merely put Mr. Blakeman, who must have read them, on notice, but it showed what everyone to do with the industry had on balance been believing for some considerable time. The matter does not stop there. Evidence was given before the commission by the Confederation of British Industry, Trades Union Con- gress, and others; and I have been given a photographic copy of part of the vidence of the Confederation of British Industry given to thFecommission in, I think, 1965. Paragraph 172 is headed: " The legal enforcement of collective agreements," and it reads as follows: " For many years employers have felt that the greatest single contri- bution which could be made to the better working of the industrial relations system would be better observance of agreements. They see therefore considerable attractions in any proposed changes in the law which would have this effect. The most simple and also the most radical of such changes would be to make collective agreements enforoeable at law. " 173. The B.E.C. reviewed this possibility from time to time and was always attracted by the prospect it offered of securing better obser- vance of collective contracts. It also noted the comparative absence of strikes during the currency of contracts in countries where there is an enforceable contract with a peace clause. It was never able to satisfy itself, however, how such enforceability could be introduced without other consequences, some of them undesirable, which would make great changes in the British system of industrial relations." A copy of the written evidence of the Ministry of Labour before the same commission, again dated 1965, was also put before me. Turning to p. 76 one finds this statement: " (The common opinion is that a contract between a single employer and a trade union would also not be enforced by the courts though this is not specified by statute)." On p. 80, paragraph 26, there is also this statement: " As has been pointed out . . . the contracts entered into between employers' associations and trade unions (and probably the contracts entered into between single employers and trade unions) are not legally enforceable in this country. This is in striking contrast to the situation in most other countries." In the evidence of the Trades Union Congress to the Royal Commission, the material parts are to be found at p. 122, paragraphs 339 and 341, and I will read them. " Collective agreements themselves cannot be termed as contracts in law as, quite apart from the Trade Union Acts, the parties do not intend to be legally bound; the agreements are deliberately written in a way which would require radical amendment if this intention had been present. Furthermore, a contracting party is not guilty of a breach of contract if someone acts in defiance of the terms of a contract without his authority. Again, trade union members are not parties to procedure agreements, either explicitly or implicitly. " 340. It cannot however be over-emphasised that the effectiveness of obligations in this field does not depend on the existence of legal sanctions but on the common interest of both sides of industry in operating an effective system of collective bargaining. Systems of in- dustrial relations in different countries round the world show an inverse relationship between the practical significance of legal sanctions and the degree to which industrial relations have reached a state of maturity. Other countries are increasingly looking to Britain to discover how to evolve a system of good industrial relations; it is in Britain that legal sanctions have the least practical significance. " 341. The General Council are therefore firmly opposed to any proposal, such as that suggested by the CBI, to make collective agree- ments of whatever kind enforoeable at law. This is not simply a question of administrative practicability. It is essentially a question of principle. Any such development would have a serious and damaging effect on the generally enlightened approach to industrial relations which has been evolved in this country over the years." There in synopsis is the evidence given by both sides of industry before the Donovan Commission, and the results in the shape of the unanimous commission's report, which, as I see it, provide extremely valuable infor- mation, at least inferentially, as to what must have been the intention of the parties, as far back as 1955. There are other publications. Perhaps I should deal with just two. First, there is the Industrial Relations handbook, dated 1961, and emanating from the Ministry of Labour H.M. Stationery Office. One finds this passage on p. 19: " The whole of the collective system rests upon the principle of mutual consent, and the value of the agreements and the machinery for settilng disputes has depended upon the loyal acceptance by the constituent members on both sides of the decisions reached. This acceptance is voluntary. Loyal acceptance has in fact been the rule in all the trades concerned. Although the question has been mised from time to time of the adequacy of these methods, the view has always been taken that it was not desirable to adopt some alternative based upon principles other than that of inutual consent or to introduce any system of penalties for non-observance of agreements." By way of footnote, there is this: " Under the general law of contract, although the terms of a collective agreement do not automatically become part of the individual contracts of employment made between employers and their employees, an employee will be bound by such terms if it can be shown that they were, either expressly or by implication, incorporated in an individual contract of employment made between them." There was an earlier court of inquiry in 1964, under the chairmanship of Pearson L.J. It was an " inquiry into the causes and circumstances of a dispute between the parties represented on the National Joint Industrial Council for the Electricity Supply Industry " (Cmnd. 2361), and once again it is the type of report which would doubtless be read and digested by both the management of Fords and also by the various union officials. It contains this paragraph: " 140. The word ' sacrosanct ' is convenient but needs to be explained in two respects, first, the three-year agreement was not intended to be legally binding, but the parties by entering into it assume a moral obligation as is usual in industrial relations." Finally, although first or almost first in point of time, there is an extract from an article by the same Professor Kahn-Freund, with whose article in the 1942/3 Modern Law Review we started this inquiry, this one dated 1954, in " The System of Industrial Relations in Great Britain " (edited by A. Flanders and H. Clegg, 1954) pp. 56-8. It contains this passage: " In the long history of British collective bargaining it does not ever seem to have happened that either a trade union or an employer or an employers' association attempted to prevent the violation of a collective agreement by an action for an injunction or to seek compensation by an action for damages. The reason can certaainl not be found in the absence of such violations. . . . " The true reason for the complete absence of any attempts legally to enforce the mutual obligations created by collective agreements can, in the writer's opinion, only be found in the intention of the parties themselves. An agreement is a contract in the legal sense only if the parties look upon it as something capable of yielding legal rights and obligations. Agreements expressly or implicitly intended to exist in the ' social ' sphere only are not enforced as contracts by the courts. This appears to be the case of collective agreements. They are intended to yield ' rights ' and ' duties ', but not in the legal sense; they are intended, as it is sometimes put, to be ' binding in honour' only, or (which arnounts to very much the same thing) to be enforceable through social sanctions but not through legal sanctions." From these materials it will be clear that the climate of opinion was almost unanimous to the effect that no legally enforceable contract resulted from the collective agreements. As I say, both Mr. Blakeman and the unions were obviously abreast of these developments and statements of opinion and must be credited with knowledge of the contents of the various publications or at least those of the publications which were connected with the Pearson report and also the report of the Donovan Commission. Mr. Neill argues that these publications are irrelevant to the considera- tion of this case and that no regard should be had to them. To that argu- ment I do not accede. Where a court is endeavouring to discover the intention of the parties to an agreement, it is impossible and indeed unreal to disregard evidence of their knowledge and accordingly of their state of inind at the time. These documents show, to my mind, that certainly since 1954 the general climate of opinion on both sides of industry has over- whelmingly been in favour of no legal obligation from collective agreements. No less important a consideration of what has been called " extra judicial " authorities is a consideration of the terins of the agreements themselves. Mr. Finer, on behalf of the first defendants, puts his argument in this way. He submits that, if one looks at the terms of the 1955 and the 1967 agreements in the Blue Book, it would be possible or almost possible to argue that any contract would be " void " for uncertainty because of the way in which a large preponderance of the clauses are drawn. He does not put his argument as high as that; indeed it might be difficult to do so in the light of the decision in National Coal Board v. Galley [1958] 1 W.L.R. 16. What he does say is that the vague aspirational wording of many of the clauses makes it as clear as can be that the parties could not possibly have considered that these contracts would be enforceable in a court of law. One perhaps can, without going through it clause by clause, point to one or two of the clauses to which he drew my attention: clause 3 (a) of the 1955 agreement on p. 6, and clause 4 (a) on p. 9. He points out in addition that that clause, which deals with the method of complaints arising on the shop floor being taken higher and higher, so to speak, by redress of grievance procedure, could not possibly be enforced effectively at law when there are no time limits imposed for any of the steps taken. He adds in parenthesis that that was one of the matters, namely, the imposition of time limts, which was sought to be remedied by the 1969 agreement. He points further to paragraphs 7 and 8 of the 1967 agreement on p. 18 of the book, to paragraph 22 on p. 34 of the book, and so on. The way that he argues the matter is this. He says that the agreements, if one regards them closely, can really be divided as to their clauses into two categories. There are the specific clauses dealing with wage rates and so on on the one hand, which are drawn with sufficient particularity. There are, on the other hand, the broad aspirational clauses drawn in vague terms. He suggests that the only possible explanation of that dicho- tomy is that the specific terms are made in due course to be incorporated in the contract of employment between Fords and their employees, and those terms, as in National Coal Board v. Galley [1958] 1 W.L.R. 16, Will certainly be legally enforceable by or against, if necessary, the employee. So far as the vaguer terms are conerned, those are the terms which are effective between the employer Fords and the union, and one only has to look, submits Mr. Finer, at the nature of those terms to see that the parties cannot really have expected any court to give legal effect to matters couched in that way. The conclusion which I have reached is this; it is necessarily a pre- liminary view as this of course is not the hearing of the action proper. If one applies the subjective test and asks what the intentions of the various parties were, the answer is that so far as they had any express intentions they were certainly not to make the agreement enforceable at law. If one applies an objective test and asks what intention must be imputed from all the circumstances of the case, the answer is the same. The fact that the agreements prima facie deal with commercial relationships is outweighed by the other considerations, by the wording of the agreements, by the nature of the agreements, and by the climate of opinion voiced and evidenced by the extra-judicial authorities. Agreements such as these, composed largely of optimistic aspirations, presenting grave practical problems of enforcement and reached against a background of opinion adverse to enforceability, are, in my judgment, not contracts in the legal sense and are not enforceable at law. Without clear and express provisions making them amenable to legal action, they remain in the realm of undertakings binding in honour. None of the authorities cited by Mr. Neill, on behalf of the plaintiffs, dissuades me from this view. In my judgment, the parties, none of them, had the intention to make these agreements binding at law. That in effect concludes the matter in favour of the defendants, but I other points made on their behalf. The first is an argument which relates only to the 1969 negotiations. It is said that the N.J.N.C. was merely a negotiating body with no power to bind the constituent unions to any agreements with the employer. It is said that until the union representatives had each appended their signatures to the final prepared document the unions were not bound, and since that document was never signed by the constituent union representatives, the unions were not so bound. In support of that contention my attention was drawn to the way which I have already pointed out, in which the earlier 1955 and 1967 agreements were signed. It is further commented with some considerable force that, if the N.J.N.C. signature binds the unions without further ado, the addition of the signatures from all the separate unions is otiose. When one exanunes the 1955 agreement and reads paragraph 2, dealing with the N.J.N.C., one finds that almost all the words used to describe the powers and duties of that committee are words of " negotia- tion " or " discussion " and so on and that the only phrase which might possibly be construed as giving a power to form agreements are the final words of sub-paragraph (c), which read " shall negotiate all agreements and variations thereto." So far as it is necessary for me to express an opinion on this matter, it seems to me to be at least strongly arguable that the N.J.N.C., what- ever it may have considered to be its powers, was really only a negotia- ting body, that until the effects of its negotiations finally reached formal publication and until that formal document was signed by the representa- tives of the various unions those agreements were not binding. In 1955 and 1967 all the unions did so sign. In 1969 they did not. I very much doubt if Mr. Conway, who found himself in some difficulty in February of this year over his dual capacity as general secretary of his union and secretary also of the N.J.N.C., ever appreciated why he was in that dilemma. He was in that dilemma, I consider, because on the one hand the N.J.N.C. had come to a decision, but on the other hand the unions who were part of the N.J.N.C. were not unanimous and there were dissenting voices, as there were entitled to be, until the document was finally signed. I also mention in passing so that it may be part of the record a further argreement addressed to me by Mr. Finer, based upon the pro- position that where, as here, a number of agents in the shape of the union representatives on the N.J.N.C. are charged with negotiating or charged with agreeing, unless one has express enabling powers to that effect, they cannot properly exercise their powers so as to bind their principals unless they do it unanimously. The authorities he cited on that point were three: New College Oxford (1566) 2 Dyer, 247a, a decision in Brown v. Andrew (1849) 18 L.J.Q.B. 153; and finally Haringon v. Sendal [1903] 1 Ch. 921. So much for that point. The final point, which I certainly do not intend to decide, but it merits a mention, is a point made by Mr. Pain on behalf of the second defendants, and that is in brief that, if one reads the terms of the 1955 and 1967 agreements, even assuming that every- thing up to that point that the plaintiffs had argued is correct, namely, that the 1969 negotiations became enforceable agreements, yet neverthe- less, submits Mr. Pain, in the light of the provisions of the 1955 and 1967 agreements, there is nothing preventing his clients or indeed the members of the other trades unions from striking in the circumstances of this case if they so wished. In order to succeed in an application for an ex parte injunction, the plaintiff must show that he has a strong prima facie case at least in support of the right which he asserts and an arguable case at least that that right has been infringed. Fords in this case, in my judgment, fail on the first leg for the reasons which I have stated and, accordingly, I have no alternative but to discharge the ex parte injunction. Injunctions discharged. Costs in cause. Directions with certificate for speedy 1t~ril. Solicitors: Lovell, White & King; W. H. Thompson; Pattinson & Brewer. L. N. W. LACIS v. CASHMARTS 1968 Oct. 30 31; Dec. 2, 3, 4 Lord Parker C.J., Ashworth and Willis JJ. Sale of Goods--Property, when passing--Cash and carry shop-- Goods selected by customer placed in basket--Transfer by assistant at cash desk into removal container--Price shouted out and recorded on till--Whether property only passing on payment of price-Sale of Goods Act, 1893 (56 & 57 Vict. c. 71), ss. 17 (2), 18 r. 1.1 Crime--Larceny--Customer in cash and carry shop undercharged-- Intention by person in authority to pass the property in all the goods--Whether goods taken with the consent of the owner ss. 1 (1), 2.2 On March 14, 1968, at the respondents' cash and carry shop the appellant selected goods which he placed in a wire basket goods to the cash desk, where an assistant took them out of The price of each article was called out by the assistant and was recorded by the manager on a till which added up the total. Although the price of the goods was #185 8s., only #85 8s. was recorded on the face of the till, because of the goods were worth over #100 the price recorded on the face of the till returned to 1Sale of Goods Act, 1893, s. 17: "(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case." S. 18: " Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1 --Where there is an unconditional contract for the sale of specific good, in a deliver- able state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed." 2Larceny Act, 1916, s. 1: " For the purpose of this Act--(1) A person steals who, without the consent of the owner, fraudulently and without a claim of right made in good faith, takes and carries away anything capable of being stolen with intent, at the time of such taking, permanently to deprive the owner thereof..." S. 2: "Stealing for which no special punishment is provided under this or any othce Act for the time being in force shall be simfplela~rceny. " zero. The manager demanded #85 8s., which the appellant paid knowing that it was not the true price and that the respondents, through their manager, were mistaken as to the price of the goods. When the mistake was later discovered, the appellant refused to pay the #100 by which he had been undercharged He was convicted of stealing a quantity of charges to the section 2 of the Larceny Act, 1916. On appeal on the ground that the offence of larceny had not been committed : -- Herd, allowing the appeal, (1) that in the case of a super- market or cash and carry shop, property in the goods only passed on the payment of the price, which was the intention of the parties, and that, accordingly, the property had not pal had become aware of the mistake and had decided to avail himself of it. (2) That, although the property had not passed the position was that, in connection with a perfectly good con- tract additional goods had been handed over and the manager with authority had intended to pass the property in all the goods, and that since the goods had been taken with the consent of the owner there was no larceny. Reg. v. Prince (1868) L.R. 1 C.C.R. 150 applied. Reg. v. Middleton (1873) L.R. 2 C.C.R. 38 distinguished. per curiam. After the Theft Act, 1968, comes into opera- tion on January 1, 1969, nobody in similar circumstances would escape liability (post, p. 337B) The following cases are referred to in the judgment: Martin v. Puttick [1968] 2 Q.B. 82; [1967] 2 W.L.R. 1131; [1967] 1 All E.R. 899, D.C. Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. [1953] 1 Q.B. 401; [1953] 2 W.L.R. 427; [1953] 1 All E.R. 482, C.A. Reg. v. Middleton (1873) L.R. 2 C.C.R. 38. Reg, v Prince. (1868) L.R. 1 C.C.R. 150 The following additional cases were cited in argument: Bell v. Lever Bros. Ltd. [1932] A.C. 161, H.L. Hartog v. Collin & Shields [1939] 3 All E.R. 566. Moynes v. Coopper [1956] 1 Q.B. 439; [1956] 2 W.L.R. 562; [1956] 1 All E.R. 450, D.C. CASE STATED by Brentford justices. On April 10, 1968, an information was preferred on behalf of the respondents, Cashmarts, against the appellant, John Lacis, that he stole a quantity of cigarettes to the value of #100, the property of Cashmarts (Brentford), Ferry Lane, Brentford, on March 14, 1968, contrary to sec- tion 2 of the Larceny Act, 1916. On the hearing of the information on April 10, 1968, the following facts were found: On March 14, 1968, the appellant went to the premises of the respondents, known as Cashmarts, Cash and Carry, at Ferry Lane, Brentford. The appallant himself carried on a grocery business, and these premises of Cashmarts were frequented for the moat part by shop owners who purchased goods wholesale for subsequent retail sale at their own shops. Goods on sale at the premises, other than cigarettes, were displayed on shelves, and customers took goods from the shelves and placed them in wire baskets provided for this purpose. If the customer wanted cigarettes, it was necessary to inquire of an assistant who provided them from a locked enclosure. On March 14, the appellant selected a number of goods, mainly types of confectionery, which he placed in a wire basket. He also approached an assistant and, following his request, was handed a number of cartons of cigarettes. The appellant then took all the goods he had selected. including the cigarettes, to a gateway or an exit barrier where a cash desk was situated. On this occasion the manager of the premises was at the cash desk and the goods were taken out of the wire basket by an assistant and placed in another container in which they were subsequently taken out of the premises by the appellant. As the goods were taken out of one container and placed in another the price of each separate article was shouted out by the assistant and recorded by the manager on a till which automatically recorded the price of each article and added up the total amount of all the goods selected. In the case of this particular till, if the goods were of a value in excess of #100, the price recorded on the face of the till returned to zero. The price of the goods on this occasion amounted to #185 8s. 0d. but the amount recorded on the face of the till was #85 8s. 0d. In reliance on the amount shown on the face of the till, the manager demanded the price of #85 8s. 0d. in respect of the goods selected by the appellant. This sum was paid by the appellant who was allowed to take from the premises all the goods selected. At the time that the manager demanded the sum of #85 8s. 0d. for the goods, the appellant was aware that the sum did not represent the true price of the goods, and that the respondents, through their manager, were mis- taken as to the price of the goods. Either at the time of demanding that sum, or very shortly after, the appellant was handed by the manager a receipt or record of the price of the goods, which receipt came from the till, and which recorded the price of #185 8s. 0d. for the goods selected. That document showed the price of the cigarettes to be #174 5s, 10d, out of the total amount of #185 8s. 0d. There was no arrangement between the appellant and the respondents for the sale of goods on credit. The manager had no authority to permit goods to be taken from the premises without their being paid for in full. The manager would not have allowed the appellant to take the goods from the premises without payment of the full price if he had appreciated what was the full price of the goods, The respondents, through their manager, subsequently learnt that the appellant had been undercharged in respect of the goods and on more than one occasion sent someone on their behalf to the shop of the appellant in an attempt to persuade him to pay the amount by which a was under- charged, namely #100, in respect of the sale of the goods, but the appellant refused to pay this amount. It was contended for the appellant that the goods were voluntarily handed over to the appellant by the respondents in pursuance of a contract of sale, and that the property in the goods passed to the appellant when the respondents through their manager showed that they accepted the appellants offer to purchase the goods either upon recording the price of each artile upon the till, or, alternatively, upon demanding and accepting as the purchase price for the goods the sum of #85 8s. 0d. It was also contended that the information was defective in that the selection of a quantity of cigarettes of the value of #100 as the articles stolen was arbitrary and unsupported by the evidence. It was contended for the respondents that the goods had been hand over by them under a mistake of which at the time the appellant was aware, and that the offence of larceny had been established. The justices were of opinion that the appellant had committed the offence of stealing a quantity of cigarettes to the value of #100 the property of the respondents, and accordingly fined the appellant #50 and ordered the restitution to the respondent of the quantity of the cigarettes of the value of #100. On appeal the question for the opinion of the High Court was whether on the facts found or alternatively the evidence produced by the respondents the justices were correct in finding that the appellant had committed the offence of larceny as charged in the information. J. A. Speed for the appellant. Roger Frisby for the respondent. LORD PARKER C.J. This is an appeal by way of case stated from a decision of justices for the Middlesex area of Greater London sitting at Brentford, who convicted the present appellant, John Lacis, of stealing a quantity of cigarettes of a value of #100, the property of the respondents, Cashmarts. The matter arose in this way: the respondents carry on business at Ferry Lane, Brentford, as a cash and carry shop, which is frequented for the most part by shop owners, who there purchase wholesale goods which they are subsequently going to resell by retail in their shops. The goods on the premises other than cigarettes are displayed on shelves. The customers select goods from the sharelves, place them in wire baskets, and in the case of cigarettes, obtain them from an assistant who, in turn, provides them from a locked enclosure. On March 14 of this year the appellant, who number of goods, mainly types of confectionery, which he placed in the wire basket provided, and then obtained a number of cartons of cigarettes from an assistant, He took all these goods then to the exit barrier, where the cash desk was situated. It so happened that on this occasion there was not only an assistant there but also the manager of the premises. The assistant took out of the wire basket the goods one by one and placed them in another container in which they were subsequently taken out of the premises by the appellant. As the goods were taken out of the wire basket and placed in the other container the price of each article was stated by the assistant, where- upon the manager recorded the price on the till, which in turn added up the total so recorded. This particular till only went up to #100 and then returned to zero. The total price of the goods selected by the appellant was #185 8s. Od., but it followed that the recording at the end only showed #58 s. Od. The m~anace by mis~tak de~maned ~tha p~rie, f858 s. ~Od, which was duly paid over by the appellant, albeit at about the same time proper price of #185 8s Od. That total figure consisted of #11 2s 2d. grocery, and #174 5s. 10d. cigarettes. It was found, and this is the important finding, that at the time when the manager demanded the sum of #85 8s. Od. for the goods, the appellant was aware that that sum did not represent the true price of the goods, and that the respondents, through their manager, were mistaken as to the price of the goods. Finally, when the manager later discovered the mistake, requests were made of the appellant to pay the balance of the price, namely #100, but the appellant has throughout refused to pay that sum. It was in those circumstances that the magistrates convicted this fraudulent man of larceny. Before this court Mr. Speed, to whom the court is indebted for his careful argument, has taken a number of points. His first point, which if he is right would be decisive of this case, is to the effect that the property in all these goods passed when the goods were taken out of the wire basket by the assistant and placed in a container for their removal from the shop. Altematively, at the latest the property would pass to the appellant when the manager recorded the price called out by the assistant on the till, thereby accepting what heretofore had been an offer to purchase. That submission is based on section 18, rule 1 of the Sale of Goods Act, 1893, which provides that : " Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1--Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when thc contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed." Quite clearly if Mr. Speed is right in his submission, the property had passed before this mistake as to price arose, and before the appellant became aware of the mistake and decided to avail himself of it. The fundamental question, of course, is: what is the intention of the parties, and indeed the preceding section, section 17, by subsection (2) states: "For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case. In my judgment when one is dealing with a case such as this, particularly a shop of the supermarket variety or the cash and carry variety, as this was the intention of the parties quite clearly as it seems to me is that the property Shall not pass until the price is paid. That as it seems to me is in accordance with the reality and in accordance with commercial practice, The court has been referred to one or two recent cases which do not raise this specific point, but where words are used, somtimes supporting Mr. Speed's argument and sometimes against him. The case referred to in partictilar is that of Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. [1953] 1 Q.B. 401, C.A. The point in issue there was whether the defendant chemists, who ran a self-service store, were in breach of the provisions of the Pharmacy and Poisons Act, 1933, which requires the sale of certain poisons to be effected by or under the supervision of a registered pharmacist. It was held that the self-service system did not amount to an offer by the defendants to sell, but merely to an invitation to the customer to offer to buy, and that such an offer was acceped at the cashier's desk, and since the registered pharmacist was present supervising at the cashier's desk, there had been no breach of the statute. It will be seen from what I have said that the point now in issue was not in issue there. But it is to be observed that Somervell L.J. at p. 405 said: " I agree with the Lord Chief Justice " (Lord Goddard C.J.) " in every- thing that he said, but I will put the matter shortly in my own words. Whether the view contended for by the plaintiffs is a right view depends on what are the legal implications of this layout--the invitation to the customer. Is a contract to be regarded as being completied when the article is put into the receptacle, or is this to be regarded as a more organised way of doing what is done already in many types of shops-- and a bookseller is perhaps the best example--namely, enabling customers to have free access to what is in the shop, to look at the different articles, and then, ultimately, having got the ones which they wish to buy, to come up to the assistant 'I want this'? The assistant in 999 times out of 1,000 says ' That is all right,' and the money passes and the transaction is completed." Those words are ambiguous. It may mean that the contract is formed, or it may mean that the performance of the contract is carried out. But " I agree with what the Lord Chief Justice has said, and with the reasons which he has given for his conclusion that in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract is completed.(99) Lord Goddard C.J. had referred to completion by acceptance of the price. In my judgment no real help can be obtained from the case either in the Court of Appeal or in the court below, who were not really considering this point at all, and the same is true of a later case of Martin v. Puttick [1968] 2 Q.B. 82, D.C. As I have said, it seems to me that the property in fact only passes on payment of the price in circum- stances such as this, and therefore I find myself against Mr. Speed's first submission. His second submission I can dispose of fairly rapidly. He says true here there was an offer to buy at the market price totalling #185 8s. Od. There was then a counter-offer, albeit made under mistake by the manager, for #85. True, says Mr. Speed, the appellant could not, as it were, snap up a bargain by holding the manager to his mistaken offer, but really he says what happaned then was that there was as it were a renewed offer by the customer, the appellant, to buy for #85 which was then accepted. I am quite unable to accept that submission; it is, as it seems to me, wholly The third point is one of real substance and difficulty. It is this: that granted for this purpose that no property passed, yet the manager intended to pass the property, and that intention to pass the property preventing this from being a case of larceny; in other words what is taken is taken with the consent of the owner. He relies, on this point first and foremost on the decision of Blackburn J. in the old case of Reg. v. Prince (1868) L.R. 1 C.C.R. 150. It is necessary to read the headnote: " Where a servant is entrusted with his master's property with a general authority to act for his master in his business, and is induced by fraud to part with his master's propery, the person who is guilty of the fraud and so obtains the property, is guilty of obtaining it by false pretences, and not of larceny, because no constitute larceny ther must be a taking against the will of the owner, or of the owner's ser- vant duly authorised to act generally for the owner. "But where a servant has no such general authority from his master, but is merely entrusted with the possesson of his goods for a special purpose, and is tricked out of that possession by fraud, the person who is guilty of the fraud and so obtains the property is guilty of larceny, because the servant has no authority to part with the property in the goods except to fulfil the special purpose forwhich they were entrusted to him. " The cashier of a bank is a servant having a general authority to conduct the business of the bank, and to part with its property on the presentation of a genuine order from a customer; and if he is deceived by a forged order, and parts with the money of the bank, he parts, intending so to do, with the property in the money, and the person knowingly presenting such forged order is guilty of obtaining It appeared in that case that the prosecutor, a man called Henry Allan, had paid moneys amonting to #900 into the London and Westminster Bank on a deposit account in his name, and that sum was standing to his credit at that bank. On that day his wife presented at the bank a forged order, I think it was a cheque purporting to be to the order of her husband, Henry Allen, for payment of the deposit and the cashier at the bank, believing the authority to be genuine, paid to her the deposit and interest in bank notes. Blackburn J., after drawing attention to the somewhat artificial distinc- tions between larceny and false pretences, one being a felony and one a misdemeanour, went on, at p. 155: " The distinction arose in former times, and I take it that it was then held in favour of life that in larceny the taking must be against the will of the owner, larceny then being a capital offence. However, as the law now stands, if the owner intended the property to pass, though he would not so have intended had he known the real facts, that is sufficient to prevent the offence of obtaining another's property from, amounting to larceny; and where the servant has an authority co- equal with his master's, and parts with his master's property, such property cannot be said to be stolen, inasmuch as the servant intends to part with the property in it." He then went on to deal with limited authority and said this: "If, however, the servant's authority is limited, then a can only part with the possession, and not with the property; if he is tricked out of the possession, the offence so commiftted will be larceny." That is the case and the passage relied on by Mr, Speed, and the question is whether that remains good law, and if it is good law, whether it is appli- cable on the facts of this case. That brings me to the oft-cited case of Reg. v. Middleton (1873) L.R. 2. C.C.R. 38 a case which was referred to a complete bench of 15 judges. The facts there were that the prisoner was a depositor in a post office savings bank in which 11s. was to his credit. He gave notice in the ordinary form to withdraw 10s, stating perfectly properly the number of his deposit book and the amount he wanted to draw. "A warrant for 10s. was duly issued to the prisoner, and a letter of advice was duly sent to the post office at N. to pay the prisoner 10s. He went to that office, and handed his depositor's book and the warrant to the clerk. But the clerk, instead of referring to the proper letter of advice for 10s., referred by mistake to another letter of advice for #8 16s. 10d., and placed the latter amount upon the counter. The clerk entered the amount paid, #8 16s. 10d., in the prisoner's depositor's book and stamped it. The prisoner took up the money and went away, having at the moment of taking it up an animus furandi, and knowing the money to be the money of the Postmaster-General." Eight of the 15 judges upheld the conviction. Quite clearly the case their Lordships who would have held the prisoner not guilty in effect upheld and applied what had been said in Reg. v. Prince. Three others upheld the conviction on the basis that the clerk in the post office only had a limited authority, and it therefore came within the exception enun- ciated by Blackburn J. in Prince's case. Baron Pigott alone took the view that the mistaken act of the clerk placing the money on the counter stopped short of placing it completely under the prisoner's possession, and that his subsequent taking it away was larceny. Finally seven of their Lordships, who were upholding the conviction, distinguished the case of Reg. v. Middleton on the facts from the case of Reg. v. Prince. It seems to me quite clear that they were not in any sense overruling Reg. v. Prince, and indeed Blackburn J. himself was one of thc 8 even. They distinguished Reg. v. Prince, as I understand it on the ground that the money in the case of Reg. v. Prince was paid over under a contract albeit a contract obtained by fraud, and that under such a contract the property passed subject to a right of the true owner, the bank in that case, to divest the property. Whereas, so they held, in the case of Reg. v. Middleton there was no such contract, and certainly no such contract induced by fraud, and that the property therefore remained throughout in the Postmaster. General and never did vest in the prisoner at all. There was, as was said in the joint judgment of the seven at p. 44, no consideration to render it his which required to be rescinded. It was simply handing it over by pure mistake and no property passed. It will be, I suppose, for all time debated, until that case is no longer cited, what is really the true effect of Reg. v. Middleton, but one thing as it seems to me is clear and that is that the case of Reg. v. Prince was never overruled, albeit it was kept to its special facts. The present case, as I see it, is really a case of Reg. v. Prince (1868) L.R. 1 C.C.R. 150. True the contract was not obtained by fraud because it arose by the mistake of the manager, but nevertheless it seems to me impossible to say that in the present case there was no contract so as to bring it within the judgment of the seven in Reg. v. Middleton. Quite clearly there was a contract of some sort because nobody could suggest that the goods representing the #85 8s. that was paid, that it to say all the goods the price of which was recorded after the till had gone back to zero, were not perfectly properly sold and delivered, and nobofy had suggested indeed that that contract was or could have been rescinded. All as it seems to me that happened is that in connection with a perfectly good con- tract, additional goods have been handed over. It seems to me that provided the manager had the requisite authority and not a limited authority the property was intended to pass in all the goods including those whose price had first been recorded and which fell within the #100. Mr. Frisby quite rightly in my view, has only faintly sought to argue that the manager i th~esec~irstances ~hadnot Wfull u~thorit. I~ say "quite rightly" because cewas the manager of the rem~iss thmrogh whom alone the respondents could act, and his act was the act of the respondents. Accordingly as it seems to me this case falls fairly and squarely within the case of Reg. 1P~rice and in th fresult this fraudulent man escapes conviction. I would only add this, that Mr. Speed did raise what at first sight may be thought to be a somewhat technical point which certainly reinforces what I think is the result in this case, that is, that he says you cannot say which of the cigarettes were stolen and which were properly bought and paid for. They cannot be specified, they cannot be identified. That as it seems to me is a real difficulty and for my part I do not see any way of avoiding it. That alone shows that the circumstances that arose in this case do not enable a prosecution for larceny to take place. I would only add that I come to this conclusion with reluctance because this is a fraudulent man quite clearly, and I am only happy to think that when the Theft Act, 1968, comes into operation on January 1, 1969, nobody in similar circumstances will be able to escape liabtiility. In the result while sympathising with the magistrate in having to deal with what undoubtedly was a difficult case, I have come to the conclusion that they were wrong and that the conviction shoul be quashcd. ASHWORTH J. I agree. WILLIS J. I agree. Appeal allowed with costs. Solicitors: Beckingsales & Brashiers; Turberville Smith & Co., Uxbridge. S. S, CONNELL v. MOTOR INSURERS' BUREAU [1967 C. No. 5962] 1969 May 8, 9 Lord Denning M.R., Sachs and Karminski L.JJ. Road Traffic--Third party insurance--" Hire or reward "--Passen- ger carried on three occasions in private car for 10s. and a drink--Whether private car " vehicle in which passengers are carried for hire or reward "--Whether obligation to insure-- Road Traffic Act, 1960 (8 & 9 Eliz. 2, c. 16), s. 203 (4) (a), proviso. Road Traffic--Third party insurance--Motor Insurerss' Bureau-- Agreement with Minister--Passenger being carried for agreed payment in car not insured against passenger risks--Whether obligation on owner of private car to insure--Liability of bureau--Road Trffaffic Act, 1960, s. 203 (4) (a), proviso. Law Reform--Whether necessary--Road traffic--Third party insur- ance--Passenger--Need for compulsory insurance. The plaintiff was injured when being driven negligently as a passenger in a private motor car insured under a policy which did not cover injury to passengers. He obtained judg- ment for damages and costs against the car owner, but the judgment remained unsatisfied by the owner and his insurance company. He thereupon brought an action against the Motor sation of Victims of Uninsured Drivers) Agreement of 1946* made between the Minister of Transport and the bureau, claim- ing that they were liable to satisfy the judgment in that at the time of the accident he was being carried " for hire or reward " * For text of the agreement, see Note to Hardy v. Motor Insurers' Bureau [1964] 2 Q.B. 745, 770 et seq. within the proviso to section 203 of the Road Traffic Act, 1960,(1) and that the Act reqnired compulsory insurance in respect of such carriage. The bureau denied liability. The trial judge found that on three occasions, including that of the accident, the plaintiff had been carried by the car owner under an agreement by which the plaintiff as passenger paid the owner 10s. and a drink; that that constituted a legally enforce- able contract; and that as the plaintiff was being carried as a passenger " for . . . reward " the risk was one which was the subject of compulsory insurance under the section of the Act, and the plaintiff could therefore recover his damages and costs from the bureau. On appeal by the bureau: -- Held, allowing the appeal, that though the plaintiff was being carried under a legally binding contract for reward, the words " in the case of a vehicle in which passengers are carried for hire or reward" in the proviso to section 203 of the Road Traffic Act 1960 must be construed particularly in the con- text of a penal statute, as applying only to a vehicle in which passengers were normally or habitually carried for hire or reward; and that since the vehicle in which the plaintiff was it was not a vehicle in respect of which compulsory insurance against injury to passengers was required under the Act, and Dictum of Branson J. in Wyatt v. Guildhall Insurance Co. Ltd. [1937] 1 K.B. 653, 662; [1937] 1 All E.R. 792 approved. Per curiam : The legislature should consider as a matter sengers in vehicles not normally used for hire or reward; and, pending such legislation, passengers who accept lifts in such vehicles, whether by courtesy or under an informal arrange- ment for sharing expenses or under a legally binding contract as between passenger and owner, would be well advised to find out whether the vehicle is insured under a policy which covers injury to passengers, for otherwise they may, if injured, find themselves without a remedy. [1962] 2 WLR. 663; [1962] l All E.R. 531, C.A. distinguished. Decision of Paull J. reversed. The following cases are referred to in the judgments: Coward v. Motor Insurers Bureau [1963] 1 Q.B. 259 ; [1962] 2 W.L.R. 663; [1962] l All E.R. 531, C.A. Reg. v. Steel, unreported, June 17, 1968, C.A. (Cr.) Whittall v. Kirby [1947] K.B. 194; [1946] 2 All E.R. 552, D.C. Wyatt v. Guildhall Insurance Co. Ltd. [1937] l K.B. 653; [1937] 1 All E.R. 792. The following additional cases were cited in argument: Bonham v. Zurich General Accident Liability Insurance Co. Ltd. [1945] KB. 292. [1945] 1 All E.R. 427, C.A. East Midland Traffic Area Traffic Commissioners v. Tyler [1938] 3 All E.R. 39, D.C. McCarthy v. British Oak Insurance Co. Ltd. [1938] 3 All E.R. 1 1 Road Traffic Act, 1960, s. 203: " (1) In order to comply with the requirements of this Part of this Act, a policy of insurance must satify the following conditions. ... (4) The policy shall not, ... be required to cover--(a) liability in respect of the death of, or bodily injury to, persons being carried in or upon, ... the vehicle at the time of the occurance of the event out of which the claims arise,... Provided that paragraph (a) of this subsection shall not have effect in the case of a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment." APPEAL from Paull J. The plaintiff, James Connell, issued a specially indorsed writ on September 19, 1967, against the Motor Insurers' Bureau. By his statement of claim he claimed (1) that at all material times one William English was the owner of a motor car and on May 15, 1962, Mr. English agreed to carry the plaintiff as a passenger for reward in his motor car from Brixton to Norwood Junction, London, and return, and that the plaintiff was there- fore a person in respect of whom a policy of insurance was required to be carried pursuant to the provisions of section 201 and section 203 of the Road Traffic Act, 1960. (2) That on that date Mr. English was driving the motor car on the return journey when by reason of his negligence the car left the highway and collided with a lamp-post whereby the plaintiff suffered severe injuries, loss and damage; that he thereupon brought pro- ceedings against Mr. English for damages for physical injuries and loss arising out of the negligent conduct of Mr. English and that on May 9, 1966, Lyell J. gave judgment for the plaintiff against Mr. English in the sum of #2,850 together with costs subsequently taxed in the sum of #444 6s. 3d.; and that the liability was a liability required to be covered by a policy of insurance under the Act of 1960. (3) That despite application for payment of the sums from Mr. English and the Trafalgar Insurance Company Ltd., his insurers, the judgment remained unsatisfied. (4) That notice of the proceedings was given to the bureau on March 19, 1964, and subsequently on or about May 11, 1966, that notice was given to the bureau that the judgment had been obtained, but that the bureau had refused or neglected and continued to neglect or refuse to satisfy the judgment; and the plaintiff claimed #3,294 6s. 3d., the amount of the unsatisfied judgment and costs. By their defence the bureau admitted that Mr. English was the owner of a motor car but denied the rest of paragraph (1) of the statement of claim; admitted paragraph (2) save the last sentence thereof; admitted pamgraphs (3) and (4), but denied that the bureau was liable to satisfy the judgment or costs. Paull J. in a reserved judgment on June 13, 1968, after stating that the action against the bureau was brought by virtue of the agreement between the bureau and the Minister of Transport whereby the bureau paid claims if a plaintiff could show that at the time of the accident he came within " compulsory insurance " under the Act of 1960, and pointing out that the compulsory insurance necessitated by thad Act did not cover passengers in motor cars in the ordinary way so that no claim could lie against the bureau in the absence of any legal contract to carry a passenger, said that if on the other hand the plaintiff was being carried for hire or reward," the bureau had to pay, and that the question was whether in the particular circumstances of the case Mr. Connell was being carried for hire or reward. His Lordship continued: "Now there is, I think, a very thin but distinct line to be drawn in regard to this question of hire or reward. In the first place, I think it is quite clear that there is no necessity for the owner of the car in which the injured person is a passenger to hold out his car as a car which can generally be hired for reward or hire. It is quite sufficient if there is a conflict in the particular case whereby in consideration of his carrying a particular passenger he is entitled to a reward or . . . to a sum of money." His Lordship then considered the evidence as to the circumstances in which the plaintiff was carried in Mr. English's car on the relevant occa- sion (which are summarised in the judgment of Lord Denning M.R.), accepted the plaintiff's evidence in preference to that of Mr. English, and concluded that the plaintiff offered and Mr. English accepted on the date of the accident the same terms as on two previous occasions, namely, that he would carry him for a payment of 10s. and a drink. His Lordship continued: " If I come to that conclusion I simply have got to ask myself the question: Was he being carried for reward? Now there are two or three cases as regards this matter and I do not think I need refer to them. I think that what they amount to is this. If there is one of those vague arrangements between workmen whereby one workman carries another workman to and from work and as a result of that that workman does in fact pay the man who carries him each week what is sometimes called ' petrol money,' in other words, a sum of money which will cover expenses or perhaps give the first workman some profit, if there is that sort of vague arrangement, there is no legal contract whereby on any one occasion one workman is bound to carry the other workman. There is no bargain between them in law. If, on any one day, the workman with the car refuses to carry the workman without the car, no action could be brought against the former work- man for the reason that the arrangement is merely a friendly arrange- ment.... The mere fact that week after week the workman without the car does pay a sum of money does not tum what is merely a friendly arrangement . . . without any legal liabtility into a contract in law; but, on the other hand, if before a journey starts the workman who has the car says: ' I will not carry you unless you agree to pay me 10s.' or #1 or whatever it may be, and the other man says: ' Very well, if you carry me I will pay you that 10s.' or that #1, I cannot see why that does not make a perfectly good legal contract. While I have hesitated once or twice during this case as to which side of the line it falls, I accept those few words that Mr. Connell has told me. I accept that Mr. English said ' Not bloody likely; that will not pay for the petrol,' and if that was the basis on which the arrangement was made . . . this was a legal contract and it does not enter into that category of a friendly act as a result of which one does in fact pay the other some sum of money. . . . I therefore think that Mr. Connell was being carried under a legal contract for reward. That being so, I think he is entiitled to judgment." He ordered the payment of the sum of #3,294 together with costs, but granted a stay of 21 days for an appeal to be entered on condition that the oney was brought into court. The bureau appealed on the ground that the judge ought not to have found that at the material time the carriage of the plaintiff in the motor car by Mr. English was such as to require insurance pursuant to the Road Traffic Act, 1960, s. 203. Further facts are stated in the judgment of Lord Denning M,R. H. Tudor Evans Q.C. and Patrick Bennett Q.C. for the bureau LORD DENNING M.R. This is a case of significance for drivers of cars and their passengers. Mr. Connell used to visit " The White House " at Brixton Hill. In April, 1962, he was in the bar. He wanted to cash a cheque at his bank four miles away. Also in the bar was a Mr. English. He had a car outside. Mr. Connell asked Mr. English: " Will you do me a favour? Will you drive me to the bank so that I can cash a cheque? " Mr. English replied in lurid English: " Not bloody likely; that won't pay for the petrol." Mr. Connell said : " I'll give you 10s. and buy you a drink." Thereupon Mr. English agreed. He drove Mr. Connell to the bank. Two or three weeks later the same thing happened again. Another 10s. and a drink: and another drive to the bank. On May 15, 1962, they were again in the bar. Mr. Connell wanted this time to go to Norwood. Mr. English agreed on the same terms--10s. and a drink. But this time Mr. English drove badly. He ran into a lamp-post. Both men were injured. Mr. Connell wanted compensation for his injuries. But Mr. English's insurance did not cover it. His policy contained a clause which excluded " any legal liability to passengers," and also a clause excluding " any liability while the car was being used for hire or reward." Mr. Connell went to solicitors, and they gave him some advice. In consequence, he went to see Mr. English in hospital and asked him: " Will you write down that I paid you 10s. for these journeys?" Mr. English said: " I cannot do that. I am in enough trouble with the insurance as it is." Mr. Connell retorted in illegitimate English: " You are a right bastard," and left. Then Mr. Connell took action against Mr. English for damages. Mr. English was without means. He did not defend. Mr. Connell obtained damages of #2,850 and costs, making a total of #3,294 payable by Mr. English. The insurance company did not pay. They were not bound to. The insurance did not cover it. So Mr. Connell took the next step. He sued the Motor Insurers' Bureau on the ground that, by statute, Mr. English was compelled to be insured; and that, as he was not insured agianst this injury, the Motor insurers' Bureau ought to pay the #3,294. Mr. Connell's case is perfectly good if Mr. English was bound, under the statute, to insure against injury to Mr. Connell: because the Motor Insurers' Bureau have agreed with the Board of Trade that they will pay the dainages in every case where a driver is uninsured when he ought to have been insured. So the question comes down to this: Was Mr. English compelled, by statute, to insure against injury to Mr. Connell? The relevant provisions are contained in section 36 of the Road Traffic Act, 1930, which are now in substance re-enacted in section 203 of the Road Traffic Act, 1960. Summarised, it comes to this. Everyone who is using a vehicle on a road is compelled by law to insure against third-party liability; but there is this important exoeption : he is not compelled to insure against injury to passengers, Mr. Connell was a passenger. So it seems that Mr. English was not bound to insure him. But there is a proviso to the exception in this respect; although a driver is not ususally bound to insure his passengers, yet he is bound to do so "in the case of a vehicle in which passengers are carried for hire or reward," Those are the critical words of the case. Mr. Connell says that he was being carried in Mr. English's car for reward, namely, for 10s. So he claims that Mr. English was bound to insure him. In construing the statute, it is important to remember that, if a person uses a car on the road without having the insurance required by the statute, he is guilty of a criminal offence: see section 201 : and we ought not to hold him to be guilty unless the statute is clear, I think that the as a matter of practice or habitually passengers are carried for hire or reward. It means that taxis, motor coaches, private-hire cars, and the like are compelled to be insured in respect of passengers. But I do not think the proviso applies to private cars in which people are given a lift. If the legislature had intended all passengers to be covered when they pay for the lift, it would have omitted the words " in the case of a vehicle in which " and put simply " when." By using the words " in the case of a vehicle in which passengers are carried," the legislature denotes a vehicle whose habitual or normal use is for the carriage of passengers for hire or reward. This was the view adopted by Branson J. in Wyatt v. Guildhall Insurance Co. Ltd. [1937] 1 K.B. 653, 662 when he said : " I think that this subsection is really dealing with vehicles normally or habitually used in the way mentioned in the exception, and that the mere fact that on an isolated occasion a man takes some reward--not necessarily a monetary reward--for the conveyance of a passenger in his car does not render him liable to a penalty for not having an insurance policy covering that passenger on that occasion." Branson J. was rightly influenced by the fact that a man who has not got a proper insurance is liable to be prosecuted. This proviso does not render a private owner liable to be prosecuted simply because he gives a man a lift and accepts a contribution towards the petrol or receives a small sum of money as a reward. He is not bound to insure such a passenger. That dictum of Branson J. has been accepted in the textbooks as being authoritative. For instance, in Shawcross on The Law of Motor in- surance, 2nd. ed. (1949) at pp. 202 and 203, it is said that the judgment of Branson J. " may be regarded as settled law. In Halsbury's Statutes of England, Vol. 24, at p. 606, Wyatt's case is given as authority for the proposition that " unless there is an habitual carrying for hire or reward there is no statutory necessity for a policy covering risks to passengers." In addition, it is to be noted that since Wyatt's case, the Road Traffic Act, 1960, has been passed to consolidate, with corrections, the provisions at to road traffic. If Parliament thought that Wyatt's case ought to be corrected, they would have done so. The resulti is, therefore, that the owner of a vehicle, such as a motor coach, a taxi, and a private-hire car, is bound to insure his passengers. But the owner of a private car is not bound to insure his passengers, even though they may make a contribution towards the petrol or pay a sum of money in return for the lift. I must, however, say a word about Coward v. Motor Insurers' Bureau [1963] 1 Q.B. 259, by which the judge was much influenced. In that case Cole had a motor-cycle. He took Coward daily to work on the pillion. Coward gave him money regularly every week. After 18 months there was an accident in which both were killed. It was due to the negligence of Cole, but he was not insured against injury to passengers. Coward's widow sued the Motor Insurers' Bureau. She failed. This court held that Cole was not compelled to be insured against injury to Coward. They put the decision on the ground that Coward and Cole never intended to enter into a legally binding obligation of carriage. In the present case the judge found that there was a legally binding contract by which Mr. English agreed to carry Mr. Connell: and for that reason he held that Mr. Englishh was bound to insure Mr. Connell. I must confess that I am not altogether satisfied about the ground given for the decision in Coward's case. It is often a very nice question whether there is a legally binding contract when a driver gives a man a lift. I should have thought that, in the ordinary way, when a man agrees to carry a man for payment, there is a contract, albeit informal, no matter whether the payment is by way of contribution to the petrol or a reward for the lift. I would agree therefore with the judge that there was a binding contract here. But in any case, contract or no, it is a fine point: and it would be a pity if these cases turned on it, I do not think they do turn on it. I would prefer to put the decision in Coward's case on the ground that the motor- cycle was not " a vehicle in which passengers are carried for hire or reward." It was a private motor-cycle giving a man a lift. So Cole was not bound to insure against injury to passengers. At any rate, the court in Coward's I propose to decide the present case on this simple ground : the car case did not decide the point we have here. driven by Mr. English as not a vehicle in which passengers were normaull or habitually carried for hire or reward. It was a private vehicle in which Mr. English had given Mr. Connell a lift on two or three occasions. Even though Mr. Connell paid for the lift under a contract, nevertheless Mr. English was not bound to insure against injury to him. Mr. Connell cannot, therefore, recover against the Motor Insurers Bureau. I would only add this: many people think the statute should be altered so as to provide compulsory insurance for passengers. I think so too. It is very hard on a passenger that he should be injured by the negligence of the driver--and have no recourse for damages. I hope that Parliament will soon remedy the position. Meanwhile, I would suggest that anyone who asks for or accepts a lift should ask the driver: " Are you insured for passenger or not?": for, if he is not, and there is an accident, he may be unable to get any compensation. I would allow the appeal and give jdgmnt to the Motor Insurers' Bureau. SACHS L.J. Upon the only issues argued before the trial judge I am in agreement with his conclusions--both as regards his having held that Mr. English's car was in effect a " local taxi," and as to the legal effect of what on the relevant occasions transpired between Mr. English and the plaintiff. Having regard to Coward's case [1963] 1 Q.B. 259, which is, of course, binding on this court, it was necessary for the plaintiff to establish not only that he was being carried for reward as opposed to being carried free, but that the reward was one payable under a legally binding contract. On the facts found by the trial judge as to how the 10s. came to be paid on three successive occasions, it seems to me clear that the plaintiff estab- lished both points. It happens that the 10s. was paid in advance. If it had not been so paid and the trip had been made, an action for it would have lain. Moreover, the 10s. was a sum far greater than would be that arranged n a mere petrol-sharing a~gremcet. In this behalf I agree with the trial judge that the facts in the Coward case are distinguishable as relating to one of those vague sort of arrange- ents between wor~kmn where there is a paymcet of what is sonmetime called " petrol money." In that case both the passenger and the owner of the vehicle were killed. There was thus no satisfactory evidence as to what was the weekly amount paid, and, more important, there was no evidence of the basis on which that payment was calculated, and the facts were consistent with its being merely a payment for part of the cost of petrol used. In those circumstances I appreciate why, on the particular facts of that case, this court held that the plaintiff did not establish an intention to enter into a legally binding contract, as opposed to making an arrangement of a far looser type. Unlike the position here, too many material facts were in that case left in doubt. I would, however, mention that the fact that neither party happened to give thought to whether a legal relationship was intended does not to my mind conclude an issue as to whether a legally binding contract was in fact achieved. What this court has to do is to look at the primary facts accepted by the trial judge as being true and then dmw the correct inferences. I would adopt the views expressed in Cheshire and Fifoot on the Law of Contract, 6th ed. (1964), p. 94, where the proposition is put forward as follows : " The test of contractual intention is objective, not subjective. What matters is not what the parties had in their minds, but what inferences reasonable people would draw from their words or conduct." Here the trial judge put it like this : " If before a journey starts the workman who has the car says 'I will not carry you unless you agree to pay me 10s.'... and the other man says ' Very well, if you carry me, I will pay you 10s.'...," then he, the trial judge, could not see why that did not make a perfectly good legal contract. With that approach I respectfully agree. This is not one of those " domestic or social occasions " (to which the author of Cheshire and Fifoot, 6th ed., refers) on which legally binding contracts are in appropriate circumstances found not to have been made. The dividing line may sometimes be think , but in the instant case the agreement appears to me to have been well on the contractual side of the line. I now turn to the second issue discussed in this court. It is one that was not raised before the trial judge, for the simple reason that there the plaintiff based his case on an assertion--later negatived by the judge--that Mr. English's car was in effect the " local taxi." That issue stems from the terms of the proviso to section 203 (4) which has already been mentioned by Lord Denning M.R. It is one which has been the subject of judicial pronouncement as long ago as 1937 in Wyatt's case [1937] 1 K.B. 653. That case deals with the difficulty under the Act of 1930 parallel to that which faces the plaintiff here. It arises from the wording of the proviso, and one can only wonder why, if the plaintiff's contentions were correct, the words "in the case of a vehicle in which passengers are carried for hire or reward " were not in fact replaced by the much simpler phrase " when passengers are being carried for hire or reward." The above distinction has already been dealt with by my Lord, and he has referred to the judgment of Branson J. in Wyatt's case. I would only venture to supplement his quotation by adding passenges which appear immediately before and after the words already recited. The judge in that case said at p. 662: " If it "--he was referring to the relevant phrase--" means what counsel for the plaintiff says it does, one cannot see why the words ' unless they are being carried for hire or reward ' should not have come in at the end of the proviso, which would have avoided the clumsy exception at the beginning. The result of adopting that con- struction would be that if anyone took a passenger in a car for anything in the nature of reward, then he would immediately become liable to penalties if he did not have a policy of insurance covering that person." Then at thceend he ~sai: 9"Two constru~ctins may be poissb~le,but as this is a penal statute one leans against the construction which would turn the user of the car into a criminal user." With those passages I respectfully agree To my mind the courts must incidentally perforce examine the words in the proviso with the eyes of the 1930 legislature, when compulsory insurance was a novel and satisfactory advance but one to be hedged with careful limits; and not with the eyes of those who today regard the absence of compulsory insurance of passengers as an unfortunate anachronism. One must also note that the Act of 1960 has not sought to amend or clarify the relevant exceptions and proviso, despite the fact that the decision of Branson J. had been for so long recognised for practical purposes as declaring settled law. In this behalf I have in mind the words of Lord Parker C.J. in Reg. v. Steel, an unreported case decided in the Criminal Division of this court on June 17, 1968. That case dealt with the inter- pretation of certain words in the well-known authority, Whittall v. Kirby [1947] K.B. 194, and of them the Lord Chief Justice said : " Since then Parliament has re-enacted the same words with full knowledge of that decision, in 1960 and again in 1962. . . . It is perfectly clear that in these circumstances this court, observing the intention and seeking to honour the intention of Parliament, must inevitably uphold the principle laid down " in the previous case. I would add that if this court today took the view which has been so persuasively put forward by Mr. Havers, it would induce really considerable confusion; there would be literally thousands who would find themselves to be for the time being, at any rate, making a crinunal user of their cars by driving without a proper policy, and there would also be literally thousands of policies which would have to be reconsidered. Clearly the proviso must be interpreted in the way in which Branson J. construed it--to my mind correctly. Accordingly, the conclusion to which I, like my Lord, have come is one reached by me without hesitation but also without satisfaction; for today any decision that limits the ambit of compulsory insurance is one to be regretted. It is now the best part of 40 years since a large measure of compulsory insurance for motorists was brought into force, hav- ing regard to the perils to which other road users were put by the motor car drivers incapable of paying damages. That was indeed a great step forward, though even at that time there was a measure of criticism of the plight in which passengers were left. Since then the courts have seen only too often a procession of gravely injured passengers who were bereft of compensation because the drivers were too mean or too careless to take out a more comprehensive form of policy, though well able to afford to pay that much extra for their pleasure or convenience. One can only hope that the instant case will stimtilate attention to the ever-increasing need to stop literally thousands of persons being in effect licensed tortiously to injure others by negligent driving without being able to compensate them. I agree that this appeal should be allowed for the reasons already given. KAMINSKI L.J. I have not found this case to be an easy case, but on the facts as found by the judge I agree that this appeal must be allowed or the reasons given by my Lord;Lord De~nnin MR.. In co~min to ~tha conclusion I must add my voioe to both my Lord and Sachs L.J. in their comments on the present position of the law. As things stand, it is or Vol. 3 11 (2) may be difficult for a passenger in a car to ascertain whether or not the owner or driver is covered by a policy of insurance if they meet with an accident. Indeed, to come to any safe conclusion as to whether or not he is protected, a wise passenger would have first of all to inspect the driver's or owner's policy of insurance, and it may thereafter be wise for him to consult his own solicitor. That, however, is a counsel of perfection unlikely to be followed. What is much more important is that in hiss day and age probably many thousands of people go to work daily as passengers in motor cars driven by their friends and colleagues; they may or may not make some contribution towards the cost of the expedition in general and the cost of petrol in particular. It seems to be most desirable that in those circumstances they should know whether or not they are covered by insurance. I agree that this appeal must be allowed. Appeal allowed. Judgment for defendants. No order for costs in either court. #3,000 paid into court to be paid out to defendants. Leave to appeal to House of Lords refused, July 3. The Appeal Committee of the House of Lords (Lord Guest, Lord Donovan and Lord Pearson) refused a petition by the plaintiff for leave to appeal. Solicitors : R. I. Lewis & Co.; Robert W. Thompson. M. M. H. [COURT OF APPEAL] GOULD v. GOULD [Plaint No. Z. 5293A] 1969 June 17, 18 Lord Denning M.R., Edmund Davies and Megaw L.JJ. Contract--Formation--Intention to create legal relationship-- Uncertainty--Husband and wife--Separation--Husband's agreement to pay wife #15 a week as long as he had it-- Whether intention to enter into legal relations. Husband and Wife--Maintenance--Agreement--Construction-- Husband's agreement to pay wife #15 a week as long as he had it--Whether intention to enter into legal relations-- Whether enforceable. In May, 1966, a husband left his wife and two children. The husband had a garage business. When he left he told his wife that he would pay her #15 a week as long as he had it. The husband paid the wife #15 a week by postal orders and cheques for some time but by February, 1968, he had fallen into arrears. By writ of February 22, 1968, the wife claimed "#135 for arrears of agreed maintenance due" from the husband. Judge Pratt gave judgment for the wife for that sum. On appeal by the husband:-- Held, allowing the appeal (Lord Denning M.R. dissenting), that the form of words used by the husband in saying that he would pay #15 a week as long as he had it imported such uncertainty as to indicate that the parties did not intend to enter into legal relations and accordingly the agreement was not enforceable. Balfour v. Balfour [1919] 2 K.B. 571, C.A. applied. Per Lord Denning M.R. An oral separation agreement is legally enforceable. There is ample consideration for such agreement (post, p. 493H). The husband's statement that he would pay so long as he could manage it was not so uncertain as to make the whole agreement void (post, p. 494B). Per Edmund Davies and Megaw L.JJ. A husband and wife can enter into an agreement which binds them in law, but it is upon the spouse asserting that such a contract has been entered into to prove that assertion. ln the general run of cases the inference would be against inferring that spouses intended to create a legal relationship (post, pp. 494F, 495E). The following cases are referred to in the judgments: Balfour v. Balfour [1919] 2 K.B. 571, C.A. Connell v. Motor Insurers [1969] 3 W.L.R. 321, C.A. Fawcett Properties Ltd. v. Buckingham County Council [1961] A.C. 636; [1960] 3 W.L.R. gal; [1960] 3 All E.R. 503, H.L.(E.). Jones v. Padavatton [1969] 1 W.L.R. 328; [1969] 2 All E.R. 616, C.A. Merritt v. Merritt, The Times, May 14, 1969. Peters (Executors) v. Inland Revenue Commissioners [1941] 2 All E.R. 620. Pettit v. Pettit [1969] 2 W.L.R. 966; [1969] 2 All E.R. 385, H.L.(E.) The following additional cases were cited in argument: Bowen v. Bowen (1908) 72 J.P. 87, D.C. McGregor v. McGregor (1888) 21 Q.B.D. 424, C.A. APPEAL from Judge Pratt at Exeter County Court. By specially indorsed writ of February 22, 1968, the wife, Eve Elizabeth Gould, claimed against her husband, Michael Gould, " #135 for arrears of agreed maintenance due " being " 13 weeks' agreed main- tenance for self and two children at #15 per week" less two instalments each of #30 paid on January 29 and February 19, 1968. On June 11, 1968, at Exeter County Court, Judge Pratt gave judgment for the plaintiff for #135. The defendant appealed on the grounds that the judge was wrong in holding that there was a legally binding contract, that there was con- sideration moving from the plaintiff to the defendant and that the alleged contract was intended to create a legally binding relationship between the parties. The facts are fully stated in the judgment of Lord Dennig M.R. J. R. Whitley for the appellant husband. L. Herrick Collins for the respondent wife. LORD DENNING M.R. Mr. and Mrs. Gould were married some years ago. They have two children. In October, 1965, the husband left the wife. They went to solicitors. An arrangement was made for the husband to pay the wife #12 a week for herself and the two children. Later on they came together again. On May 15, 1966, the husband left the wife for the second time. He agreed to pay her #15 a week; but there was nothing in writing. He paid the #15 a week for some considerable time. He often sent it by cheque and little notes with it, showing that it was #15 a week. From October, 1967, he fell behind in his payments. He made some payments in January and early February, 1968. But later on in February, 1968, he met her and told her he could not pay the full amount in the future. The wife issued a writ claiming the balance outstanding for the period up to the time when he gave notice, namely, February 17, 1968. She claimed 13 weeks at #15 a week--#195; but gave credit for the payments in January and early February of #60: leaving a balance of #135. The husband put in a defence, denying that he had entered into an agreement with her to pay her maintenance as alleged, or at all. At the trial before Judge Hugh Pratt at Exeter, the husband submitted that there was no agreement because there was no intent to create legal relations. The judge gave judgment quite shortly: " I found that the agreement entered into between the parties in May was intended to create legal relations and to be enforceable." Now there is an appeal to this court. The evidence shows that the husband agreed to pay the wife #15 a week, but he qualified it by saying: " ... so long as the business is O.K.! " or " so long as I can manage it." The question is whether that qualification means that there was no enforceable agreement at all. To decide this question, I will read all the passages on the point. They are quite short. The wife in examination-in-chief said: " On May 15, 1966, my husband left and he agreed to pay me #15 each week, although there was nothing in writing. He sent a postal order every week and he also agreed to pay the mortgage on the bungalow. In cross-examination she said: " He said he would continue to pay #15 a week. He had asked me on several occasions before he left how much I would need if he left and I said #15. He said he would pay me as long as he had it. He has a garage business." Then she described an incident a few weeks later in June, 1966. " We went to Woodbury Common "--that is near Exeter--" to talk over the situation. It was a long meeting and he said he did not intend to retum and would continue to pay #15, as long as the business was O.K. and he might have said I must be careful not to get into having to pay for things in case he should not pay." In re-examination she said: "He agreed to pay me #15 a week for myself and the children and pay the mortgage. There was no agreement that the #15 would go up or down as the business might go up or down." The husband said: " I left on a Saturday night and my wife asked me what I was going to do about money and I asked her how much she required and she said #12 or thereabouts. I also paid other bills and I suggested I would give her #15 each week and she said for how long and I said as long as I can manage it. . . . I paid her #15 generally, although sometimes I got in arrears and I have also paid the mortgage rates. In June we had a meeting and I told her that I was not going back, and that, as I was associating with another woman, I told her it was not certain that I could pay indefinitely. . . . I kept up the payments of #15 a week until November, 1967, occasionally getting into arrears and making it up. . . . At the end of February I saw the wife again and I told her about my health and that payments would have to be reduced and she asked how much, and I said I could not commit myself." That is the whole of the evidence. The first question is whether, on that evidence, the judge was entitled to find that there was an intention to create legal relations. I think he was so entitled. This question of an "intent to create legal relations" is not to be resolved by looking into the minds of the parties: for " it is common learning that the intent of a man cannot be tried, for the devil himself knows not the intent of a man cannot be tried, for the devil himself knows not the intent of a man ": see the Anonymous case in the Year Book of 1478 (Y.B. 17 Ed. N. Pasch. f.l, p1.2) set out in Fifoot's History and Sources of the Common Law (1949), p. 253. The parties probably possessed no intention one way or the other. It is not the actual intention possessed no intention one way or the other. It is not the actual intention of the parties, but the intention which the court imputes to them. It is to be found by looking at what the parties said and did in the situation in which they found themselves: and then asking: What would reasonable people think about the provision? Would they regard it as intended to be binding? If it was a firm promise, made for good consideration, a reason- able person will, as a rule, regard it as intended to be binding: and the courts will enforce it unless it was a mere domestic or social engagement: see Connell v. Motor Insurers' Bureau [1969] 3 W.L.R. 231. In family cases, when husband and wife are living together happily, the court does not, as a rule impute to them by their domestic arrangements, an intention to create legal relations. That was decided in Balfour v. Balfour [1919] 2 K.B. 571: though I observe that in the recent case of Pettitt v. Pettitt [1969] 2 W.L.R. 966 Lord Hodson said, at p. 983, that, on the facts, Balfour v. " stretched that doctrine to its limits." But when husband and wife, at arms length, decide to separate and the husband promises to pay a sum as maintenance to the wife during the separation, the court does, as a rule, impute to them an intention to create legal relations. No matter whether the agreement be in writing or by word of mouth, it is held to be intended to be binding. That is shown by a decision of this court in the Peters (Executors) v. Inland Revenue Commissioners [1941] 2 All E.R. 620, where there was an oral agreement on separation by a husband to pay the wife #850 a year by monthly instalments. The instalments were subsequently reduced by the husband without objection by the wife. This court reversed the decision of the tribunal of fact (the Inland Revenue Commissioners) and held that in law there was a legally binding agreement. I hold, therefore, that an oral separation agreement by which the husband agrees to pay the wife so much a week is legally enforceable. There is ample consideration for such agreement. First, there is the consideration that neither is insisting on the matrimonial right to live together. Second, whilst the payments are being made, she cannot com- plain of wilful neglect to maintain. Third, the agreement means that she has no authority to pledge his credit at common law for necessaries. lt was suggested by Mr. Whitley that there is something in section 23 of the Matrimonial Causes Act, 1965, to negative oral agreements to separate. I cannot accept that for one moment. Section 23 only affects written agreements to separate. It does not affect oral agreements. The only point of difficulty is because of the statement by the husband that he would pay " so long as he could manage it," or " so long as the business was O.K.". That is a qualification which is not at all precise, but it is not so uncertain as to make the whole agreement void. As I said in Fawcett Properties Ltd. v. Buckingham County Council [1961] A.C. 636, 678 "...in cases of contracts, as of wills, the courts do not hold the terms void for uncertainty unless it is utterly impossible to put a meaning on them." I think a good meaning can be given to the husband's state- ment by implying a term that, if the husband found that he could not manage to keep up the payments, he could, on reasonable notice, determine the agreement. That is a perfectly intelligible term. If it were included in a written document, I have no doubt the court would enforce it. It should also do so when it is included in an oral agreement. In the present case the husband did not give notice to the wife till February, 1968. After that date, he may not be liable. But up till that date, he should pay. The plain fact is that this man has made an agreement to pay his wife #15 a week for maintenance of herself and her children. No circumstances have arisen, even on his own showing, to warrant his with- drawing it before the end of February, 1968. I think the court should enforce it up till that time. I agree with the judge and I would dismiss the appeal. EDMUND DAVIES L.J. I have the misfortune to differ from my Lord, the Master of the Rolls. There can be no doubt that husband and wife can enter into a contract which binds them in law. Peters (Executors) v. Inland Revenue Commissioners [1941] 2 All E.R. 620 and the recent decision of Stamp J. in Merritt v. Merritt, The Times May 14, 1969, afford examples of this. But it is upon the spouse asserting that such a contract has been entered into to prove that assertion: see the observations of Atkin L.J. in Balfour v. Balfour [1919] 2 K.B. 571, 580 and those of Salmon L.J. in Jones v. Padavatton [1969] 1 W.L.R. 328, 332. In the general run of cases the inclination would be against inferring that spouses intended to create a legal relationship: see Lord Hodson in Pettitt v. Pettitt [1969] 2 W.L.R. 966, 983. The evidence establishing such an intention, needs, in my judgment, to be clear and convincing. It is true that the facts of the present case differ from those of Balfour v. Balfour [1919] 2 K.B. 571 in that although the original agreement there relied upon was entered into upon the eve of thc husband's leaving his wife to take up his Governmental duties in Ceylon, at that time amity reigned between them; whereas here the arrangement sued upon was made after the husband had left his wife. While I agreed that in the present circumstances the probability that a legally binding agreement was intended may be greater than in Balfour v. Balfour, nevertheless the best key in my judgment to the parties' intention is the language they employed. The importance of this aspect of the case is not restricted simply to the question of whether the agreement is bad for uncertainty, but extends to the initial question of whether a legally binding agreement was ever within the parties' contemplation. According to the wife, the husband promised to pay her #15 a week " as long as he had it" and " as long as the business was O.K." The husband's evidence was substantially to the same effect, namely, " I suggested I would give her #15 each week; and she said ' for how long? '; and I said ' As long as I can manage it." In my judgment those words import such uncertainty as to indicate strongly that legal relations were not contemplated. Furthermore, such uncertainty appears to my way of thinking to give rise to insoluble problems. How and by whom is it to be determined whether the business was "O.K.," or whether the husband could " manage " to keep up the payments? Furthermore, what was he getting in retum for his alleged legal undertaking? There is nothing in the terms employed to indicate that as a quid pro quo the wife was surrendering any right--nothing, for example, to show that as long as the husband kept up the weekly payments of #15 under the oral arrangement the wife would not seek maintenance. Mr. Herrick Collins accepts that the husband could terminate his payments at any time; but he submits that this could not be done capriciously, and that if the court found that the husband had so acted, he would be liable. For my part I find it impossible to regard the language employed as having any such conse- quences in law. I have come to the conclusion that all that occurred here was that the parties entered into a purely domestic arrangement not intended to have legally binding force and that the county court judge was in error in arriving at the contrary conclusion. I would therefore allow the husband's appeal. MEGAW L.J. I agree with the judgment which has just been delivered by Edmund Davies L.J., and I agree with him, for the reasons which he has given, that this appeal should be allowed I would desire to add a few words of my own. The question of the uncertainty of the words used must in my view be a matter of significance in considering the question whether or not there was an intention to enter into legal relations in a matter of this nature. Counsel for the respondent has put forward various suggestions as to the meaning and effect of the agreement that was entered into here. There is no dispute as to the words that were used in making this oral agreement. To my mind, therefore, it is of no significance whether the agreement is (as it is) an oral agreement, rather than an agreement in an agreement which had been put in writing. The agreement was this, to use the words of the respondent herself: " He said he would pay me as long as he had it." Counsel for the respondent suggested that the effect of that, as a legally binding agreement, was that if the husband's financial position altered to his detriment as compared with what it was at the date when the agreement was made, then the husband would be entitled to give notice to the wife; and, on the expiry of reasonable notice, given when his financial position had deteriorated, the legally binding contract would come to an end. In my view such a provision of reasonable notice is quite inconsistent with the words that have been used. Again, counsel for the respondent put forward the suggestion that the effect of this, as he submitted, legally binding agreement was that if the husband's financial position were to change thereafter, the amount of #15 a week, which was the amount that was promised, could be varied as a result of an investi- gation by the county court of the husband's means and an award could be made that the contract should involve the payment week by week thereafter of some different sum. In my judgment, again, that is not a possible interpretation of the agreement having regard to the words used. In the light of those and similar difficulties in arriving at any real conclusion as to light of those and similar difficulties in arriving at any real conclusion as to what the words used in making the contract did mean I have come to the conclusion in agreement with Edmund Davies L.J., that it cannot be said that there was here an intention to enter into legal relations. Appeal allowed. Judgment for the defendant. No order as to costs in the Court of Appeal or in the court below. Solicitors: Amery-Parkes & Co. for G. D. Cann & Mallett, Exeter; Ashford, Penny & Harward, Exeter. A. H. B. *MANCHESTER DIOCESAN COUNCIL FOR EDUCATION v. COMMERCAIL & GENERAL INVESTMENTS LTD. [1965 M. No. 5769] 1969 October 9, 10; 30 Buckdey J. Contract--Formation-Offer and acceptance--Stipulated mode of communicating acceptance--Acceptance by different method. Contract--Formation--Offer and acceptance--Whether delay in acceptance tantamount to refusal. In 1964, the plaintiff, in whom a school was vested under two schemes, made in 1962 and 1964 respectively, offered the school premises for sale by tender in anticipation of the The conditions of sale, incorporating a from of tender, were drawn up by the plaintiff, and required tenders to be sent to the plaintiff's surveyor on or before August 27, 1964, and stipulated that the sale of the premises, subject to the 1962 scheme, was subject to the approval of the purchase price by 4 provided that the person whose offer was accepted should be notified by letter sent to him by post at the address given in his tender and that every letter should be "deemed to have been received in due course of post." A deposit of ten per cent. was payable within seven days after the posting of the notice of acceptance. Completion was not to take place until one month after the closure of the school. On August 26, agreeing in the event of the offer being accepted " in accordance with the . . . conditions on or before the day named" therein, to pay the purchase price and complete the purchase in accord- ance with the conditions. The conditions did not name any day as the day on or before which any offer should be accepted. On September 15, 1964, the plaintiff's surveyor wrote to the defendant's surveyor stating that the plaintiff had accepted the defendant's offer. The Minister's approval was obtained on November 18, 1964, and on December 23 the plaintiff's solici- tors wrote to the defendant's solicitors to inform them and to ask them to confirm that there was a binding contract. The were unable to confirm that there was a binding contract and letter of acceptance to the defendant at the address given in the tender. On the same day the defendant wrote purporting to withdraw the offer. In an action by the plaintiff for a declaration that there was a binding contract constituted by the tender and either (i) the letter of September 15, 1964, or (ii) the letter of January 7, 1965, specefic performance and damages in lieu of or in addition to specific performance:-- Held, (1) that where an offeror prescribes a particular mode acceptance, but does not stipulate that only accept- ance in that mode shall be binding acceptance may be com- offeror, that since condition 4 was included in the offer at the instance of the plaintiff strict compliance with it could be waived by the plaintiff, provided that the defendant was not thereby adversely affected and that accordingly the letter of September 15, constituted a sufficient communication of acceptance (post, p. 246B--G). Tinn v. Hoffman & Co. (1873) 29 L.T. 271 applied. (2) That although the power to complete a sale was con- ditional upon prior approval of the purchase price by the Secretary of State for Education and Science, the power to enter into a contract to sell was not, and the fact that the consent was not obtained until later did not prevent the letter of September 15 from creating a binding contract (post, p. 247B c). Milner v. Staffordshire Congregational Union (Incorpora- ted [1956] Ch. 275; [1956] 2 W.L.R. 556; [1956] 1 All E.R. 494 distinguished. (3) That if the letter of September 15 did not constitute acceptance, the question whether the offer had become incapable of acceptance by January 7, owing to delay in accepting it, depended on whether the offeree should be treated as having by his conduct refused the offer; that since the letter of September 15 disclosed the intention to accept from which there had been no departure prior to January 7, the letter of that date was effective to bind the defendant and, accordingly, the plaintiff was entitled to specific performance (post, pp. 248H-249A). Ramsgate Victoria Hotel Co. Ltd. v. Montefiore (1866) LR. 1 Ex. 109 and In re Bowron Bailey & Co. (1868) 3 Ch.A pp. 592 considered. Dicta of Lord Cranworth L.C. in Meynell v. Surteer (1855) 1 Jur.N.S. 737 and Sir John Romilly M.R. in Williams v. D Williams (1853) 17 Beav. 213 distinguished. The following cases are referred to in the judgment: Bowron Bailey & Co., In re (1868) 3 Ch.App. 592. Hashem v. Zenab [1960] A.C. 316; [1960] 2 W.LR. 374, P.C. Meynell v. Surtees (1855) l Jur.N.S. 737. Milner v. Staffordshire Congregational Union (Incorporated [ 1956] Ch. 275; [1956] 2 W.L.R. 556; [1956] 1 All E.R. 494. E Ramsgate Victoria Hotel Co. Ltd. v. Montefore (1866) L.R. l Ex. 109. Tinn v. Hoffman & Co. (1873) 29 L.T. 271. Williams v. Williams (1853) 17 Beav. 213. The following additional cases were cited in argument: Aberfoyle Plantations Ltd. v. Cheng [1960] A.C. 115; [1959] 3 W.LR. 1011; [1959] 3 All E.R.910,P.C. Johnson v. Humphrey [1946] 1 All E.R. 460. Property & Bloodstock Ltd. v. Emerton [1968] Ch. 94; [1967] 3 W.L.R. 973; [1967] 2 All ER. 839; [1967] 3 All ER. 321, CA. Shoreditch Vestry v. Hughes (1864) 17 C.B.N.S. 137. ACTION In this action the plaintiff, Manchester Diocesan Council for Education, sought (1) a declaration that a written offer dated August 25, 1964, signed on behalf of the defendant, Commercial and General Investments Ltd., and either a letter dated September 15, 1964, by the plaintiff's surveyors, or alternatively a letter signed by the plaintiff's solicitors being an accept- ance of the offer constituted a binding contract for the purchase by the defendant from the plaintiff at the price of #28,500 of a freehold property, Hesketh Fletcher Senior Church of England School; (2) specific performance of the contract; and (3) damages for breach of contract in lieu of or in addition to specific performance. The facts are stated in the judgment of Buckley J. Christopher Heath for the plaintiff. Guy Seward for the defendant. Cur. adv. vult. October 30, 1969. BUCKLEY J. read the following judment. The plaintiff, Manchester Diocesan Council for Education, is a corporate body in which there is vested a freehold property known as the Hesketh Fletcher Senior Church of England School, which, as its name indicates, was for- merly used for the purposes of a school. Part of this property was vested in the plaintiff by a scheme framed by the Minister of Education in 1962 under the Endowed Schools Acts, 1869 to 1948. Clause 4 of the scheme is in the following terms: " The govenung body "--that is the plaintiff--" is hereby authorised to sell any of the premises of the foundations, the schools of which have been, or are about to be, closed, subject in each case to the approval of the purchase price by the Minister of Education, or to let the same according to the general law applicable to the letting of property by trustees of charitable foundations." The Minister is now called the Secretary of State for Education and Science. The remainder of the property was vested in the plaintiff by another scheme made in 1964 by the Secretary of State for Education and Science under the Charities Act, 1960, s. 18. This the plaintiff could sell under the School Sites Act, 1841, s. 11, without ministerial consent. The Hesketh Fletcher School was closed in August, 1967. In February, 1963, in anticipation of this closure, negotiations were opened between the plaintiff's surveyor and a surveyor acting for the defendant company, which is a property development company. In March, 1963, the defendant, through its surveyor, offered #12,500 for the property subject to contract. egotiations hen seem to have hung fire until October, 1963, when the plaintiff's surveyor informed the defendant's surveyor that another offer twice as large had been received. The defendant shortly afterwards in- creased its offer to #25,000. At about this time, the plaintiff decided to sell the property by tender. For this purpose it caused particulars and conditions of sale to be prepared. These incorporated a form of tender. The conditions required tenders to be sent to the plaintiff's surveyor on or before August 27, 1964, and stipulated that the sale was subject to the approval of the purchase price by the Secretary of State for Education and Science. Condition 4 was in the following terms: " The person whose tender is accepted shall be the purchaser and shall be informed of the acceptance of his tender by letter sent to him by post addressed to the address given in his tender and every letter sent shall be deemed to have been received in due course of post." Condition 5 required payment of a ten per cent. deposit within seven days after posting of the notice of acceptance. Condition 8 provided that com- pletion of the sale should not take place until after the closure of the school but should do so one month after the closure. It was stated that it was not anticipated that the school would close before 1967. On August 25, 1964, the defendant completed the form of tender, offering a sum of #28,500 in the following terms : " We, Commercial and General Investments Ltd., of 15 Berkeley Street, London, W.l, hereby offer to buy from the Manchester Dio- cesan Council for Education the property described in the foregoing particulars for the sum of #28,500 and we agreed that in the event of this offer being accepted in accordance with the above conditions on or before the day named in the conditions for this purpose we will pay the said purchase money and carry out and complete the pur- chase in accordance with the said conditions. Dated August 25, 1964." Then it is signed per pro Commercial and General Investments Ltd. by I suppose, ont of the directors, and the address is given, 15 Berkeley Street, London, W.1. No day was in fact named in the conditions as the day on or before which any offer should be accepted. This part of the form of tender was presumably included as the result of an oversight. This tender was despatched to the plaintiff's surveyor on August 26, 1964, and was presumably received on the following day. On September 1, 1964, the plaintiff's surveyor informed the defendant's surveyor that the defendant's offer was the highest one received and that the plaintiff's surveyor had recommended its acceptance. In this letter the plaintiff's surveyor wrote : " We shall write to you again as soon as we receive formal instructions." On September 14 the defendant's surveyor replied in a letter in which he wrote: " I look forward to receiving formal acceptance in early course," and in the same letter named the defendant's solicitors to whom a contract could be sent. This letter was acknowledged "The sale has now been approved by the Manchester Diocesan Council for Education, the incumbent and the board of school governors. Mr L. H. Orford, diocesan registrar, of this address, has been instructed to obtain the approval of the Secretary of State for Education. As soon as this is given he will be getting in touch with Messrs. D. J. Freeman & Co., your client's solicitors." The plaintiff relies on this letter as an acceptance of the defendant's offer, notwithstanding that the procedure envisaged by condition 4 was not followed. The Department of Education and Science on October 23, 1964, asked for the purchase price to be apportioned between that part of the property which was comprised in the 1962 scheme and the part comprised in the 1964 scheme. This was done, and on November 18, 1964, the Secretary of State approved the sale of the part comprised in the 1962 scheme. On December 23, 1964, the plaintiff's solicitors wrote to the defendant's solicitors : " We act for the Council for Education and understand that you act for the Commercial & General Investments Ltd., who submitted an offer by tender of #28,500 to purchase the above site, and which was accepted by our clients subject to the consent of the Department of Education and Science. We are writing to inform you that this con- sent has now been obtained and we conclude that the contract is therefore binding on both parties. Kindly confirm. The defendant's solicitors replied on January 5, 1965 : " We acknowledge receipt of your letter of 23rd ultimo upon which we have obtained our clients' instructions and regret that we cannot confirm that there is a binding contract between the parties in this matter." On January 6, 1965, the plaintiff's solicitors wrote : " We acknowledge receipt of your letter of yesterday's date and are surprised to hear that your clients do not consider themselves bound. So far as we are concerned they put in the highest tender and its accept- ance was communicated to them, subject only to the approval of the Church Commissioners which has now been obtained, and we con- sider a binding contract is in existence. We shall be glad to know, however, if there is any reason for your clients' attitude, as any further contract would only contain exactly the same terms as those contained in the tender submitted by them." On the following day they wrote to the defendant at 15 Berkeley Street (the address of the defendant given in the form of tender) giving formal notice of acceptance of the defendant's tender. On the same day the defendant's solicitors wrote to the plaintiff's solicitors that the defendant no longer wished to proceed with the purchase. It is common ground that, if it was still open to the plaintiff to accept the tender on January 7, the plaintiff's solicitors' letter of that date that in that event the defendants' withdrawal of their offer was too late. It is said, however, that because of the lapse of time between August 25, 1964, and January 7, 1965, the offer contained in the tender must be re- garded as having lapsed before January 7, 1965. On either footing the withdrawal of the offer on January 7 is irrelevant. The writ was issued on August 24, 1965. The plaintiff claims a declara- tion that the tender and either the letter of September 15, 1964, or that of January 7, 1965, constituted a binding contract and consequential relief. The first question is whether the plaintiff can rely on the letter of September 15, 1964, as an acceptance of the offer constituted by the ten- der. The defendant contends that it is not in terms an acceptance and that, it was not acted upon as an acceptance. In this connection, reliance is placed upon the fact that no demand was made for payment of the deposit, nor was any approach then made to the defendant's solicitors. The letter must clearly be read in the context of the earlier correspondence and in particular of the plaintiff's surveyor's letter of September 1, and the de- fendant's surveyor's reply of September 14. Apart from any effect condition 4 may have on the position, I feel no doubt thad the letter of September 15 should be read as a communication to the defendant through its surveyor of the fact that the plaintiff had approved the sale of the property to the defendant, that is to say, he accepted the defendant's offer. It was a state- ment of the formal instructions received by the plaintiff's surveyor which were foreshadowed in the letter of September 1, and was in reply to the defendant's surveyor's letter saying that he looked forward to receiving a formal acceptance. The offer contained in the tender was to the effect that in the event of its being accepted in accordance with the conditions of sale on or before the day named therein for that purpose--and none was so named--the defendant would pay the price and complete the purchase. An offeror may by the terms of his offer indicate that it may be accepted in a particular manner. In the present case the conditions included condition 4 which I have read. It is said, on the defendant's behalf, that that condition was not complied with until January 7, 1965; that until that date the offer was never accepted in accordance with its terms; and that consequently nothing earlier than that date can be relied on as an acceptance resulting in a binding contract. If an offeror stipulates by the terms of his offer that it may, or that it shall, be accepted in a particular manner a contract results as soon as the offeree does the stipulated act, whether it has come to the notice of the offeror or not. In such a case the offeror conditionally waives either expressly or by implication the normal requirement that acceptance must be communicated to the offeror to conclude a contract. There can be no doubt that in the present case, if the plaintiff or its authorised agent had posted a letter addressed to the defendant at 15 Berkeley Street on or about September 15 informing the defendant of the acceptance of its tender, the contract would have been complete at the moment when such letter was posted, but that course was not taken. Condition 4, however, does not say that that shall be the sole permitted method of communicating an acceptance. It may be that an offeror, who by the terms of his offer insists upon accept- ance in a particular manner, is entitled to insist that he is not bound unless acceptance is effected or communicated in that precise way, although it seems probable that, even so, if the other party communicates his accept- ance in some other way, the offeror may by conduct or otherwise waive his right to insist upon the prescribed method of acceptance. Where, however, the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding, I am of opinion that acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract. Thus in Tinn v. Hoffman & Co. (1873) 29 L.T. 271, where acceptance was requested by return of post, Honeyman J. said, at p. 274: " That does not mean exclusively a reply by letter by retum of post, but you may reply by telegram or by verbal message or by any means not later than a letter written by retum of post." If an offeror intends that he shall be bound only if his offer is accepted in some particular manner, it must be for him to make this clear. Condition 4 in the present case has not, in my judgment, this effect. Moreover, the inclusion of condition 4 in the defendant's offer was at the instance of the plaintiff, who framed the conditions and the form of tender. It should not, I think, be regarded as a condition or stipulation imposed by the defendant as offeror upon the plaintiff as offeree, but as a term introduced into the bargain by the plaintiff and presumably con- sidered by the plaintiff as being in some way for the protection or benefit of the plaintiff. It would consequently be a term strict compliance with which the plaintiff could waive, provided the defendant was not adversely affected. The plaintiff did not take advantage of the condition which would have resulted in a contract being formed as soon as a letter of accept- ance complying with the condition was posted, but adopted another course, which could only result in a contract when the plaintiff's acceptance was actually communicated to the defendant. For these reasons, I have reached the conclusion that in accordance with the terms of the tender it was open to the plaintiff to conclude a contract by acceptance actually communicated to the defendant in any way; and, in my judgment, the letter of September 15 constituted such an acceptance. It follows that, in my judgment, and suject to a point relating to the need to obtain ministerial consent to which I will refer in a moment the parties thereupon became contractually bound. The fact that the plaintiff did not at once demand payment of the deposit or approach the defendant's solicitors does not, I think, militate against this view. The plaintiff was not bound to insist on prompt payment of the deposit, nor does there seem to have been any reason in this case for the preparation of a more formal contract, or for any other activity by legal advisers at that stage. As it was not expected that the school would be closed for some two years and completion was not to take place until after that event, there was no hurry. But it is said that clause 4 of the 1962 scheme conferred only a con- ditional power of sale and that nunisterial approval was necessary before a contract of sale could be made. Reliance is placed on Milner v. Stafford- shire Congregational Union (Incorporated) [1956] Ch. 275 where it was held that it was unlawful for charity trustees to enter into a contract of sale under the Charity Trusts Amendment Act, 1855, s. 29, without the prior approval of the Charity Commissioners. In my judgment that case is clearly distinguishable from the present case. Section 29 of the Act of 1855 expressly makes any sale by charity trustees--that is, any contract for sale-- unlawful unless it is made with the approval of the commissioners. The power to contract is conditional upon prior approval. The requirement of clause 4 of the 1962 scheme in the present case is quite different. By that clause the governing body is authorised to sell property comprised in the scheme but any sale--i.e., any contract for sale--is required to be con- ditional upon ministerial approval of the price being obtained. The power to complete a sale is conditional upon prior approval, but not the power to contract. The fact that ministerial approval was not obtained until Novem- ber 18, 1964, does not, in my judgment, invalidate the contract, if any, made on September 15. If I am right in thinking that there was a contract on September 15, 1964, that disposes of the case but, in case I should be held to be wrong in that view, I will now consider the other point in the case and will for this pur- pose assume that no contract was made at that date. On this basis no contract can have been concluded before January 7, 1965. The defendant contends that, as the tender stipulated no time within which it must be accepted, it was an implied term of the offer that it must be accepted, if at all, within a reasonable time. It is said that acceptance on January 7 was not within a reasonable time. It has long been recognised as being the law that, where an offer is made in terms which fix no time limit for acceptance, the offer must be accepted within a reasonable time to make a contract. (Chitty on Con- tracts, 22nd edn. (1961), p. 90, paragraph 89; Williams on Vendor and Purchaser, 4th edn. (1936), p. 16; Halsbury's Laws of England, 3rd edn. (1954), Vol. 8, p. 71, paragraph 124.) There seems, however, to be no reported case in which the reason for this is explained. There appear to me to be two possible views on methods of approaching the problem. First, it may be said that by implication the offer is made upon terms that, if it is not accepted within a reasonable time, it must be treated as with- drawn. Alternatively, it may be said that, if the offeree does not accept the offer within a reasonable time, he must be treated as having refused it. On either view the offer would cease to be a live one upon the expiration of what, in the circumstances of the particular case, should be regarded as a reasonable time for acceptance. The first of these alternatives involves im- plying a term that if the offer is not accepted within a reasonable time, it shall be treated as withdrawn or lapsing at the end of that period, if it has not then been accepted: the second is based upon an inference to be drawn from the conduct of the offeree, that is, that having failed to accept the offer within a reasonable time he has manifested an intention to refuse it. If in the first altemative the time which the offeror is to be treated as having set for acceptance is to be such a time as is reasonable at the date of the offer, what is reasonable must depend on circumstances then existing and reasonably likely to arise during the continuance of the offer; but it would be not unlikely that the offeror and offeree would make different assessments of what would be reasonable, even if, as might quite possibly not be the case, they based those judgments on identical known and anticipated circum- stances. No doubt a court cotild resolve any dispute about this, but this approach clearly involves a certain degree of uncertainty about the precise be treated as having set for acceptance is to be such a time as turns out to be reasonable in the light of circumstances then existing and of circum- stances arising thereafter during the continuance of the offer, whether fore- seeable or not, an additional element of uncertainty is introduced. The second alternative, on the other hand, involves simply an objective assess- ment of facts and the determination of the question whether on the facts the offeree should, in faimess to both parties, be regarded as having refused the offer. It does not seem to me that either party is in greater need of protection by the law in this respect than the other. Until his offer has been accepted it is open to the offeror at any time to withdraw it or to put a limit on the time for acceptance. On the other hand, the offeree can at any time refuse the offer or, unless he has been guilty of unreasonable delay, accept it. Neither party is at a disadvantage. Unless authority constrains me to do otherwise, I am strongly disposed to prefer the second alternative to the first The only reported case which was brought to my attention in which an offeree has been held to have lost the right of concluding a contract by acceptance on account of delay is Ramsgate Victoria Hotel Co. Ltd. v. Montefiore (1866) L.R. 1 Ex. 109. The defendant in that case applied for shares in the plaintiff company on June 8, 1864. Shares were allotted to him on November 23, 1864, in response to his application. He had not with- drawn his application, but it was held that he was not bound to accept the shares which had not been allotted within a reasonable time. The judg- ment is extremely shortly reported and no reasons are given. In re Bowron Bailey & Co. (1868) L.R. 3 Ch.App. 592 was a similar case, but unfor- tunately in that case also the judgment does not explain with precision the reasoning which led to the conclusion that the company could not bind an applicant for shares to take them up after a delay in allotment. There are obiter dicta in the judgment of Lord Cranworth L.C. in Meynell v. Surtees (1855) 1 Jur.N.S. 737 in the second column on that page which support the view that a term should be implied in the offer, but the Lord ance and was dealing with an argument that the offer in that case was in some way binding on the offeror although it was never accepted. He was stressing the revocable nature of an offer in contrast to the binding effect of a contract. I do not think he had in mind the considerations with which I am concerned. There is an obiter dictum of Sir John Romilly M.R. in Williams v. Williams (1853) 17 Beav. 213, which, although the language is not explicit, may perhaps be said to favour the other view, but that was a case in which a vendor was held to be disentitled to specific performance of an admitted contract on account of delay. There was no issue about the acceptance of an offer. I have dealt with this part of the case at some length because, if the first alternative were the correct view of the law and if what is reasonable had to be ascertained as at the lime of the offer, the subsequent conduct of the parties would be irrelevant to the question how long the offer should be treated as remaining open. In my opinion, however, the subsequent conduct of the parties is relevant to the question, which I think is the right test, whether the offeree should be held to have refused the offer by his conduct. In my judgment, the letter of September 15, 1964, excludes the possi- bility of imputing to the plaintiff a refusal of the offer. If that letter does bility of imputing to the plaintiff a refusal of the offer. If that letter does not itself constitute an effective acceptance, it clearly discloses an intention to accept from which there is nothing to suggest a departure before January 7, 1965. Accordingly, if no contract was formed earlier, I am of opinion that it was open to the plaintiff to accept it on January 7 and that the plain- tiff's letter of that date was effectual to bind the defendant contractually. If there is a contract between the parties, as I have concluded that there is, it is common ground that the plaintiff was entitled to sue on it, not only for a declaration, but also for specific performance, notwithstanding that the writ was issued before the date fixed for completion: see Hasham v. Zenab [1960] A.C. 316. For these reasons, I am of opinion that the plaintiff succeeds in this action. Order for specific performace and costs. Solicitors : Lee, Bolton & Lee; D. J. Freeman & Co. T. C. C. B. [CHANCERY COURT OF THE COUNTY PALATINE OF LANCASTER, MANCHESTER DISTRICT] * KING'S MOTORS (OXFORD) LTD. v. LAX AND ANOTHER 1969 June 12 Burgess V.-C. Landlord and Tenant--Lease-Option--Uncertainty-Option for renewal at such rent " as may be agreed "--Whether void. A lease granted by the defendants to the plaintiffs of a garage filling station and adjoining premises contained an option for the grant of a further term at such rent as might be agreed between the parties. The plaintiffs purported to exercise the option but were served by the defendants with a notice to terminate. The plaintiffs brought an action seeking, inter alia, a declaration that the notice to terminate was null and void. On the question whether the option was enforce- able : -- Held, that in the absence of an arbitration claw or some supplementary agreement fixing the rent to be paid, the option was void for uncertainty and could not be enforced against the defendants; and, accordingly, the plaintiffs' action failed. Young v. Van Beneen [1953] 3 D.L.R. 702 followed. Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, C.A. dis- tinguished. The following cases are referred to in the judgment: Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, C.A. Manchester Ship Canal Co. v. Manchester Racecourse Co. [1901] 2 Ch. 37, C.A. Young v. Van Beneen [1953] 3 D.L.R.702. No additional cases were cited in argument. ACTION By a lease dated March 16, 1962, the defendants, William Henry Lax and Harry Marriner, demised a garage filling station and adjoining premises to the defendants, King's Motors (Oxford), Ltd., for a term of ------------------- [Reported by Miss BARBARA BROCBANK, Barrister-at-Law.] seven years from September 29, 1961. The lease contained, in clause 4, an option provision in the following terms: " If the tenants shall be desirous of continuing the term hereby created for a further term of seven years at the expiration of the term hereby granted and shall six months before the expiration of the term hereby created give to the landlords a notice in writing of such their desire and shall pay the rent hereby reserved and perform the several stipulations herein contained and on their part to be observed and performed up to the termination of the term hereby created then the landlords will let the premises to the tenants for a further term of seven years at such a rental as may be agreed upon between the parties hereto in writing prior to the expiration of the term hereby granted and subject in all other respects to the same stipulations as are herein contained except this clause for renewal." The plaintiffs, purporting to have exercised the option, brought an action seeking, inter alia, a declaration that a notice to terminate dated April 9, 1968, served on them by the defendants, was null and void and of no effect. The facts are set out in the judgment of Burgess V.-C. L. J. Porter for the plaintiffs. D. B. Mallard for the defendants. BURGESS V.-C. I find this case a rather startling one. It raises a matter of considerable importance to the parties concerning the validity and effect of an option clause in a lease agreed between them, and one would have thought that somewhere in the past in the case of a contract for the sale of land or agreement for a lease, as opposed to contracts for the sale of goods or other commercial contracts, assistance might have been found from some former decision in the courts of this country, but unfortunately this is not so. The action concems a lease, which was entered into on March 16, 1962, between a company, of which the defendants were seemingly then the directors, and the plaintiffs. It was a lease of a garage filling station and premises for a term of seven years from September 29, 1961, at a rent of #2,000 a year. That lease contained in clause 4 an option pro- vision, the effect of which in law I have to determine. Subject to certain notices before the expiration of the term the plaintiffs thought that they could under the lease obtain a lease of the premises for a further seven years on the same terms and conditions as the existing lease save only that the option clause was not to be included therein again. Those parties who negotiated the lease on behalf of their respective clients did so with care because they remembered that vital point. If the terms were fulfilled the further term was to be seven years and no more, and I quote the passage ". . . at such a rental as may be agreed upon between the parties hereto in writing." It would be wrong if I did not say that my first impression on reading that clause was that if the parties could not agree or made no attempt to agree upon a rent the court might be able to step in and assist. Mr. Porter, on behalf of the plaintiffs, said that this was the position. Here there is an agreement intended to be binding and it includes the option. The agreement is not ineffective because no rent is fixed, but the court can ensure in a case like this or, if necessary, imply a term, that if no rent is agreed it should be a fair rent. He relies for that proposition upon the case in the Court of Appeal of Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1. That was a case in which the parties had agreed to the sale of land to the coach company as an addition to their premises upon terms that they would thereafter buy all their petrol from the vendor--of course, an enormous advantage the point that is taken by the defendants in this case. " We are not proposing to continue to purchase petrol from you because the contract is void for uncertainty." It does not state the price or any time limit and so forth. The Court of Apeal was able on the facts of that case--and if I may respectfully say so I can see how they were able to do so--to hold that the agreement was enforceable and a term must be implied that the petrol supplied by the plaintiff should be of reasonable quality and price, and if any dispute arose about what was a reasonable price it was to be determined by arbitration. It is a fact in that case that there was at the end of the agreement an arbitration clause. Here there is in only one part of the lease any reference to arbitration and that is contained in the clause dealing with what might happen if the premises caught fire. It cannot, I think, be argued that any arbitration clause in aid of the plaintiffs in this case can be called into being. The argument for uncertainty is that, as the rent was not agreed and was left to be agreed, unless the parties were--if you like to put it that way--to play the game together and agree, the contract is not enforceable and is void for uncertainty. In substance it amounts to no more than a contract to enter into a contract which is always given as the classic example of an agreement which is unenforceable. The cases on that sort of point are well known, and I need not refer to them. However, I have, through the industry of counsel, had my attention drawn to Young v. Van Beneen [1953] 3 D.L.R. 702, a case in the Court of Appeal in British Columbia, and Mr. Mallard relies as part of his argument upon the decision of the court in that case. It is a case very similar to the present one. I just refer to the headnote which is in the following terms: " Where a lease provides that the tenant has an option to rent the premises for a further period, fixing no terms except the length of such period, and leaving the rental to be determined by agreement between the parties, such provision is too vague and indefinite to be capable of enforcement and does not confer upon the tenant any right to a tenancy which is enforceable at law. In the absence of a supplementary agreement fixing the terms of the new lease and the rent to be paid, the tenant is bound to surrender possession at the expiration of the original lease." As in this case, the rent was to be determined by agreement. What was expressly given to the tenant was the option in terms which I consider on the construction the court might have held amounted to a first refusal. On that ground the tenant's position might have been saved to some extent by the legal effect to be given to the meaning of " first refusal," which is to be found in Manchester Ship Canal Co. v. Manchester Racecourse Co. [1901] 2 Ch. 37. That course was not taken by the British Columbia Court of Appeal. They decided it on the principle that a term necessary was not agreed but remained to be agreed and the option was unenforceable. My mind has fluctuated, for I find it a matter of regret personally that the state of the law is such that I am unable in this case to decide in favour of the plaintiffs. As the law stands it seems to me that the defendants, at any rate in this court, must succeed. In the course of his argument, Mr. Mallard did refer me to the principles upon which a term, if I had felt able to imply it in accordance with Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, should be implied. He raised the point, and I deal with it purely because it must be kept open for a higher court, that you can gather the intent not only from the document itself but from the surrounding circumstances. He does suggest to me that if I wish I should look at the surrounding circumstances. I take the view, rightly or wrongly, that this is a case where I should not look beyond the terms of the lease as eventually agreed. By the nature of things I have come, quite rightly, to learn certain surrounding circumstances because the action started as a claim for rectification. Quite rightly, in the course of pleading that claim, I leamed of what the plaintiffs thought should have been in the lease. For reasons with which I am not con- cerned, Mr. Porter, at the opening of this case, and I have no doubt that he was right, told the court that he was unable to proceed with that claim. In those circumstances I think that, even if I had been able to imply a term, I should not have done it until I had looked at all that took place between the parties regarding this particular lease before it was finally agreed and signed. Accordingly, in my judgment, the plaintiffs' action fails because the option they had, the letter exercising it which I find as a fact was posted in accordance with the provisions of the lease, although in fact it was never actually received, was duly exercised but in fact was of no avail, because the provision is one unenforceable in law. I therefore dismiss the action with costs. Judgment for the defendants with costs. Solicitors: Sale, Lingards & Co., Manchester; Lupton & Fawcett, Leeds [COURT OF APPEAL] * MERRITT v. MERRITT 1970 April 27 Lord Denning M.R., Widgery and Karminski L.JJ. Contract--Formation--Intention to create legal relationship--Un- certainty--Husband and wife--Separation--Husband's agree- ment to transfer matrimonial home to wife's sole ownership --Whether intention to enter into legal relations. A husband and wife married in 1941. In 1949 they built a house as a matrimonial home. It was in the husband's name with a large sum on mortgage with a building society. In 1966 they agreed to put the house in their joint names. Shortly afterwards the husband left the house and went to live with another woman. At a meeting on May 25, 1966, the husband agreed to pay outstanding to the building society. At her insistence he all charges in connection with the house until the mortgage repayments had been completed he agreed to transfer the house into her sole ownership. The wife paid off the balance of the mortgage and the husband then reduced the #40 a month to #25 a month. Stamp J. granted the wife's application for a declaration that the house belonged to her and ordered the husband to join in the necessary conveyance. On the husband's appeal:-- Held, dismissing the appeal that since the parties had separated the agreement regarding the ownership of the matrimonial home was one which was intended to create legal relations and was binding upon them. Balfour v. Balfour [1919] 2 K.B. 571, C.A.; Jones v. C.A. and Gould v. Gould [1970] 1 Q.B. 275; [1969] 3 W.L.R. 490; [1969] 3 All E.R. 728, C.A. distinguished. Per curiam. In deciding whether or not an agreement is intended to establish legal relations the surrounding circum- stances must be looked at to see whether reasonable people would regard the agreement as intended to be binding (post, pp. 12131D--E, H, 1214g). Decision of Stamp J. affirmed. The following cases are referred to in the judgments: Balfour v. Balfour [1919] 2 K.B. 571, C.A. Gould v. Gould [1970] 1 Q.B. 275; [1969] 3 W.L.R. 490; [1969] 3 All E.R. 728, C.A. Jones v. Padavatton [1969] 1 W.L.R. 328; [1969] 2 All E.R. 616, C.A. The following additional case was cited in argument: Gissing v. Gissing [1969] 2 Ch. 85; [1969] 2 W.L.R. 525; [1969] 1 All E.R. 1043, C.A.; (Note) [1969] 2 Ch. 105; [1969] 2 W.L.R. 1208, C.A. APPEAL from Stamp J. The defendant, John Bertram Merritt, appealed against the judgment The defendant, John Bertram Merritt, appealed against the judgment of Stamp J. on May 14, 1969, adjudging that the plaintiff, Millicent Joan Merritt, was entitled to a declaration that she was the sole beneficial onwer of the freehold property known as 133 Clayton Road, Hook, Surrey and ordering that the defendant join with the plaintiff in transferring the property to the plaintiff. The grounds of appeal were, inter alia: that the judge misdirected himself in law in holding that the parties intended to and did enter into legal relations; that he misdirected himself in holding that the agreement between the parties was legally binding and enforceable, in holding that there was valid consideration for the contract and in failing to declare that the plaintiff held the property on trust for the plaintiff and the defendant. The facts are stated in the judgment of Lord Denning M.R. Anthony Thompson for the defendant. Michael Johnston for the plaintiff. LORD DENNING M.R. Husband and wife married as long ago as 1941. After the war in 1949 they got a building plot and built a house. It was a freehold house, no. 133, Clayton Road, Hook, Chessington. It was in the husband's name, with a considerable sum on mortgage with a building society. Mere they lived and brought up their three children, two daughters, aged now 20 and 17, and a boy now 14. The wife went out to work and contributed to the household expenses. Early in 1966 they came to an agreement whereby the house was to be put in joint names. That was done. It reflected the legal position when a house is acquired by a husband and wife by financial contributions of each. But, unfortunately, about that time the husband formed an attachment for another woman. He left the house and went to live with her. The wife then pressed the husband for some arrangement to be made for the future. On May 25 they talked it over in the husband's car. The husband said that he would make the wife a monthly payment of #40 and told her that out of it she would have to make the outstanding payments to the building society. There was only #180 outstanding. He handed over the building society's mortgage book to the wife. She was herself going out to work, earning net #7 10s. a week. Before she left the car she insisted that he put down in writing a further agreement. It forms the subject of the present action. He wrote these words on a piece of paper: -- " In consideration of the fact that you will pay all charges in connection with the house at 133 Clayton Road, Chessington, Surrey, until such time as the mortgage repayment has been completed, when the mort- gage has been completed, I will agree to transfer the property into your sole ownership. Signed, John Merritt. May 25, 1966." The wife took that paper away with her. She did, in fact, over the ensuing months pay off the balance of the mortgage, partly, maybe, out of the money the husband gave her, #40 a month, and partly out of her own earnings. When the mortgage had been paid off, he reduoed the #40 a month down to #25 a month. The wife asked the husband to transfer the house into her sole owner- ship. He refused to do so. She brought an action in the Chancery Division for a declaration that the house should belong to her and for an order that he should make the conveyance. The judge made the order; but the husband now appeals to this court. The first point taken on his behalf by Mr. Thompson is that the agreement was not intended to have legal relations. It was, he says, a family arrangement such as was considered by the court in Balfour v. Balfour [1919] 2 K.B. 571 and in Jones v. Padavatton [1969] 1 W.L.R. 328. So the wife could not sue upon it. I do not think those cases have any application here. The parties there were living together in amity. In such cases their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated, or about to separate. They then bargain keenly. They do not rely on honourable understandings. They want everything cut and dried. It may safely be presumed that they intend to create legal relations. Mr. Thompson then relied on the recent case of Gould v. Gould [1970] 1 Q.B. 275, when the parties had separated, and the husband agreed to pay the wife #12 a week " so long as he could manage it." The majority of the court thought those words introduced such an element of uncertainty that the agreement was not intended to created legal relations. But for that element of uncertainty, I am sure the majority would have held the agreement to be binding. They did not differ from the general proposition " when husband and wife, at arm's length, decide to separate, and the husband promises to pay a sum as maintenance to the wife during the separation, the court does, as a rule, impute to them an intention to create legal relations. In all these cases the court does not try to discover the intention by looking into the minds of the parties. It looks at the situation in which they were placed and asks itself: Would reasonable people regard the agreement as intended to be binding? Mr. Thompson sought to say that this agreement was uncertain because of the arrangement for #40 a month maintenance. That is obviously untenable. Next he said that there was no consideration for the agreement. That point is no good. The wife paid the outstanding amount to the building society. That was ample consideration. It is time that the husband paid her #40 a month which she may have used to pay the building society. But still her act in paying was good consideration. Mr. Thompson took a small point about rates. There was nothing in it. The rates were adjusted fairly between the parties afterwards. Finally, Mr. Thompson said that, under section 17 of the Act of 1882, this house would be owned by husband and wife jointly: and that even if this house were transferred to the wife, she should hold it on trust for them both jointly. There is nothing in this point either. This paper which the husband signed dealt with the beneficial ownership of the house. It was intended to belong entirely to the wife. I find myself in entire agreement with the judgment of Stamp J. This appeal should be dismissed. WIDGERY L.J. I agree with Lord Denning M.R.'s judgment, feeding, as he does, that no criticism can be levelled at the finding of the judge below. When a husband and wife are living together in amity it is natural enough to presume that their discussions about money matters are not intended to create legally binding contracts. As Lord Atkin said in Balfour v. Balfour [1919] 2 K.B. 571, 579: " The common law does not regulate the form of agreements between spouses. Their promises arc not sealed with seals and sealing wax. The consideration that really obtians for them is that natural love and affection which counts for so little in these cold courts." But, of course, once that natural love and affection has gone, as it normally has when the marriage has broken up, there is no room at all for the application of such a presumption. Salmon L.J. made this clear in Jones v. Padavatton [1969] 1 W.L.R. 328, to which reference has already been made, where he said, at p. 332: " As a rule when arrangements are made between close relations, for example between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship. This is not a presump- tion of law, but of fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection." The experience of life and human nature which raises this presumption in the case of a husband and wife living together in amity does not support it when the affection which produces that relationship of confidence has gone. I find it unnecessary to go so far as to say that there is a presumption in favour of the creation of legal relalionships when the marriage is breaking up, but certainly there is no presumption against the creation of such legal relations as there is when the parties arc living happily together. I would dismiss this appeal. KARMINSKI L.J. I agree, and only desire to add this. It is in my view of great importance, in considering whether or not an aggreement of the kind which we have to consider here would create legal relations, to look at the surrounding facts. In the present case on May 20, 1966, the husband informed his wife that he was in love with another woman with whom he was living, and he added these words: " When the house is paid for, I will consider signing over the other half to you." That was followed five days later by the meeting in the motor car which resulted, after full discussion, in the signing of the agreement to which reference has already been made by my Lord. I do not propose to read it again. In deciding therefore whether or not an agreement is intended to establish legal relations, it seems to me essential to look at the surrounding circumstances. In Balfour v. Balfour [1919] 2 K.B. 571, the relevant facts were that the husband, who was employed in Government services in Ceylon, had to retum there in 1916. The wife could not join him there at any rate for the time being because of her own ill-health and the husband agreed to pay her #30 a month for her support. At that time therefore the agreement was a perfectly friendly one occasioned by a separation which was not, at any rate at that time, the desire of either of them. In the present case it is manifest that the husband had left the wife by his own choice, because he preferred the company of another woman. He was therefore not only presumably committing adultery with her, but was also in desertion. Th wife therefore had several grounds for which she could have commenced divorce proceedings, or taken such procedings as she might have been advised for maintenance, either in a justices' court or in the High Court, on the ground of desertion or wilful neglect to maintain. In fact no proceedings became necessary, because the husband arranged to pay #40 a month, and undertook that when she had discharged a small amount outstanding on the mortgage he would transfer the property to her sole ownership. I have no doubt, therefore, that on the facts of this case Stamp J. was perfectly correct in coming to the conclusion which he formed, and I agree that this appeal must be dismissed. Appeal dismissed. Costs of #50 ordered to be paid to plaintiff by defendant personally. Solicitors: Wilkinson, Howlett & Durham; C. A. Maddin & Co., Surbiton. A. H. B. [COURT OF APPEAL] THORNTON v. SHOE LANE PARKING LTD. [1967 T. No. 1206] 1970 Dec. 17, 18 Lord Denning M.R., Megaw L.J. and Sir Gordon Willmer Contract--Exceptions clause--Car parking--Automatic ticket machine--Garage not accepting liability for injury--Reference to conditions in small print on ticket--Conditions displayed on premises--Infury to customer--Whether exemption clause operative The plaintiff drove his car into a new automatic car park. He had not been there before. A notice on the outside gave the charges and stated that all cars were " parked at owner's risk." A traffic light on the entrance lane showed red and a machine produced a ticket when the car had drawn up beside it. The plaintiff took the ticket and, the light having turned green, he drove on into the garage where his car was parked by mechanical means. On the plaintiff's return to collect the car there was an accident and he was severely injured. The plain- tiff claimed damages from the defendant garage. The defen- dants contended, inter alia, that the ticket incorporated a condition exempting them from liability. The ticket stated the car's time of arrival and that it was to be presented when the car was claimed. In the bottom left hand corner in small print it was said to be " issued subject to conditions . . . displayed on the premises." On a pillar opposite the ticket machine a set of eight printed " conditions " was displayed in a panel. In the second condition it was stated that the garage would not be liable for any injury to the customer occurring when his car was on the premises. Mocatta J. held that the defendants were half to blame for the plaintiff's accident and awarded him #3,637 damages. On appeal by the defendants : -- Held, dismissing the appeal, that since the plaintiff did not know of the exemption condition and the defendants had not done what was reasonably sufficient to bring it to his notice it did not exempt them from liability. Dicta of Mellish L.J. in Parker v. South Eastern Railway Co. (1877) 2 C.P.D. 416, 423, 424, C.A. applied. Per curiam. The nature of the intended exemption con dition is a factor to be taken into account in deciding as to the reasonableness of what has been done to bring it to the notice of the other party (post, pp. 589c-F, 591G-H--592A, 593D.) Per Lord Denning M.R. The offer was contained in the notice at the entrance and was accepted when the plaintiff drove into the garage. The concluded contract could not be altered by anything printed on the ticket (post, pp. 588H-- 589A.) Decision of Mocatta J. affirmed. The following cases are referred to in the judgments : Chapelton v. Barry Urban District Council [1940] 1 K.B. 532; [1940] 1 All E.R. 356, C.A. Hood v. Anchor Line (Henderson Brothers) Ltd. [1918] A.C. 837, H.L.(E.). McCutcheon v. David MacBrayne Ltd. [1964] 1 W.L.R. 125; [1964] 1 All E.R. 430, H.L.(Sc.). Mendelssohn v. Normand Ltd. [1970] 1 Q.B. 177; [1969] 3 W.L.R. 139; [1969] 2 All E.R. 1215, C.A. Olley v. Sarlborough Court Ltd. [1949] 1 K.B. 532; [1949] 1 All E.R. 127, C.A. Parker v. South Eastern Railway Co. (1 877) 2 C.P.D. 416, C.A. Richardson, Spence & Co. v. Rowntree [1894] A.C. 217, H.L.(E.). Spurling (J.) Ltd. v. Bradshaw [1956] 1 W.L.R. 461; [1956] 2 All E.R. 121, C.A. Thompson v. tondon, Midland and Scottish Railway Co. [1930] 1 K.B. 41, C.A. Watkins v. Rymill (1883) 10 Q.B.D. 178, D.C. The following additional cases were referred to in argument : Ashby v. Tolhurst [1937] 2 K.B. 242; [1937] 2 All E.R. 837, C.A. Harris v. Great Western Railway Co. (1876) 1 Q.B.D. 515. Henson v. London and North Eastern Railway Co. [1946] 1 All E.R. 652, C.A. Sugar v. London, Midland and Scottish Railway Co. [1941] 1 All E.R. 172. E Taylor v. Glasgow Corpn., 1952 S.C. 440; 1952 S.L.T. 399. APPEAL from Mocatta J. The defendants, Shoe Lane Parking Ltd., appealed against the judg- ment of Mocatta J. on June 18, 1970, giving judgment for the plaintiff, Francis Charles William Thornton, for #3,637 6s. 11d. with nine-tenths of his costs on his claim by writ of May 12, 1967, for damages for personal injuries caused by the defendants' breach of statutory duty under the Occupiers' Liability Act 1957 and/or negligence on May 19, 1964, at Shoe Lane, London. The grounds of appeal were: (1) that the judge should have directed himself that the ticket issued by the defendants to the plaintiff was a con- tractual document; (2) that he ought to have found as a fact that the plaintiff knew that the ticket contained upon it a reference to the defen- dants' conditions and that he had read that reference; (3) that he ought to have held that the defendants gave the plaintiff reasonable notice of the defendants' conditions (if that question was material). The facts are stated in the judgment of Lord Denning M.R. E. A. Machin for the defendants. John Newey Q.C. and M. A. B. Burke-Gaffney for the plaintiff. LORD DENNING M.R. In 1964 Mr. Thornton, the plaintiff, who was a free-lance trumpeter of the highest quality, had an engagement with the B.B.C. at Farringdon Hall. He drove to the City in his motor car and went to park it at a multistorey automatic car park. It had only been open a few months. He had never gone there before. There was a notice on the outside headed " Shoe Lane Parking." It gave the parking charges: " 5s. for two hours; 7s. 6d. for three hours, and so forth; and at the bottom: " All Cars Parked At Owner's Risk." Mr. Thornton drove up to the entrance. There was not a man in attendance. Mere was a traffic light which showed red. As he drove in and got to the appropriate place, the traffic light turned green and a ticket was pushed out from the machine. Mr. Thornton took it. He drove on into the garage. The motor car was taken up by mechanical means to a floor above. Mr. Thornton left it there and went off to keep his appointment with the B.B.C. Three hours later Mr. Thornton came back. He went to the office and paid the charge for the time the car was there. His car was brought down from the upper floor. He went to put his belongings into the boot of the car. but unfor- tunately there was an accident. Mr. Thornton was severely injured. The judge has found it was half his own fault, but half the fault of Shoe Lane Parking Ltd., the defendants. The judge awarded him #3,637 6s. 11d. On this appeal the garage company do not contest the judge's findings about the accident. They acknowledge that they were at fault, but they claim that they are protected by some exempting conditions. They rely on the ticket which was issued to Mr. Thornton by the machine. They say that it was a contracual document and that it incorporated a condition which exempts them from liability to him. The ticket was headed " Shoe Lne parking." Just below there was a " box " in which xws auto- matically recorded the time when the car went into the garage. There was a notice alongside: " Please present this ticket to cashier to claim your car." Just below the time, there was some small print in the left hand corner which said: " This ticket is issued subject to the conditions of issue as displayed on the premises." That is all Mr. Thornton says he looked at the ticket to see the time on it, and put it in his pocket. He could see there was printing on the ticket, but he did not read it. He only read the time. He did not read the words which said that the ticket was issued subject to the conditions as displayed on the premises. If Mr. Thornton had read those words on the ticket and had looked round the premises to see where the conditions were displayed, he would have had to have driven his car on into the garage and walked round. Then he would have found, on a pillar opposite the ticket machine, a set of printed conditions in a panel. He would also have found, in the paying office (to be visited when coming back for the car) two more panels containing the printed conditions. If he had the time to read the con- ditions--it would take him a very considerable time-- he would read: " CONDITIONS The following are the conditions upon which alone motor vehicles are accepted for parking: -- 1. The customer agrees to pay the charges of Shoe Lane Parking Developments Ltd. . . . 2. The customer is deemed to be fully insured at all times against all risks (including, without prejudice to the generality of the foregoing, fire, damage and theft, whether due to the negligence of others or not) and the company shall not be responsible or liable for any loss or misdelivery of or damage of whatever kind to the customer's motor vehicle, or any articles carried therein or thereon or of or to any accessories carried thereon or therein or injury to the customer or any other person occurring when the customer's motor vehicle is in the parking building howsoever that loss, misdelivery, damage or injury shall be caused; and it is agreed and understood that the customer's motor vehicle is parked and permitted by the company to be parked in the parking building in accordance with this licence entirely at the customer's risk. . . ." There is a lot more. I have only read about one-tenth of the conditions. The important thing to notice is that the company seek by this condition to exempt themselves from liability, not only for damage to the car, but also for injury to the customer howsoever caused. The condition talks about insurance. It is well known that the customer is usually insured against damage to the car. But he is not insured against damage to himself. If the condition is incorporated into the contract of parking, it means that Mr. Thornton will be unable to recover any damages for his personal injuries which were caused by the negligence of the company. We have been referred to the ticket cases of former times for Parker v. South Eastern Railway Co. (1877) 2 C.P.D. 416 to McCutcheon v. David McBrayne Ltd. [1964] 1 W.L.R. 125. They were concerned with railways, steamships and cloakrooms where booking clerks issued tickets to customers who took them away without reading them. In those cases the issue of the ticket was regarded it without objection, his act was regarded as a acceptance of the offer: see Watkins v. Rymill (1833) 10 Q.B.D. 178 188 and Thompson v. London, Midland and Scottish Railway C. ([930] 1 K.B. 41, 47. These cases were based on the theory that the customer, on being handed the ticket, could refuse it and decline to enter into a contract on those terms. He could ask for his money back. That theory was, of course, a fiction. No customer in a thousand ever read the conditions. If he had stopped to do so, he would have missed the train or the boat. None of those cases has any application to a ticket which is issued by an automatic machine. The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine. The contract was concluded at that time. It can be translated into offer and acceptance in this way : the offer is made when the proprietor of the machine holds it out as being ready to receive the money. The acceptance takes place when the customer puts his money into the slot. The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made: see Olley v. Marlborough Court Ltd. [1949] 1 K,B. 532. The ticket is no more than a voucher or receipt for the money that has been paid (as in the deckchair case, Chapelton v. Barry Urban District Council [1940] 1 K.B. 532 on terms which have been offered and accepted before the ticket is issued. In the present case the offer was contained in the notice at the entrance giving the charges for garaging and saying " at owner's risk," i.e., at the risk of the owner so far as damage to the car was concerned. The offer was accepted when Mr. Thornton drove up to the entrance and, by the movement of his car, turned the light from red to green, and the ticket was thrust at him. The contract was then concluded, and it could not be altered by any words printed on the ticket itself. In particular, it could not be altered so as to exempt the company from liability for personal injury due to their negligence. Assuming, however, that an automatic machine is a booking clerk in disguise--so that the old fashioned ticket cases still apply to it. We then have to go back to the three questions put by Mellish L.J. in Parker v. South Eastern Railway Co., 2 C.P.D. 416, 423, subject to this qualification: Mellish L.J. used the word " conditions " in the plural, whereas it would be more apt to use the word " condition " in the singular, as indeed the lord justice himself did on the next page. After all, the only condition that matters for this purpose is the exempting condition. It is no use telling the customer that the ticket is issued subject to some " conditions " or other, without more: for he may reasonably regard " conditions " in general as merely regulatory, and not as taking away his rights, unless the exempting condition is drawn specifically to his attention. (Alter- natively, if the plural " conditions " is used, it would be better prefaced with the word " exempting," because the exempting conditions are the only conditions that matter for this purpose.) Telescoping the three questions, they come to this: the customer is bound by the exempting con- dition if he knows that the ticket is issued subject to it; or, if the company did what was reasonably sufficient to give him notice of it. Mr. Machin admitted here that the company did not do what was reasonably sufficient to give Mr. Thomton notice of the exempting con- dition. That admission was properly made. I do not pause to inquire whether the exempting condition is void for unreasonableness. All I say is that it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. It is an instance of what I had in nund in J. Spurling Ltd. v. Bradshaw [1956] 1 W.L.R. 461, 466. In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it--or something equally startling. But, although reasonable notice of it was not given, Mr, Machin said that this case came within the second question propounded by Mellish L.J., namely that Mr. Thornton " knew or believed that the writing contained conditions." There was no finding to that effect. The burden was on the company to prove it, and they did not do so. Certainly there was no evidence that Mr. Thomton knew of this exempting condition. He is not, therefore, bound by it. Mr. Machin relied on a case in this court last year--Mendelssohn v. Normand Ltd. [1970] 1 Q.B. 177 Mr. Mendelssohn parked his car in the Cumberland Garage at Marble Arch, and was given a ticket which con- tained an exempting condition. There was no discussion as to whether the condition formed part of the contract. It was conceded that it did. That is shown by the report in the Law Reports at p. 180. Yet the garage company were not entitled to rely on the exempting condition for the reasons there given. That case does not touch the present, where the whole question is whether the exempting condition formed part of the contract. I do not think it did. Mr. Thomton did not know of the condition, and the company did not do what was reasonably sufficient to give him notice of it. I do not think the garage company can escape liability by reason of the exemption condition. I would, therefore, dismiss the appeal. MEGAW L.J. For myself, I would reserve a final view on the question at what precise moment of time the contract was concluded. In relation to the main arguments that have been put before us, I would refer to the opening paragraph of the speech of Lord Dunedin in Hood v. Anchor Line (Henderson Bros.) Ltd. [1918] A.C. 837, 846: " My Lords, this is a class of case in which of citing of authorities there is no end, and yet it is, I think, quite possible to say ' Hear the conclusion of the whole matter.' The case of Parker v. South Eastern Railway Co., 2 C.P.D. 416 which has been approved in every case since its date, really stereotyped the question which the tribunal, be it jury or judge, inust put to itself when such a question arises." I shall come back to the question as it was fomulated by Lord Dunedin. That case was a ticket case. It related to a ticket for a trans-Atlantic voyage taken by Mr. Hood, which contained on its face conditions limiting liability. The company issuing the ticket had taken great care both on the ticket itself and on the accompanying documents to call attention to the limiting conditions. An accident happened when the ship was sunk off the coast of Ireland. Mr. Hood suffered serious injury. His contract was held to be subject to the limiting conditions. It was accepted that the shipping company had been unable to prove that Mr. Hood had actually read, or was aware of, any of the warnings that the shipping company had tried to convey to him as to the limiting conditions. In that case Lord Finlay L.C., giving the leading judgment, said [1918] A.C. 837. 842 in relation to Parker v. South Eastern Railway Co., 2 C.P.D. 416 and Richardson, Spence & Co. v. Rowntree [1894] A.C. 217: "The second and third of these cases"--that is the two cases I have just mentioned--" show that if it is found that the company did what was reasonably sufficient to give notice of conditions printed on the back of a ticket the person taking the ticket would be bound by such conditions." Viscount Haldane said, at p. 844: " I agree that the appellant here was entitled to ask that all that was reasonably necessary as matter of ordinary practice should have been done to bring to his notice the fact that the con- tract tendered to him when he paid his passage money excluded the right which the general law would give him, unless the contract did exclude it, to full damage if he was injured by the negligence of those who contracted to carry him on their steamer. Whether all that was reasonably necessary to give him this notice was done is, however, a question of fact, in answering which the tribunal must look at all the circumstances and the situation of the parties. Later in his speech Viscount Haldane said: " In Parker v. South Eastern Railway Co. the only question was whether the question had been properly put to the jury." The essence of the decision in Parker v. South Eastern Railway Co., 2 C.P.D. 416 was analysed by Lord Hodson in McCutheon v. David MacBrayne Ltd. [1964] 1 W.L.R. 125, 129 as follows: " That case, affirmed in Hood v. Anchor Line (Henderson Brothers) td. [918] A.C. 837, estab~lihed that the appropriate questions for the jury in a ticket case were: (1) Did the passenger know that there was printing on the railway ticket? (2) Did he know that the ticket contained or referred to conditions? and (3) Did the railway company do what was reasonable in the way of notifying prospective passengers of the existence of conditions and where their terms might be considered? " Now take those questions in relation to the present case. First, did the plaintiff know that there was printing on the ticket? Mocatta J. has answered that question, being a question of fact, with the answer Yes. Therefore one moves on to the second question: did he know that the ticket contained or referred to conditions? Mocatta J, made no express finding on that point. In my view there is the clearest implication from the way in which he stated and dealt with the third question that his finding on the second question was to answer it No. But even if I should be wrong in that view of the implication of the judgment, it would not do the defendants any good; because the onus is on them to establish the existence of this term in the contract, and they have not got the neces- sary finding, express or by implication, of an affirmative answer to the second question. Mr. Machin has gallantly striven to suggest that the judge's finding of fact, that the plaintiff did not read the words on the ticket referring to the conditions, was a wrong finding. But the judge saw and heard the witnesses, and I see no reason whatever to challenge or doubt his conclusion of fact on that matter. So I come to the third of the three questions. That question, if I may return to the speech of Lord Dunedin in Hood v. Anchor Line (Henderson Brothers) Ltd. [1918] A.C. 837, 846, 847 was posed by him in this way: " Accordingly it is in each case a question of circumstance whether the sort of restriction that is expressed in any writing (which, of course, includes printed matter) is a thing that is usual, and whether, being usual, it has been fairly brought before the notice of the accepting party." That, though it is more fully stated by Lord Dunedin, is essentially the same question, I think, as was formulated by Mellish L.J. in Parker's case, 2 C.P.D. 416, 424 at the very end of his judgment, where he said that the question which ought to have been left to the jury was: whether the milway company did what was reasonably sufficient to give the plaintiff notice of the condition. (I emphasise the use by Mellish L.J. of the definite article and of the word " condition " in the singular.) I agree with Lord Denning M.R. that the question here is of the particular condition on which the defendants seek to rely, and not of the conditions in general. When the conditions sought to be attached all constitute, in Lord Dunedin's words [1918] A.C. 846, 847, " the sort of restriction . . . that is usual," it may not be necessary for a defendant to prove more than that the intention to attach some conditions has been fairly brought to the notice of the other party. But at least where the particular condition relied on involves a sort of restriction that is not shown to be usual in that class of contract, a defendant must show that his intention to attach an unusual condition of that particular nature was fairly brought to the notice of the other party. How much is required as being, in the words of Mellish L.J., 2 C.P.D. 416, 424, " reasonably sufficient to give the plaintiff notice of the condition," depends upon the nature of the restrictive condition. In the present case what has to be sought in answer to the third question is whether the defendant company did what was reasonable fairly to bring to the notice of the plaintiff, at or before the time when the contract was made, the existence of this particular condition. This con- dition is that part of the clause--a few words embedded in a lengthy clause--which Lord Denning M.R. has read, by which, in the midst of provisions as to damage to property, the defendants sought to exempt themselves from liability for any personal injury suffered by the customer while he was on their premises. Be it noted that such a condition is one which involves the abrogation of the right given to a person such as the plaintiff by statute, the Occupiers Liability Act 1957. True, it is open under that statute for the occupier of property by a contractual term to exclude that liability. In my view however before it cam be said that a condition of that sort, restrictive of statutory rights, has been fairly brought to the notice of a party to a contract there must be some clear indication which would lead an ordinary sensible person to realise, at or before the time of making the contract, that a term of that sort, relating to personal injury, was sought to be included. I certainly would not accept that the position has been reached today in which it is to be assumed as a matter of general knowledge, custom, practice, or whatever is the phrase that is chosen to describe it, that when one is invited to go upon the property of another for such purposes as garaging a car, a contractual term is normally included that if one suffers any injury on those premises as a result of negligence on the part of the occupiers of the premises they shall not be liable. avail the defendants here. In my view the judge was wholly right on the evidence in the conclusion which he reached that the defendants have not taken proper or adequate steps fairly to bring to the notice of the plaintiff at or before the time when the contract was made that any special conditions were sought to be imposed. I think it is a highly relevant factor in considering whether proper steps were taken fairly to bring that matter to the notice of the plaintiff that the first attempt to bring to his notice the intended inclusion of those condi- tions was at a time when as a matter of hard reality it would have been practically impossible for him to withdraw from his intended entry upon the premises for the purpose of leaving his car there. It does not take much imagination to picture the indignation of the defendants if their potential customers, having taken their tickets and observed the reference therein to contractual conditions which, they said, could be seen in notices on the premises, were one after the other to get out of their cars, living the cars blocking the entrances to the garage, in order to search for, find and peruse the notices! Yet unless the defendants genuinely intended that potential customers should do just that, it would be fiction, if not farce, t treat those customers as persons who havce beengiven a fair o$pportuity, before the contracts are made, of discovering the conditions by which they are to be bound. I agree that this appeal should be dismissed. SIR GORDON WILLMER. I have reached the same conclusion, and there is very little for me to add. It seems to me that the really distinguishing feature of this case is the fact that the ticket on which reliance is placed was issued out of an automatic inachine. I think it is right to say--at any rate, it is the fact so far as the cases that have been called to our attention are concerned--that in all the previous so-called " ticket cases " the ticket has been proffered by a human hand, and there has always been at least the notional opportunity for the customer to say--if he did not like the conditions--" I do not like your conditions: I will not have this ticket." But in the case of a ticket which is proffered by an automatic machine there is something quite irrevocable about the process. There can be no locus poenitentiae. I do not propose to say any more upon the difficult question which has been raised as to the precise moment when a contract was concluded in this case; but at least it seems to me that any attempt to introduce conditions after the irrevocable step has been taken of causing the machine to operate must be doomed to failure. It may be that those who operate garages of this nature, as well as those who instal other types of automatic machines, should give their attention to this problem. But it seems to me that the judge below was on the right track when he said, towards the end of his judgent, that in this sort of case, if you do desire to impose upon your customers stringent conditions such as these, the least you can do is to post a prominent notice at the entrance to the premises, waming your customers that there are conditions which will apply. So far as the rest of the case is concerned, I agree with what has been said by my Lords and do not wish to add anything further. Appeal dismissed with costs. Solicitors: Barlow, Lyde and Gilbert; Alastair Thomson and Partners. A. H. B LEWIS v. AVERAY [Plaint No. 7050466] 1971 JuJy 22 Lord Denning M.R., Phillimore and Megaw L.JJ. Contract--Mistake--Mistake as to identity--Sale and delivery of car against cheque and production of ostensible proof of identity -- Presumption of concluded contract -- Fraudulent purchaser using name creating impression of position in film world--Presumption not displaced where identity of pur- chaser not inducing sale--Whether title passed to innocent third party. The plaintiff L in Bristol advertised his car for sale for #450. A rogue, introducing himself as G' called on L in to the fiat tried the car, and said he liked it. They then went to the flat of L's fiancee where there was general social conversation in which the rogue represented himself as being connected with the film world in which " R.G. " was a well-known television actor. the rogue said he would like to buy the car and take it away that night, and he wrote a cheque for #450 on a Beckenham bank and signed it " R.A.G. " As it was then 11 p.m. L asked for proof that the rogue was " R.A.G. " The rogue brought out a pass to well-known film studios bearing that name and his photograph with an official-looking stamp. L thereupon handed him the logbook and allowed him to take the car. The cheque, having come from a stolen cheque book, was dishonoured. bought the car from the man for #200 but when he wrote to L to ask for the workshop manual the full fraud was relvealed. The rogue was not traced. In an action by L against A for the return of the car or its value and damages for its detention, Deputy Judge Ellison found that there was no contract between L and the person with whom he had dealt so that no title passed to the rogue or from him to A; and he awarded L the damages claimed. Held, allowing the--appeal, that there was nothing to dis- place the presumption that when the plaintiff accepted the cheque and handed over the car and logbook, he concluded a contract with the person physically present with whom he had been dealing. Under that contract the property in the goods passed to that person, albeitt a rogue, and his subsequent sale to the innocent purchaser gave the purchaser the property in the car as against the plaintiff . Per Lord Denning M.R. A mistake by one party as to the identity or attributes of the person with whom he is contracting does not render the contract void ab initio, even where the mistake is induced by fraud, though the contract may be avoided before an innocent third party has acquired rights under it (post, p. 609C-D) Per Megaw L.J. Even though a contract may be voided by reason of a unilateral mistake as to the identity of opposite party, nothing in the present evidence supports a finding that when the plaintiff offered to sell the car to the man physically present he regarded that man's identity as a matter of vital importance (post, p. 611E). Ingram v. Little [1961] 1 Q.B. 31, C.A. doubted. Phillips v. Brooks Ltd. [1919] 2 K.B. 243 approved The following cases are referred to in the judgments: Ingram v. Little [1961] 1 Q.B. 31; [1960] 3 W.L.R. 504; [1960] 3 All E.R. 332, C.A. King's Norton Metal Co. v. Edridge, Merrett & Co. Ltd. (1897) 14 T.L.R. 98, C.A. Lake v. Simmons [1927] A.C. 487, H.L.(E.). Phillips v. Brooks Ltd. (1919j 2 K,B. q3. Sowler v. Potter [1940] 1 K.B. 271; [1939] 4 All E.R. 478. as Central Newbury Car Auctions Ltd. v. Unity Finance Ltd. [1957] 1 Q.B. Cundy v. Lindsay (1878) 3 App.Cas. 459, H.L.(E.). Mercantile Credit Co. Ltd. v. Hamblin [1965] 2 Q.B. 242; [1964] 3 W.L.R. 798; [1964] 3 All E.R. 592, C.A. APPEAL from Deputy Judge Ellison sitting at Bromley County Court. The plaintiff, Keith Loder Lewis, brought an action against Anthony John Averay, claiming that he had at all material times been and was still the owner and entitled to possession of an Austin Cooper " S " motor car; that the defendant in or about May 1969 had obtained and still retained possession of it; and that despite demands for the return of the car to him, the defendant had refused to retum it and had wrongfully detained it and converted it to his own use; and he claimed the retum of the car or its value and damages for its detention. By his amended defence the defendant claimed that he had purchased the car for #200 on May 13, 1969, and was the lawful owner of it. He claimed altematively that the plaintiff was estopped and/or by his conduct precluded from denying the authority to sell of the person from whom the defendant had pur- chased the motor car; and the particulars of the conduct alleged included the allegation that in the transaction by which the plaintiff parted with the car he had failed to make any or adequate inquiries conceming the status or identity of the person unknown to whom he had handed the car and its documents and thereby enabled or permitted such person with whom the defendant dealt to represent to him that he was the owner of and entitled to sell the car. The county court judge on January 15, 1971, gave judgment for the plaintiff for the return of the car or #100 its value and #230 damages for the detention thereof, finding that there was no contract between the plain- tiff and the person who had taken the car, so that the defendant who had honestly purchased the car from that person did not acquire a title to it. The defendant, despite being refused legal aid to appeal, appealed with the financial support of the Automobile Association of which he was a member, on the grounds that (1) on the judge's findings of fact and on the evidence there was in law a contract (although voidable for fraud) between the plaintiff and the person with whom he dealt; (2) that if and in so far as the judge found that the plaintiff intended not to deal with the person before him but with some other existing person (whether Richard Greene, a well-known actor, or any other person by the name of Richard Green) such finding was unsupported by or was against the weight of the evidence; (3) that he was wrong in finding facts unsupported by or against the weight of the evidence as follows: (i) that the plaintiff's then fiancee was a party to the contract; (ii) that her state of mind was relevant; (iii) that she knew that there was an actor called Richard Greene who was constantly seen on television as the star of Robin Hood and other tele- vision shows; (iv) that it was impossible for the plaintiff to make inquiries with regard to the address in Beckenham given by the person with whom he dealt, at that time of day; (v) that the plaintiff changed his decision not to allow the person with whom he dealt to take the car away that night when that person produced a pass as evidence of identity; (4) that he was wrong in law in holding that there was no contract when there was offer and acceptance in form, and nothing to rebut the presumption that the plaintiffs acceptance or offer was addressed to the person to whom he was speaking; and (5) that he was wrong in law in holding that the plaintiff was not by his conduct estopped or precluded from denying the authority to sell of the person from whom the defendant purchased the car. Roger Titheridge and Bruce Markam-Davis for the defendant. David Prebble for the plaintiff. LORD DENNING M.R. This is another case where one of two innocent persons has to suffer for the fraud of a third: It will no doubt interest students and find its place in the textbooks. Mr. Lewis is a young man who is a post-graduate student of chemistry. He lives at Clifton near Bristol. He had an Austin Cooper " S " motor car. He decided to sell it. He put an advertisement in the newspaper offering it for #450. On May 8, 1969, in reply to the advertisement a man-- I will simply call him the " rogue," for so he was--telephoned and asked if he could come and see the car. He did not give his name. He said he was speaking from Wales, in Glamorganshire. Mr. Lewis said he could come and see it. He came in the evening to Mr. Lewis's flat. Mr. Lewis showed him the car, which was parked outside. The rogue drove it and tested it. He said he liked it. They then went along to the flat of Mr. Lewis's fiancee, Miss Kershaw (they have since married). He told them he was Richard Green and talked much about the film world. He led both of them to believe that he was the well-known film actor, Richard Greene, who played Robin Hood in the " Robin Hood " series. They talked about the car. He asked to see the logbook. He was shown it and seemed satisfied. He said he would like to buy the car. They agreed a price of #450. The rogue wrote out a cheque for #450 on the Beckenham Branch of the Midland Bank. He signed it " R. A. Green." He wanted to take the car at once. But Mr. Lewis was not willing for him to have it until the cheque was cleared. To hold him off, Mr. Lewis said there were one or two small jobs he would like to do on the car before letting him have it, and that would give time for the cheque to be cleared. The rogue said. " Don't worry about those small jobs. I would like to take the car now." Mr. Lewis said: " Have you anything to prove that you are Mr. Richard Green? " The rogue thereupon brought out a special pass of admission to Pinewood Studios, which had an oficial stamp on it. It bore the name Richard A. Green and the address, and also a photograph which was plainly the photograph of this man, who was the rogue. On seeing this pass, Mr. Lewis was satisfied. He thought this man was really Mr. Richard Greene, the film actor. By that time it was 11 o'clock at night. Mr. Lewis took the cheque and let the rogue have the car and the logbook and the Ministry of Transport test certificate. Each wrote and signed a receipt evidencing the transaction. Mr. Lewis wrote: " Received from Richard A. Green, 59 Marsh Rd., Beckenham, Kent the sum of #450 in retum for Austin Cooper S Reg. No. AHT 484B chassis No. CA257--549597 Keith Lewis." The roque wrote: " Received logbook N. 771835 and M.O.T. for Mini- Cooper S No. AHT 484B R. A. Green." Next day, May 9, 1969, Mr. Lewis put the cheque into the bank. A few days later the bank told him it was worthless. The rogue had stolen a cheque book and written this #450 on a stolen cheque. Meanwhile, while the cheque was going through, the rogue sold the car to an innocent purchaser. He sold it to a young man called Mr. Averay. He was at the time under 21. He was a music student in London at the Royal College of Music. His parents live at Bromley. He was keen to buy a car. He put an advertisement in the " Exchange and Mart," seeking a car for #200. In answer he had a telephone call from the rogue. He said he was speaking from South Wales. He said that he was coming to London to sell a car. Mr. Averay arranged to meet him on May 11, 1969. The rogue came with the car. Young Mr. Averay liked it, but wanted to get the approval of his parents. They drove it to Bromley. The parents did approve. Young Mr. Averay agreed to buy it for #200. The rogue gave his name as Mr. Lewis. He handed over the car and logbook to young Mr. Averay. The logbook showed the owner as Mr. Lewis. In return Mr. Averay, in entire good faith, gave the rogue a cheque for #200. The rogue signed this receipt : " Sale of Cooper S to A. J. Averay. Received #200 for the Cooper S Registration No. AHT 484B, the said car being my property absolutely there being no hire purchase charges outstanding or other impediment to selling the car. Keith Lewis May 13, 1969." A fortnight later, on May 29, 1969, Mr. Averay wanted the workshop manual for the car. So his father on his behalf wrote to the name and ad- dress of the seller as given in the logbook--that is, Mr. Lewis. Then, of course, the whole story came to light. The rogue had cashed the cheque and disappeared. The police have tried to trace him, but without success. Now Mr. Lewis, the original owner of the car, sues young Mr. Averay. Mr. Lewis claims that the car is still his. He claims damages for con- version. The judge found in favour of Mr. Lewis and awarded damages of #330 for conversion. The real question in the case is whether on May 8, 1969, there was a contract of sale under which the property in the car passed from Mr. Lewis voidable for fraud, nevertheless Mr. Averay would get a good title to the car. But if there was no contract of sale by Mr. Lewis to the rogue-- either because there was, on the face of it, no agreement between the parties, or because any apparent agreement was a nullity and void ab initio for mistake, then no property would pass from Mr. Lewis to the rogue. Mr. Averay would not get a good title because the rogue had no property to pass to him. There is no doubt that Mr. Lewis was mistaken as to the identity of the person who handed him the cheque. He thought that he was Richard Greene, a film actor of standing and worth: whereas in fact he was a rogue whose identity is quite unknown. It was under the influence of that mistake that Mr. Lewis let the rogue have the car. He would not have dreamed of letting him have it otherwise. What is the effect of this mistake? There are two cases in our books which cannot, to my mind, be reconciled the one with the other. One of them is Phillips v. Brooks Ltd. [1919] 2 K.B. 243, where a jeweller had a ring for sale. The other is Ingram v. Little [1961] 1 Q.B. 31; where two ladies had a car for sale. In each case the story is very similar to the present. A plausible rogue comes along. The rogue says he likes the ring, or the car, as the case may be. He asks the price. The eller names it. The rogue says he is prepared to buy it at t~hatprice. He pulls out a cheque book. He writes, or prepares to write, a cheque for the price. The seller hesitates. He has never met this man before. He does not want to hand over the ring or the car not knowing whether the cheque will be met. The rogue notices the seller's hesitation. He is quick with his next move. He says to the jeweller, in Phillips v. Brooks: " I am Sir George Bullough of 11 St. James's Square "; or to the ladies in Ingram v. Little " I am P. G. M. Hutchinson of Stanstead House, Stanstead Road, Caterham "; or to the post-graduate student in the present case : " I am Richard Greene, the film actor of the Robin Hood series." Each seller checks up the information. The jeweller looks up the directory and finds there is a Sir George Bullough at 11 St. James's Square. The ladies check up too. They look at the telephone directory and find there is a " P. G. M. Hutchinson of Stanstead House, Stanstead Road. Caterham." The post-graduate student checks up too. He examines the official pass of the Pinewood Studios and finds that it is a pass for " Richard A. Green " to the Pinewood Studios with this man's photograph on it. In each case the seller feels that this is sufficient confirmation of the man's identity. So he accepts the cheque signed by the rogue and lets him have the ring, in the one case, and the car and logbook in the other two cases. The rogue goes off and sells the goods to a third person who buys them in entire good faith and pays the price to the rogue. The rogue disappears. The original seller presents the cheque. It is dishonoured. Who is entitled to the goods? The original seller? Or the ultimate buyer? The courts have given different answers. In Phillips v. Brooks. the ultimate buyer was held to be entitled to the ring. In Ingram v. Little the original seller was held to be entitled to the car. In the present case the deputy county court judge has held the original seller entitled. It seems to me that the material facts in each case are quite in- distinguishable the one from the other. In each case there was, to all outward appearance, a contract: but there was a mistake by the seller as to the identity of the buyer. This mistake was fundamental. In each case it led to the handing over of the goods. Without it the seller would not have parted with them. This case therefore raises the question: What is the effect of a mistake by one party as to the identity of the other? It has sometimes been said that if a party makes a mistake as to the identity of the person with whom he is contracting there is no contract, or, if there is a contract, it is a nullity and void, so that no property can pass under it. This has been supported by a reference to the French jurist Pothier; but I have said before, and I repeat now, his statement is no part of English law. I know that it was quoted by Lord Haldane in Lake v. Simmons [1927] A.C. 487. 501, and, as such, misled Tucker J. in Sowler v. Potter [1940] 1 K.B. 271, into holding that a lease was void whereas it was really voidable. But Pothier's statement has given rise to such refinements that it is time it was dead and buried together. For instance, in Ingram v. Little [1961] 1 Q.B. 31 the majority of the court suggested that the difference between Phillips v. Brooks [1919] 2 K.B. 243 and Ingram v. Little was that in Phillips v. Brooks the contract of sale was concluded (so as to pass the property to the rogue) before the rogue made the fraudulent misrepresentation : see [1961] 1 Q.B. 31, 51, 60 : whereas in Ingram v. Little the rogue made the fraudulent misrepresentation before the contract was concluded. My own view is that in each case the property in the goods did not pass until the seller let the rogue have the goods. Again it has been suggested that a mistake as to the identity of a person is one thing: and a mistake as to his attributes is another. A mistake as to identity, it is,said, avoids a contract: whereas a mistake as to attributes does not. But this is a distinction without a difference. A man's very name is one of his attributes. It is also a key to his identity. If then, he gives a false name, is it a mistake as to his identity? or a mistake as to his attributes? These fine distinctions do no good to the law. As I listened to the argument in this case, I felt it wrong that an innocent purchaser (who knew nothing of what passed between the seller and the rogue) should have his title depend on such refinements. After all, he has acted with complete circumspection and in entire good faith: whereas it was the seller who let the rogue have the goods and thus enabled him to commit the fraud. I do not, therefore, accept the theory that a mistake as to identity renders a contract void. I think the true principle is that which underlies the decision of this court in King's Norton Metal Co. Ltd. v. Edridge Merrett & Co. Ltd. (1897) 14 T.L.R. 98 and of Horridge J. in Phillips v. Brooks [1919] 2 K.B. 243, which has stood for these last 50 years. It is this : When two parties have come to a contract--or rather what appears, on the face of it, to be a contract--the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, liable to be set aside at the instance of the mistaken person, so long as he does so before third parties have in good faith acquired rights under it. Applied to the cases such as the present, this principle is in full accord with the presumption stated by Pearce L.J. and also Devlin L.J. in Ingram v. Little [1961] 1 Q.B. 31, 61, 66. When a dealing is had between a seller like Mr. Lewis and a person who is actually there present before him, then the presumption in law is that there is a contract, even though there is a fraudulent impersonation by the buyer representing himself as a different man than he is. There is a contract made with the very person there, who is present in person. It is liable no doubt to be avoided for fraud, but it is still a good contract under which title will pass unless and until it is avoided. In support of that presumption, Devlin L.J. quoted, at p. 66, not only the English case of Phillips v. Brooks, but other cases in the United States where " the courts hold that if A appeared in person before B, impersonating C, an innocent purchaser from A gets the property in the goods against B." That seems to me to be right in principle in this countr also. In this case Mr. Lewis made a contract of sale with the very man, the rogue, who came to the flat. I say that he " made a contract " because in this regard we do not look into his intentions, or into his mind to know what he was thinking or into the mind of the rogue. We look to the outward appearances. On the face of the dealing, Mr. Lewis made a contract under which he sold the car to the rogue, delivered the car and the logbook to him, and took a cheque in return. The contract is evidenced by the receipts which were signed. It was, of course induced by fraud. The rogue made false representations as to his identity. But it was still a contract, though voidable for fraud. It was a contract under which this property passed to the rogue, and in due course passed from the rogue to Mr. Averay, before the contract was avoided. Though I very much regret that either of these good and reliable gentlemen should suffer, in my judgment it is Mr. Lewis who should do so. I think the appeal should be allowed and judgment entered for the defendant. PHILLIMORE L.J. I share the regret expressed by Lord Denning M.R. I think the law was conveniently stated by Pearce L.J. in the course of his judgment in Ingram v. Little [1961] 1 Q.B. 31 to which reference has already been made. He said, at p. 61 : " Each case must be decided on its own facts. The question in such cases is this. Has it been sufficiently shown in the particular circumstances that, contrary to the prima facie presumption "--and I would emphasise those words--" a party was not contracting with the physical person to whom he uttered the offer, but with another individual whom (as the other party ought to have understood) he believed to be the physical person present. The answer to that question is a finding of fact." Now, in that particular case the Court of Appeal, by a majority and in the very special and unusual facts of the case, decided that it had been sufficiently shown in the particular circumstances that, contrary to the prima facie presumption, the lady who was selling the motor car was not dealing with the person actually present. But in the present case I am bound to say that I do not think there was anything which could displace the prima facie presumption that Mr. Lewis was dealing with the gentleman present there in the flat--the rogue. It seems to me that when, at the conclusion of the transaction, the car was handed over, the logbook was handed over, the cheque was accepted, and the receipts were given, it is really impossible to say that a contract had not been made. I think this case really is on all fours with Phillips v. Brooks, which has been good law for over 50 years. True, the contract was induced by fraud, and Mr. Lewis, when he discovered that he had been defrauded, was entitled to avoid it; but in the meanwhile the rogue had parted with the property in this motor car which he had obtained to Mr. Averay, who bought it bona fide without any notice of the fraud, and accordingly he thereby, as I think, acquired a good title. This action was in my judgment one which was bound to fail. I think the judge was wrong in the decision to which he came and this appeal must be allowed. MEGAW L.J. For myself, with very great respect, I find it difficult to understand the basis, either in logic or in practical considerations, of the test laid down by the majority of the court in Ingram v. Little [1961] 1 Q.B. 31. That test is, I think, accurately recorded in the headnote, as follows : "--where a person physically present and negotiating to buy a chattel fraudulently assumed the identity of an existing third person, the test to determine to whom the offer was addressed was how ought the promisee to have interpreted the promise." The promisee, be it noted, is the rogue. The question of the existence of a contract and therefore the passing of property, and therefore the right of third parties, if this test is correct, is made to depend upon the view which some rogue should have formed, presumably knowing that he is a rogue, as to the state of mind of the opposite party to the negotiation, who does not know that he is dealing with a rogue. However that may be, and assuming that the test so stated is indeed valid, in my view this appeal can be decided on a short and simple point. It is the point which was put at the outset of his argument by Mr. Titherid e on behalf of the defendant appellant. The well-known text- book Cheshire and Fifoot on the Law of Contract 7th ed. (1969), 213 and 214, deals with the question of invalidity of a contract by virtue of uni-- lateral mistake, and in particular unilateral mistake relating to mistaken identity. The editors describe what in their submission are certain facts that must be established in order to enable one to avoid a contract on the basis of unilateral mistake by him as to the identity of the opposite party. The first of those facts is that at the time when he made the offer he regarded the identity of the offeree as a matter of vital importance. To translate that into the facts of the present case, it must be established that at the time of offering to sell his car to the rogue, Mr. Lewis regarded the identity of the rogue as a matter of vital importance. In my view, Mr. Titheridge is abundantly justified, on the notes of the evidence and on the indings of the ~jdge, in his submission that the mistake of XMr Lewis went no further than a mistake as to the attributes of the rogue. It was simply a mistake as to the creditworthiness of the man who was there present and who described himself as Mr. Green. I should say that I think the judge may possibly have been to some extent misled, because he seems to have assumed that the evidence given by the lady who is now Mrs. Lewis and who was then the plaintiffs fiancee was of some assistance. The judge refers in many places to " they saw " or " they thought." That is all very well, if there were evidence that the plaintiff himself heard or knew the same things as his financee heard or knew, or if she, having heard, for example, the name of Mr. Green when he first arrived, had mentioned that fact to Mr. Lewis. But there was no such evidence, and therefore all that the judge recites about what Miss Kershaw heard and thought appears to me, with great respect, not to assist in this matter. When one looks at the evidence of the plaintiff, Mr. Lewis himself, it is, I think, clear, as Mr. Titheridge submits, that there was not here any evidence that would justify the finding that he, Mr. Lewis, regarded the identity of the man who called himself Mr. Green as a matter of vital importance. I agree that the appeal should be allowed. Appeal allowed. Judgment entered for defendant. No order as to costs on either side except necessary legal aid taxation. Liberty1 to make application for costs to be paid out of legal aid fund. Application under section 1 of Legal Aid Act 1964 and regulation 11 adjourned to give notice to Law Society. Solicitors : Amery-Parkes & Co.; Adams, Brown & Co., Clifton, Bristol, M. M. H. * HOLWELL SECURITIES LTD. v. HUGHES 1973 Oct. 16, 17, 18; Russell, Buckley and Lawton L.JJ. Nov. 5 Election or Option--Exercise--Agreement granting option to pur- chase property--Option exercisable by notice in writing to intending vendor--Notice posted by intending purchaser but never received by intending vendor--Whether " notice in writ- ing to intending vendor"--Law of Property Act 1925 (15 & 16 Geo. 5, c. 20), s. 196 (4) (5) 1 In October 1971 the defendant granted the plaintiffs a six months' option to purchase certain property. The option was to be exercised " by notice in writing to " the defendant, and on Apri1 14, 1972, the plaintiffs' solicitors sent a written notice exercising the option by ordinary post to the defendant. The notice never reached the defendant or his address. On March 2, 1973, Templeman J. dismissed the plaintiffs' action for specific performance on the ground that, as the defendant had not received the notice, the plaintiffs had not exercised the option to purchase. On appeal by the plaintiffs: -- Held, dismissing the appeal, that the need for the communi- cation of an acceptance to an offeror could only be displaced by the artificial concept of communication by the act of posting where the offer was in its terms consistent with such displace- ment (post, pp. 157G 160E, F); that in the present case the requirement of " notice in writing to the intending vendor " in the option agreement was inconsistent with such displacement (post, pp. 158A, 161E, F); further, that the provisions of section 196 of the Law of Property Act 1925, being applicable to the present case. had to be read into the option agreement; that those provisions were inconsistent with the application of the theory of acceptance at the time of posting (post. pp. 1 58G. 162c); and, accordingly, that the posting of the notice could not constitute an exercise of the option to purchase. Decision of Templeman J. [1973] 1 W.L.R. 757; [1973] 2 All E.R. 476 affirmed. The following cases are referred to in the judgments : Berkeley Road. N.W.9, In re, 88 [1971] Ch. 648; [1971] 2 W.L.R. 307; [1971] 1 All E.R. 254. British & American Telegraph Co. v. Colson (1871) L.R. 6 Exch. 108. Bruner v. Moore [1904] 1 Ch. 305. Dickinson v. Dodds (1876) 2 Ch.D. 463, C.A. Hare v. Nicholl [1966] 2 Q.B. 130; [1966] 2 W.L.R. 441; [1966] 1 All E.R. 285, C.A. Henthorn v. Fraser [1892] 2 Ch. 27, C.A. Household Fire and Carriage Accident Insurance Co. v. Grant (1879) 4 Ex.D. 216. C.A. The following additional cases were cited in argument: Byrne & Co. v. Leon Van Tienhoven & Co. (1880) 5 CP.D. 344. Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327; [1955] 3 W.L.R. 48; [1955] 2 All E.R. 493, C.A. 1 Law of Property Act 1925, s. 196 (4) (5): see post, pp. 161G, H, 162A. APPEAL from Templeman J. [1973] 1 W.L.R. 757. By an agreement in writing dated October 19, 1971, the defendant. Dr. Thomas Hilaire Hughes, in consideration of #100, granted to the plaintiffs, Holwell Securities Ltd., the option of purchasing the freehold of 571 High Road, Wembley, for #45,000. The agreement provided : " 2. The said option shall be exercisable by notice in writing to the intending vendor at any time within six months from the date hereof . . . 3. Upon the exercise of the said option the intending purchaser shall pay to the intending vendor's solicitors as stakeholders by way of deposit the sum of #4,500." On April 14, 1972, the plaintiffs' solicitors sent the following letter by hand to the defendant's solicitors : " Re : Dr. T. H. Hughes and Holwell Securities Ltd., 571 High Road, Wembley. We refer to our earlier correspondence regarding our clients' option to purchase the above property. Our clients wish to exercise their option and we should be obliged if you would accept receipt. We enclose our clients' cheque in your favour for the sum of #4,500 being 10 per cent. deposit payable on the exercise of the option to be held by you as stakeholders. . . . We are sending a copy of this letter to your client." On the same day the plaintiffs' solicitors wrote to the defendant: "re: High Road Wembley: Holwell Securities Ltd. We enclose for your information a copy of a letter today sent to your solicitors." The letter, with a copy of the letter sent to the defendant's solicitors enclosed. was; i accordance with the postal procedure employed by thce laintiffs' solicitors, franked and handed over with the rest of the mail to a repre- sentative of the Post Office later that day. Meanwhile, the defendant's solicitor on receipt of his letter telephoned the defendant and told him that he had received a letter which purported to exercise the option but that he did not think that it was a valid exercise, and that the defendant could expect a similar letter. The defendant left for Ireland that evening, as he had already planned, after being advised by his solicitor that he was not obliged to stay at home and wait for whatever might be delivered. When he returned on April 20 the letter had not been delivered. By writ dated July 4, 1972, the plaintiffs sought specific performance of an agreement for the sale to them by the defendant of 571 High Road, Wembley, alleged to be constituted by the option agreement of October 19, 1971, and the exercise of the option by notice in writing to the defendant dated April 14, 1972. By a defence dated September 4, 1972, the defendant denied that the option had been exercised in accordance with the terms of the option agreement. On March 2, 1973, Templeman J. dismissed the plaintiffs' action. The plaintiffs appealed by notice dated May 8, 1973, on the grounds (1) that the judge was wrong in construing clause 2 of the option agreement as meaning that the notice exercising the option had to be given to the defendant in the sense that he had to receive it; (2) that the judge was wrong in law in holding that the option was not exercised by posting the notice on April 14, 1972; (3) that the judge was wrong in law in holding that the letter purporting to exercise the option sent to the defendant's solicitors the contents of which they orally communicated to the defendant was not a sufficient exercise of the option; and (4) that the judge failed to pay sufficient attention to the fact that the defendant expected the notice to be sent to him by post. W. A. Macpherson Q.C. and Hubert Picarda for the plaintiffs. Frank Whitworth Q.C. and Roger Ellis for the defendant. Cur. adv. vult. November 5. The following judgments were read. RUSSELL L.J. This case is reported below in [1973] 1 W.L.R. 757, and for the purpose of the appeal from the decision of Templeman J. I need not rehearse the facts in detail. It is not disputed that the plaintiffs' solicitors' letter dated April 14, 1972, addressed to the defendant at his residence and place of work, the house which was the subject of the option to purchase, was posted by ordinary post in a proper way, enclosing a copy of the letter of the same date delivered by hand to the defendant's solicitors. It is not disputed that the letter and enclosure somehow went astray and never reached the house nor the defendant. It is not disputed that the language of the letter and enclosure would have constituted notice of exercise of the option had they reached the defendant. It is not contended that the handing of the letter to the solicitor constituted an exercise of the option. The plaintiffs' mam contention below and before this court has been that the option was exercised and the contract for sale and purchase was constituted at the moment that the letter addressed to the defendant with its enclosure was committed by the plaintiffs' solicitors to the proper representative of the postal service, so that its failure to reach its destina- tion is irrelevant. It is the law in the first place that, prima facie, acceptance of an offer must be communicated to the offeror. Upon this principle the law has engrafted a doctrine that, if in any given case the true view is that the parties contemplated that the postal service might be used for the purpose of forwarding an acceptance of the offer, committal of the acceptance in a regular manner to the postal service will be acceptance of the offer so as to constitute a contract, even if the letter goes astray and is lost. Nor, as was once suggested, are such cases limited to cases in which the offer has been made by post. It suffices I think at this stage to refer to Henthorn v. Fraser [1892] 2 Ch. 27. In the present case, as I read a passage in the judgment below [1973] 1 W.L.R. 757, 764D, Templeman J. concluded that the parties here contemplated that the postal service might be used to communicate acceptance of the offer (by exercise of the option); and I agree with that. But that is not and camiot be the end of the matter. In any case, before one can find that the basic principle of the need for communication of acceptance to the offeror is displaced by this artificial concept of com- munication by the act of posting, it is necessary that the offer is in its terms consistent with such displacemenat and not one which by its terms points rather in the direction of actual communication. We were referred to Henthorn v. Fraser and to the obiter dicta of Farwell J. in Bruner v Moore [1904] 1 Ch. 305, which latter was a case of an option to purchase patent rights. But in neither of those cases was there apparently any language in the offer directed to the manner of acceptance of the offer or exercise of the option. Vol 1 The relevant language here is, " The said option shall be exercised by notice in writing to the intending vendor . . . ," a very common phrase in an option agreement. There is, of course, nothing in that phrase to suggest that the notification to the defendant could not be made by post. But the requirement of " notice ... to," in my judgment, is language which should be taken expressly to assert the ordinary situation in law that acceptance requires to be communicated or notified to the offeror, and is inconsistent with the theory that acceptance can be constituted by the act of posting, referred to by Anson's Law of Contract, 23rd ed. (1969), p. 47, as " acceptance without notification. " It is of course true that the instrument could have been differently worded. An option to purchase within a period given for value has the characteristic of an offer that cannot be withdrawn. The instrument might have said "The offer constituted by this option may be accepted in writing within six months:" in which cse no doubt the posting would have sufficed to form the contract. But that language was not used, and, as indicated, in my judgment, the language used prevents that legal out- come. Under this head of the case hypothetical problems were canvassed to suggest difficulties in the way of that conclusion. What if the letter had been delivered through the letter-box of the house in due time, but the defendant had either deliberately or fortuitously not been there to receive it before the option period expired? This does not persuade me that the artificial posting rule is here applicable. The answer might well be that in the circumstances the defendant had impliedly invited com- mumcation by use of an orifice in his front door designed to receive communications. There is, I consider, a further or perhaps parallel ground for exclusion of acceptance by act of posting in this case, which arises under section 196 of the Law of Property Act 1925 and in particular subsection (5) which was new in property legislation. It extends the other provisions of the section to " notices required to be served by any instrument affecting property." It was accepted for the plaintiffs that the option instrument was an instrument affecting property. The view of Plowman J. in In re 88 Berkeley Road, N.W.9 [1971] Ch. 648 that " served meant " given " was not disputed. Section 196 (4) provides that such a notice shall be sufficiently served if it is sent by post in a registered letter addressed to the person to be served by name at his abode or place of business, and that, if it is not returned through the post office undelivered, service shall be deemed to be made " at the time at which the registered letter would in the ordinary course be delivered. " Later provisions include in this the recorded delivery service. These provisions, if applicable to the present case, are of course to be regarded as part and parcel of the option instrument. Being such, they are, it seems to me, inconsistent with the application of the theory of acceptance at the time of posting. For suppose an exercise of the option by a registered letter which went astray, and suppose it to have been posted on the last option day: this section would deem the notice to have been given too late. This conflicts with and therefore negatives the application of a system of acceptance by the act of posting the registered letter, just as would be the case if the option instrument had expressly provided " The said notice in writing if sent by registered post duly etc., etc., shall be deemed to have been given to the intending vendor at the time at which etc., etc." Counsel for the plaintiff frankly accepted the validity of that agument, but contended that this was not the type of notice to which the section was directed. I do not see why it is not. Perhaps in the end his contention was based upon much the same grounds as those upon which he sought to deny the significance of the words " notice in writing to " upon which I have founded the first part of this judgment. This leaves an alternative contention for the plaintiffs which Temple- man J. dismissed with brevity [1973] 1 W.L.R. 757, 765. When the defendant's solicitors received the plaintiffs' solicitors' letter dated April 14, they communicated by telephone with the defendant. They did not read the letter to the defendant. The defendant's evidence was as follows : " Q. Did you then, as a result of that, ring Messrs. Bulcraig & Davis? A. As a result of that, I did, yes. Q. And to whom did you speak there? A. I spoke to Mr. Wade. Q. Do you remember what he told you? A. Yes. Q. Not the exact words? A. No. He asked me if I had heard from Messrs. Brecher, the other people's solicitors, and I said ' No.' He said ' Well, I have had a letter from them delivered to me today and I understand that you will be getting a letter as well, or a copy of this.' My recollection is that he said ' a letter ' but later I understood that what was meant was a copy. And he said: ' I don't think this option is exercised properly until notice is served on you,' or ' until you receive a letter,' and I said ' Oh dear, I had intended to go to Ireland this evening. Will it be all right if I do?' and he said yes it would. My recollection is that he said 'Your presence does not have to be there ' or ' You don't have to be there yourself, if this letter is delivered, or posted to you.' " Counsel for the plaintiffs argued that since the defendant knew that the plaintiffs were anxious to exercise the option, and there was in existence a written notice exercising it, therefore there was a " notice in writing to the defendant." I consider this argument to be falla- cious. A person does not give notice in writing to another person by sitting down and writing it out and then telephoning to that other saying " Listen to what I have just written." Moreover, the defendant did not have knowledge of the existence of the combination of two letters which alone could be said to be an exercise of the option. Dickinson v. Dodds (1876) 2 Ch.D. 463 to which we were referred does not assist on this point: all it does is show that an offeree cannot accept a withdrawable offer after he has learnt by whatever means, that it has been withdrawn. Accordingly, I would dismiss the appeal. Buckley L.J. authorises me to say that he agrees with the judgment that I have delivered. LAWTON L.J. The issue in this appeal was clear. Did the plaintiffs exercise an option to purchase the premises known as 571, High Road, Wembley, by posting a letter to the defendant which he never received and the roundabout one. Both, in my judgment, are satisfactory but the roundabout one has some paths leading off it which can lead the traveller after legal truth astray. The plaintiffs, I think, took one of these paths. I propose in this judgment to start by taking the short path and then to survey the other. It is a truism of the law relating to options that the grantee must comply strictly with the conditions stipulated for exercise: see Hare v. Nicholl [1966] 2 Q.B. 130. It follows that the first task of the court is to find out what was stipulated: the instrument of grant has to be construed. It is a formal document which must have been drafted by someone familiar with conveyancing practice. From its lay-out and content ut is likely to have been based on a precedent in the Encyclopaedia of Forms and Precedents. It follows, so it seems to me, that the words and phrases in it should be given precise meanings whenever possible and that words which are in common use amongst conveyancers should be " The said option shall be exercisable by notice in writing to the intending vendor at any time within six months from the date hereof . . ." In my judgment, the phrase " notice in writing" is of importance in this context. Conveyancers are familiar with it and frequently use it. It occurs in many sections of the Law of Property Act 1925; for examples, see sections 36 (2), 136, 146 and 196. In the option clause under con- sideration the draftsman used the phrase in connection with the exercise of the option but in other parts of the agreement he was content to use such phrases as " agreed in writing " (see clause 4) and " if required in writing " (see clause 8 (a)). Should any inference be drawn from the use of the word " notice"? In my judgment, yes. Its derivation is from the Latin word for knowing. A notice is a means of making something known. The Shorter Oxford English Dictionary gives as the primary mean- ings of the word : " Intimation, information, intelligence, warning, . . Formal intimation or waming of something." If a notice is to be of any value it must be an intimation to someone. A notice which cannot impinge on anyone's mind is not functioning as such. Now in this case, the " notice in writing " was to be one " to the intending vendor." It was to be an intimation to him that the grantee had exercised the option; he was the one who was to be fixed with the informa- tion contained in the writing. He never was, because the letter carrying the information went astray. The plaintiffs were unable to do what the agreement said they were to do, namely, fix the defendant with know- ledge that they had decided to buy his property. If this construction of the option clause is correct, there is no room for the application of any rule of law relating to the acceptance of offers by posting letters since the option agreement stipulated what had to be done to exercise the option. On this ground alone I would dismiss the appeal. I turn now to what I have called the roundabout path to the same result. Mr. Macpherson on behalf of the plaintiffs submitted that the option was exercised when the letter was posted, as the rule relating to the acceptance of offers by post did apply. The foundation of his argument the acceptance of offers by post did apply. The foundation of his argument was that the parties to this agreement must have contemplated that the option might be, and probably would be, exercised by means of a letter sent through the post. I agree. This, submitted Mrs. Macpherson, was enough to bring the rule into operation. I do not agree. In Henthorn v. Fraser [1892] 2 Ch. 27, Lord Herschell stated the rule as follows, at p. 33: " Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted." It was applied by Farwell J. in Bruner v. Moore [1904] 1 Ch. 305 to an option to purchase patent rights. The option agreement, which was in writing, was silent as to the manner in which it was to be exercised. The grantee purported to do so by a letter and a telegram. Does the rule apply in all cases where one party makes an offer which both he and the person with whom he was dealing must have expected the post to be used as a means of accepting it? In my judgment, it does not. First, it does not apply when the express terms of the offer specify that the acceptance must reach the offeror. The public nowadays are familiar with this exception to the general rule through their handling of football pool coupons. Secondly, it probably does not operate if its application would produce manifest inconvenience and absurdity. This is the opinion set out in Cheshire and Fifoot, Law of Contract, 3rd ed. (1952), p. 43. It was the opinion of Lord Bramwell as is seen by his judgment in British & American Telegraph Co. v. Colson (1871) L.R. 6 Exch. 108, and his opinion is worthy of consideration even though the decision in that case was overruled by this court in Household Fire and Carriage Accident Insurance Co. v. Grant (1879) 4 Ex.D. 216. The illustrations of incon- venience and absurdity which Lord Bramwell gave are as apt today as they were then. Is a stockbroker who is holding shares to the orders of his client liable in damages because he did not sell in a falling market in accordance with the instructions in a letter which was posted but never received? Before the passing of the Law Reform (Miscellaneous Pro- visions) Act 1970 (which abolished actions for breach of promise of marriage), would a young soldier ordered overseas have been bound in contract to inarry a girl to whom he had proposed by letter, asking her to let him have an answer before he left and she had replied affirmatively in good time but the letter had never reached him? In my judgment, the factors of inconvenience and absurdity are but illustrations of a wider principle, namely, that the rule does not apply if, having regard to all the circumstances, including the nature of the subject matter under con- sideration, the negotiating parties caimot have intended that there should be a binding agreement until the party accepting an offer or exercising an option had in fact communicated the acceptance or exercise to the other. In my judgment, when this principle is applied to the facts of this case it becomes clear that the parties cannot have intended that the posting of a letter should constitute the exercise of the option. The option agreement was one to which section 196 of the Law of Property Act 1925 applied: see subsection (5), which is in these terms: " The provisions of this section shall extend to notices required to be served by any instrument affecting property executed or coming into operation after the commencement of this Act unless a contrary intention appears." The option agreement was an instrument affecting property. A notice in writing had to be given to exercise the option. Giving a notice means the same as serving a notice: see In re 88, Berkeley Road, N.W.9 [1971] Ch. 648. The object of this subsection was to enable conveyancers to omit from instruments affecting property stipulations as to the giving of notices if they were prepared to accept the statutory ones. As there was nothing in the option agreement to a contrary effect, the statutory stipulations applied in this case. Section 196 (4) is in these terms: " Any notice required or authorised by this Act to be served shall also be sufficiently served, if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned through the post office undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered." The object of this subsection, as also of subsection (3), is to specify circumstances in which proof of actual knowledge may be dispensed with. This follows from the use of the phrase " any notice . . . shall also be sufficiently served . . ." If Mr. Macpherson's submissions are well-founded, a letter sent by ordinary post the evening before the option expired would have amounted to an exercise of it; but a registered letter posted at the same time and arriving in the ordinary course of post, which would have been after the expiration of the option, would not have been an exercise. The parties to the option agreement cannot have intended any such absurd result to follow. When the provisions of section 196 (4) are read into the greeeent, as they have to be, thceonly reasonable inference is that thce parties intended that the vendor should be fixed with actual knowledge of the exercise of the option save in the circumstances envisaged in the subsection. This, in my judgment, was enough to exclude the rule. I would dismiss the appeal. Appeal dismissed with costs. Leave to appeal refused. Solicitors : Brecher & Co.; Bulcraig & Davis. C. N. [PRIVY COUNCIL] NEW ZEALAND SHIPPING CO. LTD. . . . APPELLANT AND A. M. SATTERTHWAITE & CO. LTD. . . . RESPONDENT [ON APPEAL FROM THE COURT OF APPEAL OF NEW ZEALAND] 1973 Oct. 15, 16, 17, 18, 22; Lord Wilberforce, Lord Hodson, 1974 Feb. 25 Viscount Dilhorne, Lord Simon of Glaisdale and Lord Sahnon Shipping--Bill of lading--Time bar--Stipulation that action to be brought within one year against carrier, his servant, agent and independent contractor Stevedore unloading freight damaging later--Whether stevedore entitled to benefit of contract made between shipper and carrier--Whether stevedore's performance or service of unloading consideration for contractual benefit of time bar provision--Carriage of Goods by Sea Act 1924 (14 & 15 Geo. 5, c. 22), Sch., art. III, r. 6 A bill of lading for the shipment of a drilling machine from Liverpool to Wellington incorporated the rules scheduled to the Carriage of Goods by Sea Act 1924 (The Hague Rules) and article III, rule 6 discharged the carrier from all liability for loss or damage unless suit was brought within one year. The bill of lading further stipulated that the same immunity was extended to the carrier's servants or agents, including indepen- dent contractors. The carrier was a wholly owned subsidiary company of the stevedore, the stevedore acted as the carrier's agent in New Zealand and the carrier had authority to enter into the contract on behalf of the stevedore. As a result of the stevedore's negligence, the drill was damaged in unloading and the consignee brought an action after the lapse of one year against the stevedore for damages. The stevedore pleaded the time limit in which the action could be brought under the bill of lading. The Supreme Court upheld that defence. The Court of Appeal allowed an appeal by the consignee on the ground that the shipper and the stevedore were not bound inter se in contract at the time when the bill of lading was signed and delivered because at that stage no consideration moved from the stevedore. On appeal by the stevedore to the Judicial Committee : -- Held, allowing the appeal (Viscount Dilhorne and Lord Simon of Glaisdale dissenting), (1) that the shipper agreed to exempt the carrier, his servants and independent contractors from liability in respect of the performance of the contract of carriage and the exemption was designed to cover the whole carriage from loading to discharge by whomsoever it was performed (post, p. 870F--H). (2) That the bill of lading brought into existence a bargain initially unilateral but capable of becoming mutual between the shipper and the stevedore made through the carrier as agent which became a full contract when the stevedore per- formed services by unloading the goods and the performance of those services for the benefit of the shipper was the con- sideration for the agreement by the shipper that the stevedore should have the benefit of the exemptions in the bill of lading (post, pp. 870H--871A). Dictum of Lord Reid in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446, 474, H.L.(E.) and Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A. applied Snelling v. John G. Snelling Ltd. [1973] Q.B. 87; [1972] 2 W.L.R. 588; [1972] 1 All E.R. 79. Tweddle v. Atkinson (1861) 1 B. & S. 393. Virgin Island Corporation v. Merwin Lighterage Co. Inc., 1959 A.M.C. 2133. Watson v. Swann (1862) 11 C.B.N.S. 756. White v. Blackmore [1972] 2 Q.B. 651; [1972] 3 W.L.R. 296; [1972] 3 All E.R. 158, C.A. Wilkie v. London Passenger Transport Board [1946] 1 All E.R. 650; [1947] 1 All E.R. 258, C.A. APPEAL (No. 3 of 1973) from a judgment (June 29, 1972) of the Court of Appeal of New Zealand (Turner P., Richmond and Perry JJ.) allowing an appeal by the respondent, A. M. Satterthwaite & Co. Ltd., from a judgment of the Supreme Court of New Zealand (Beattie J.) dismissing an action by the respondent against the appellant, the New Zealand Shipping Co. Ltd., for damages in connection with the negligent unloading of a drill from the vessel Eurymedon at the port of Wellington in August 1964. The facts are stated in the majority judgment of their Lordships. Michael Mustill Q.C. and J. T. Eichelbaum (of the New Zealand Bar) for the appellant stevedore. Anthony Lloyd Q.C. and G. S. Tuohy (of the New Zealand Bar) for the respondent consignee. Cur. adv. vult.2 February 25, 1974. The majority judgment of their Lordships was delivered by LORD WILBERFORCE. The facts of this case are not in dispute. An expensive drilling machine as received on board the ship Euuryedon at Liverpool for transhipment to Wellington pursuant to the terms of a bill of lading no. 1262 dated June 5, 1964. The shipper was the maker of the drill, Ajax Machine Tool Co. Ltd. (" the consignor"). The bill of lading was issued by agents for the Federal Steam Navigation Co. Ltd. (" the carrier "). The consignee was A. M. Satterthwaite & Co. Ltd. of Christchurch, New Zealand (" the con- signee "). For several years before 1964 the New Zealand Shipping Co. Ltd. (" the stevedore ") had carried out all stevedoring work in Wellington in respect of the ships owned by the carrier, which was a wholly owned subsidiary of the stevedore. In addition to this stevedoring work the steve- dore generally acted as agent for the carrier in New Zealand; and in such capacity as general agent (not in the course of their stevedoring functions) the stevedore received the bill of lading at Wellington on July 31, 1964. Clause 1 of the bill of lading, on the construction of which this case turns, was in the same terms as bills of lading usually issued by the stevedore and its associated companies in respect of ordinary cargo carried by their ships from the United Kingdom to New Zealand. The consignee became the holder of the bill of lading and owner of the drill prior to August 14, 1964. On that date the drill was damaged as a result of the stevedore's negligence were printed in small capitals: " In accepting this bill of lading the shipper, consignee and the owners of the goods, and the holders of this bill of lading agree to be bound by all of its conditions, exceptions and provisions whether written, printed or stamped on the front or back hereof." On the back of the bill of lading a number of clauses were Printed in small type. It is only necessary to set out the following. The first and third paragraph of clause 1 provided: " This bill of lading shall have effect (a) subject to the provisions of any legislation giving effect to the International Convention for the unification of certain rules relating to bills of lading dated Brussels, August 25, 1924, or to similar effect which is compulsorily applicable to the contract of carriage evidenoed hereby and (b) where no such legislation is applicable as if the Carriage of Goods by Sea Act 1924, of Great britain and the rules scheduled thereto applied hereto and were incorporated herein. Nothing herein contained shall be deemed to be a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the pro- visions of the said legislation or Act and rules (as the case may be) and the said provisions shall not (unless and to the extent that they are by law compulsorily applicable) apply to that portion of the contract evidenced by this bill of lading which relates to forwarding under clause 4 hereof. If anything herein contained be inconsistent with or repugnant to the said provisions, it shall to the extent of such in- consistency or repugnance and no further be null and void. . . . " It is hereby expressly agreed that no servant or agent of the carrier (including every independent contractor from time to time employed by the carrier) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, consignee or owner of the goods or to any holder of this bill of lading for any loss or damage or delay of whatsoever kind arising or resulting directly or indirectly from any act neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty herein contained and every right, ex- emption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading. Clause 11 provided : " The carrier will not be accountable for goods of any description beyond #100 in respect of any one package or unit inless the value thereof shall have been stated in writing both on the broker's order which must be obtained before shipment and on the shipping note presented on shipment and extra freight agreed upon and paid and bills of landing signed with a declaration of the nature and value of the oods appearing thereon. When thcevalue is dWeclred and extra value or pro rata on that basis in the event of partial loss or damage." No declaration as to the nature and value of the goods having appeared in the bill of lading, and no extra freight having been agreed upon or paid, it was acknowledged by the consignee that the liability of the carrier was accordingly limited to #100 by the application of clause 11 of the bill of lading. Moreover, the incorporation in the bill of lading of the rules scheduled to the Carriage of Goods by Sea Act 1924 meant that the carrier and the ship were discharged from all liability in respect of damage to the rill unless suit was brought against them within one year after deeliery. No action was commenced until April 1967, when the consignee sued the stevedore in negligence, claiming #880 the cost of repairing the damaged dill The question in the appeal is whether the stevedore can take the benefit of the time limitation provision. The starting point, in discussion of this question, is provided by the House of Lords decision in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446. There is no need to question or even to qualify that case in so far as it affirms the general proposition that a contract between two parties cannot be sued on by a third person even though the contract is expressed to be for his benefit. Nor is it necessary to disagree with anything which was said to the same effect in the Australian case of Wilson v. Darling Island Stevedoring and Lighterage Co. Ltd. (1956) 95 C.L.R. 43. Each of these cases was dealing with a simple case of a contract the benefit of which was sought to be taken by a third person not a party to it, and the emphatic pronouncements in the Silicones left open the case where one of the parties contracts as agent for the third person: in particular Lord Reid's speech spelt out, in four pro- positions, the prerequisites for the validity of such an agency contract. There is of course nothing unique to this case in the conception of agency contracts: well known and common instances exist in the field of hire purchase, of bankers' commercial credits and other transactions. Lord Reid said, at p. 474: " I can see a possibility of success of the agency argument if (first) the bill of lading makes it clear that the stevedore is intended to be pro- tected by the provisions in it which limit liability, (secondly) the bill f lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any diffictilties about consideration moving from the stevedore were overcome. And then to affect the consignee it would be necessary to show that the provisions of the Bills of Lading Act 1855 apply. The question in this appeal is whether the contract satisfies these propositions. Clause 1 of the bill of lading, whatever the defects in its drafting is clear in its relevant terms. The carrier, on his own aocount, stipulates for certain exemptions and immunities: among these is that conferred by article LII, rule 6 of the Hague Rules which discharges the carrier from all liability for loss or damage unless suit is brought within one year after delivery. In addition to these stipulations on his own account, the carrier as agent for, inter alios, independent contmctors stipulates for the same exemptions. Much was made of the fact that the carrier also contracts as agent for numerous other persons; the relevance of this argument is not apparent. It cannot be disputed that among such independent contractors, for whom, as agent, the carrier contracted, is the appellant company which habitually acts as stevedore in New Zealand by arrangement with the carrier and which is, moreover, the parent company of the carrier. The carrier was, indisputably, authorised by the appellant to oontract as its agent for the purposes of clause 1. All of this is quite straightforward and was accepted by all the judges in New Zealand. The only question was, and is, the fourth question presented by Lord Reid, namely that of consideration. It was on this point that the Court of Appeal differed from Beattie J., holding that it had not been shown that any consideration for the shipper's promise as to exemption moved from the promisee, i.e. the appellant company. If the choice, and the antithesis, is between a gratuitous promise, and a promise for consideration, as it must be in the absence of a tertium quid, there can be little doubt which, in commercial reality, this is. The whole contract is of a commercial character, involving service on one side, rates of payment on the other, and qualifying stipulations as to both. The relations of all parties to each other are commercial relations entered into for business reasons of ultimate profit. To describe one set of promises, in this context, as gratuitous, or nudum pactum, seems paradoxical and is prima facie implausible. It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable considera- tion, that seems to present difficulty, but this same difficulty exists in many situations of daily life, e.g sales at auction; supermarket purchases; board- ing an omnibus; purchasing a train ticket; tenders for the supply of goods; offers of rewards; acceptance by post; warranties of authority by agents; manufacturers' guarantees; gratuitous bailments; bankers' conunercial credits. These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration. In their Lordships' opinion the present contract presents much less difficulty than many of those above referred to. It is one of carriage from Liverpool to Wellington. The carrier assumes an obligation to transport the goods and to discharge at the port of arrival. The goods are to be carried and discharged, so the transaction is inherently contractual. It is contemplated that a part of this contract, viz. discharge, may be performed by independent contractors--viz. the appellant. By clause 1 of the bill of lading the shipper agrees to exempt from liability the carrier, his servants and independent contractors in respect of the performance of this contract of carriage. Thus, if the carriage, including the discharge, is wholly carried out by the carrier, he is exempt. If part is carried out by him, and part by his servants, he and they are exempt. If part is carried out by him and part by an independent contractor, he and the independent con- tractor are exempt. The exemption is designed to cover the whole carriage from loading to discharge, by whomsoever it is performed: the perfomnance attracts the exemption or immunity in favour of whoever the performer turns out to be. There is possibly more than one way of analysing this business transaction into the necessary components; that which their Lordships would accept is to say that the bill of lading brought into existence a bargain initially unilateral but capable of becoming mutual, between the shipper and the appellant, made through the carrier as agent. This became a full contract when the appellant performed services by dis- charging the goods. The performance of these services for the benefit of the shipper was the consideration for the agreement by the shipper that the appellant should have the benefit of the exemptions and limitations contained in the bill of lading. The conception of a " unilateral " contract of this kind was recognised in Great Northern Railway Co. v. Witham (1873) L.R. 9 C.P. 16 and is well established. This way of regarding the matter is very close to if not identical to that accepted by Beattie J. in the Supreme Court: he analysed the transaction as one of an offer open to acceptance by action such as was found in Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256. But whether one describes the shipper's promise to exempt as an offer to be accepted by performance or as a promise in exchange for an act seems in the present context to be a matter of semantics. The words of Bowen L.J. in Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, 268: " why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition?" seem to bridge both conceptions: he certainly seems to draw no distinction between an offer which inatures into a contract when accepted and a promise which matures into a contract after performance, and, though in some special contexts (such as in connection with the right to withdraw) some further refinement may be needed, either analysis may be equally valid. On the main point in the appeal, their Lordships are in substantial agreement with Beattie J. The following points require mention. 1. In their Lordships' opinion, consideration may quite well be provided by the appellant, as suggested, even though (or if) it was already under an obligation to discharge to the carrier. (There is no direct evidence of the existence or nature of this obligation, but their Lordships are prepared to assume it.) An agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration and does so in the present case: the promisee obtains the benefit of a direct obligation which he can enforce. This proposition is illustrated and supported by Scotson v. Pegg (1861) 6 H. & N. 295 which their Lordships consider to be good law. 2. The consignee is entitled to the benefit of, and is bound by, the stipulations in the bill of lading by his acceptance of it and request for delivery of the goods thereunder. This is shown by Brandt v. Liverpool, Brazil and River Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575 and a line of earlier cases. The Bills of Lading Act 1855, section 1 (in New Zealand the Mercantile Law Act 1908, section 13) gives partial statutory recognition to this rule, but, where the statute does not apply, as it may well not do in this case, the previously established law remains effective. 3. The appellant submitted, in the alternative, an argument that, quite apart from contract, exemptions from, or limitation of, liability in tort may be conferred by mere consent on the part of the party who may be injured. As their Lordships consider that the appellant ought to succeed in contract, they prefer to express no opinion upon this argument: to evaluate it requires elaborate discussion. 4. A clause very similar to the present was given effect by a United States District Court in Carle & Montanari Inc. v. American Export Isbrandtsen Lines Inc. [1968] 1 Lloyd's Rep. 260. The carrier in that case contracted, in an exemption clause, as agent, for, inter alios, all stevedores and other independent contractors, and although it is no doubt true that the law in the United States is more liberal than ours as regards third party contracts, their Lordships see no reason why the law of the Commonwealth should be more restrictive and technical as regards agency contracts. Commercial considerations should have the same force on both sides of the Pacific. In the opinion of their Lordships, to give the appellant the benefit of the exemptions and limitations contained in the bill of lading is to give effect to the clear intentions of a commercial document, and can be given within existing principles. They see no reason to strain the law or the facts in order to defeat these intentions. It should not be overlooked that the effect of denying validity to the clause would be to encourage actions against servants, agents and independent contractors in order to get round exemp- tions (which are almost invariable and often compulsory) accepted by shippers against carriers, the existence, and presumed efficacy, of which is reflected in the rates of freight. They see no attraction in this consequence. Their Lordships will humbly advise Her Majesty that the appeal be allowed and the judgment of Beattie J. restored. The respondent must pay the costs of the appeal and in the Court of Appeal. [Dissenting judgment by VISCOUNT DILHORNE.] On June 5, 1964, a bill of lading was issued by the agents for the Federal Steam Navigation Co. Ltd., the carrier, to the Ajax Machine Tool Co. Ltd., the consignor, for the carriage of a drilling machine to Wellington in New Zealand. The respondent was the consignee. The bill of lading bore on its face the following words: " In accepting this bill of lading the shipper, consignee and the owners of the goods, and the holder of this bill of lading agree to be bound by all of its conditions, exceptions and provisions whether written, printed or stamped on the front or back hereof." The consignee accepted the bill of lading and so the consignee agreed to its terms and conditions. In the course of its discharge from the ship at Wellington, the drilling machine was damaged by the negligence of the appellant, the stevedore, and the question for determination in this appeal is whether the appellant is exempted from liability for its negligence by the terms of the bill of lading. That depends on the construction to be placed on and the effect of clause 1 of the conditions printed on the back of the bill of lading, and in particular of the third paragraph thereof. That so far as material reads as follows: " It is hereby expressly agreed that no servant or agent of the carrier (including every independent contractor from time to time employed by the carrier) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, consignee or owner of the goods or to any holder of this bill of lading for any loss or damage or delay of whatsoever kind arising from or resulting directly or indirectly from any neglect or default on his part while acting in the course of or in connection with his employment, and, without prejudioe to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty herein contained and every right, ex- emption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid, and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading." Before the Board the appellant advanced four main contentions; first, that the bill of lading constituted or was evidence of an immediately binding contract between the shipper and the appellant made through the medium of the carrier as agent for the appellant and supported by consideration; secondly, that the bill of lading constituted an immediate bargain between the shipper and the appellant which matured into a binding unilateral contract when the appellant made the bargain unconditional and supplied consideration by performing services in relation to the goods; thirdly, that the bill of lading contained an offer by the shipper to the carrier as agent for the appellant to enter into a unilateral contract whereby if the appellant performed services in relation to the goods the shipper would give them the benefit of every exemption from and limitation of liability contained in the bill of lading; and fourthly, whether or not there was any contract between the shipper and the appellant, that the bill of lading evidenced the consent of the shipper to the performance of services in relation to the goods upon terms that the appellant would have the benefit of every exemption from, and limitation of, liability contained in the bill of lading and that this con- sent nullified the duty of care which the appellant would otherwise have owed at common law, and, alternatively, that this consent excluded or qualified the liability of the appellant for breaches of that duty. Dealing with the appellant's third contention first, clause 1 of the bill of lading was obviously not drafted by a layman but by a highly qualified lawyer. It is a commercial document but the fact that it is of that descrip- tion does not mean that to ;ive it efficacy, one is at liberty to disregard its language and read into it that which it does not say and could have said or to construe the English words it contains as having a meaning which is not expressed and which is not implied. The clause does not in my opinion either expressly or impliedy contain an offer by the shipper to the carrier to enter into an agreement whereby if the appellant performed services in relation to the goods the shipper would give it the benefit of every exemption from and limitation of liability con- tained in the bill of lading. I see no difficulty in expressing such an offer in clear and unequivocal language, and if the clause contained such an offer, I would have been in favour of allowing the appeal. What the clause records is not an offer but an agreement, and one agreement only, made between the shipper and the carrier acting in a dual capacity, on its own behalf and on behalf of all persons who were or might be its servants or employed by it as independent contractors, and an agree- ment to which all such persons are or are to be deemed to be parties. I agree with Turner P. in thinking that the terms of clause 1 cannot be read as constituting such an offer. If the terms of the expressed agree- ment fail to constitute a legally binding contract between the shipper and the appellant, to read them as merely constituting an offer by the shipper capable of acceptance by conduct by the appellant is to rewrite the clause. The appellant's first contention, that an immediately binding contract was constituted or evidenoed by clause 1, was rejected by Beattie J. at first instance and by all the members of the Court of Appeal and in my opinion rightly; Beattie J. saying [1972] N.Z.L.R. 385, 397: "In the present case I consider the stevedore did not give any con- sideration for what could be said to be the promise on the part of the consignee to release it from liability or exempt it in certain respects. There is nothing in the bill of lading which suggests that the stevedore could sue the consignee for its stevedoring fees or, alternatively, that the consignee could compel the stevedore to carry out the contract which it made with the carrier if it decided not to do so because the agency relationship refers only to the exemption provision which purports to create a benefit only and no detriment or liability is im- posed on the stevedore." and Turner P. in the Court of Appeal saying [1973] 1 N.Z.L.R. 174, 178: " In agreement with other members of the court I think that in the circumstances of this case it is impossible, . . . to regard the consignor and the stevedore as bound inter se in contract at the time when the bill of lading was signed and delivered, because at that stage it is im- possible to see what consideration moved from the stevedore." The appellant's second contention recognises that at the time of the issue of the bill of lading there was no legally binding contract between the consignor and the appellant. It was not suggested that the agreement set out in clause 1 was not a legally binding contract between the consignor and the carrier and so this contention involves reading the one agreement, to which the consignor on the one hand and the carrier and whomsoever it chose to employ are or are to be deemed to be parties, as a valid contract between the consignor and the carrier and at the same time as a bargain not amounting to a valid contract between the consignor and all those who were at the time employed or who might be employed by the carrier. I do not know of any precedent for construing one agreement in writing in these two different ways. What was the alleged bargain? If I understood the argument correctly, it was that the consignor would exempt any person employed by the carrier in the carriage and discharge of the drill from all liability if that person performed any services in relation to the carriage and discharge of the drill. The contention was that if such services were performed, that constituted acceptance of the consignor's offer to exempt and consideration for it; and so by performanoe the bargain was converted into a full contract. I admire the ingenuity of the argument. It attempts to overcome the difficulty that clause 1 is expressed to contain an agreement and not an offer and it attempts to overcome the lack of consideration on which in my opinion the appellant's first contention founders; but I do not myself see any material difference between A offering B money if B does work for A and a bargain between A and B that A will pay B money if B does work for A. In each case A is making an offer which B can accept by doing the work. In my view one really cannot read the agreement set out in clause 1 as stating any such bargain. Indeed, however it is formulated, one has only to contrast the alleged bargain with the language of the clause to recognise that the clause does not express or imply any such bargain containing any such offer. In my opinion this contention fails for these reasons and for the reasons for which the appellant's third contention fails. Both con- tentions involve reading the agreement as if it was or contained an offer. To give effect to either the second or third contention of the appellant would not just mean straining the language of the clause but rewriting it. At the end of his speech in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446, 472 Viscount Simonds referred to the judgment of Fullagar J. in Wilson v. Darling Island Stevedoring and Lighterage Co. Ltd. (1956) 95 C.L.R. 43 with which Dixon C.J. entirely agreed. Viscount Simonds said that he agreed with every line and word of it and he referred in particular to the passage in Fullagar J.'s judgment in which he protested against a tendency by some artifice to save negligent people from the normal con- sequence of their fault. The relevant passage in Fullagar J.'s judgment reads as follows, at p. 70: " What has been supposed to be a principle involved in the Elder Dempster case [1924] A.C. 522 . . . has, . . . been extended so as to give to a stevedore exemption from liability for negligence by virtue of a provision in a bill of lading to which the stevedore is not a party, and which is really no concern whatever of the stevedore, This appears to me to be a ' development ' of the common law which is altogether out of character, and which is exactly the opposite of what one would have expected and felt to be justified. It is all the more remarkable in view of the fact that the modern tendency has been to expand the field of liability in tort. The common law has, I think, from quite early times--consistently with its general policy of freedom of contract--allowed the validity of provisions in a contract which limit or exclude liability for negligence. But it has always frowned on such provisions and insisted on construing them strictly. In Peek v. North Staffordshire Ry. Co. (1863) 10 H.L.Cas. 473, the judges advised the Lords, and the Lords held, that a condition relieving a carrier from all liability for the neglect or default of his servants was neither just nor reasonable within the meaning of a statute. The traditional attitude of the common law is perhaps nowhere more clearly illustrated than in a passage in the judgment of Denning L.J. in Adler v. Dickson [1955] 1 Q.B. 156, 180, at the end of which he refers to Peek's case and particularly to the judgment of Blackburn J. And yet we seem to discern in the latter part of that very judgment, in the New South Wales decisions which are challenged on this appeal, and in two or three other recent cases, a curious, and seemingly irresistible, anxiety to save grossly negligent people from the normal consequences of their negligence--an anxiety which refuses to be baulked even by so well established a general doctrine as that of Tweedle v. Atkinson (1861) 1 B. & S. 393. This seems to me to be an extraordinary phenomenon, and I am sure it would have surprised both Lord Blackburn and Lord Sumner." Clause 1 of the bill of lading in this case, construed strictly, cannot be read in my opinion as the appellant desires. Anxiety to save negligent people from the consequences of their negligence does not lead me to give an unnatural and artificial meaning to the clause and a meaning which the words it contains do not bear. To give effect to the appellant's contentions appears to me to surrender to the anxiety to which Fullagar J. referred, a surrender which cannot be justified simply by labelling the bill of lading a commercial document. It is no more a commercial document than a con- signment note for the carriage of goods by rail or road and it should not be forgotten that ordinary members of the public as well as those engaged in commerce send goods by sea as well as overland. The appellant's fourth contention does not depend on the terms of the bill of lading. I have had the advantage of seeing my noble and learned friend Lord Simon of Glaisdale's opinion and I agree with what he has said with regard to this contention. As in my opinion the terms of the bill of lading do not suffice to exempt the appellant from liability for negligence if sued by the consignor, it follows that they do not operate to exempt them from liability at the suit of the respondent. For these reasons in my opinion this appeal should be dismissed. [Dissenting judgment by LORD SIMON OF GLAISDALE.] I would dismiss the appeal, broadly on the grounds set out in the judgments of the Court of Appeal, even though the arguments presented to the Board on behalf of the stevedore differed significantly from the way that the case was put in the New Zealand courts. The case before Beattie J. The stevedore's main contention in the New Zealand courts involved that a legally enforceable contract between at least the consignor and the stevedore came into existence when the bill of lading was issued. The envisaged by Lord Reid in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446, 474: " I can see a possibility of success of the agency argument if (first) the bill of lading makes it cleat that the stevedore is intended to be pro- tected by the provisions in it which limit liability, (secondly) the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, (thirdly) the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any difficulties about consideration moving from the stevedore were overcome. And then to affect the consignee it would be necessary to show that the provisions of the Bills of Lading Act 1855 apply." The case has throughout proceeded on the basis that if Lord Reid's five conditions were satisfied, Midland Silicones would not apply so as to exclude the stevedore from exoneration. It does not appear to have been disputed that Lord Reid's first two conditions were satisfied (though it will be necessary later to advert to certain difficulties which arise from the wording of clause 1). Beattie J. also held that Lord Reid's third condition had been met, the bill of lading being in a form with which the stevedore was familiar and it having passed through its hands prior to the commencement of the unloading. The main argument before Beattie J. turned on whether Lord Reid's fourth condition had been met--namely, whether any difficulties about consideration moving from the stevedore had been overcome. It was argued for the stevedore that there was an implied obligation upon it under the bill of lading to dis- charge the goods consigned, such an obligation providing sufficient con- sideration. Beattie J. did not accept that any such implication arose, and concluded that because the stevedore had not given consideration for any promise on the part of the consignor to release the stevedore from liability or to exempt it from liability in certain respects (as set out in the bill of lading) the stevedore could not claim to be a party to the contract made or evidence by the bill of lading at the time of its issue. Beattie J., however, went on to consider the case on the basis of whether the bill of lading was or was not evidence of the type of contract recognised as efficacious in Carlill v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484; [1893] 1 Q.B. 256. He held that the exemption clause in the bill of lading was an offer of indenmity by the consignor made through the carrier as agent for the carrier's servants or agents; that this offer was an offer to those per- sons who might be or tum out to be servants or agents of the carrier, to the effect that if they performed their various functions in respect of the goods carried, the consignor would exempt such servants or agents from all liability; that such an offer was accepted and the contract completed when the servants or agents of the carrier performed their required functions in respect of the goods being carried; that the stevedore accepted the offer made to it by performing its required function to discharge the drill; that the consignor's promise bound the consignee; and that the stevedore could accordingly rely on the promise of exemption as against the consignee. Beattie J. therefore gave judgment for the stevedore on this basis. The case in the Court of Appeal The consignee appealed to the Court of Appeal (Turner P., Richmond J. and Perry J.), who unanimously allowed the appeal. They agreed with Beattie J. that it was impossible to regard the consignor and the stevedore as bound inter se in contact at the time when the bill of lading was signed and delivered, because at that stage at least no consideration moved from the stevedore. As Perry J., in particular, pointed out, nowhere in the bill of lading or elsewhere is there any promise by the stevedore, or anyone else except the carrier, to unload the drill: no one but the carrier undertook to peform the obligations of carriage, and the consignor could not compel the stevedore to unload or sue them if they refused to do so. As for the stevedore's contention based on the Carlill case, Turner P. and Richmond J. held that, for such a type of contract to arise, the offer must expressly or impliedly make known to the persons to whom it is addressed some particular method of acceptance as sufficient to make the bargain binding; whereas the language of clause 1 of the bill could not, because of its generality, be fitted into the category of an offer to the world at large, being rather intended to confer an absolute and unconditional exemption on every one of the carrier's employees or agents. Perry J. added that, having failed as a contempomneous collateral contract (as held both by Beattie J. and the Court of Appeal), the clause could not properly be treated as an offer made by the consignor to the servants and agents of the carrier through the latter's agency, for the following reasons: (1) if that were the intention, one would expect to find it clearly so expressed in a carefully worded document, and not left to be suggested by inference or implication only; (2) the clause was silent as to the method of acceptance by performance of the alleged offerees; (3) if the lause was an offer to the stevedore it was also an offer to a large indeter- minate number of servants and agents of the carrier, and so contemplated an infinite variety of ways of acceptance--"one offer and a multitude of acceptances by performance of endless variety and of an unknown and unstated nature " [1973] 1 N.Z.L.R. 174, 185--a situation far removed from the one offer and one method of acceptance contemplated in Carlill's case; (4) such a finding would be inconsistent with the words of the clause itself, which stated that " all such persons [servants and agents etc.] shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading," such contract being the contract of carriage between the consignor and the carrier, and not some other con- tract; (5) even if the stevedore's participation in the contract was limited by the words "to this extent," the purpose nevertheless was to make it a party to the contract in or evidenced by the bill of lading, not to any other contract--thus leaving no room for suggesting that the stevedore was party to some separate and independent (also undefined) consignor- stevedore contract The Court of Appeal, having dismissed the stevedore's two main contentions--namely, first, that it was a party to an immediate contract and thereby entitled to rely on its exemption clauses or, secondly, that it had accepted by performance a Carlill-type offer and was thereby entitled to take advantage of the exemption clauses of the contract so constituted--found it unnecessary to come to a conclusion on various issues which would have arisen consequentially if they had decided either of the main issues in favour of the stevedore--e.g. (1) whether a promise by the stevedore to perform an obligation already incumbent on the carrier or on the stevedore itself by virtue of its alleged contract with the carrier (i.e. to unload the drill) could be sufficient consideration to support a contract between the consignor and the stevedore (cf. Shadwell v. Shadwell (1860) 9 C.B.N.S. 159; Scotson v. Pegg (1861) 6 H. & N. 295 and Chichester v. Cobb (1866) 14 L.T. 433); (2) whether section 1 of the Bills of Lading Act 1855 (U.K.) (or section 13 of the Mercantile Law Act 1908 (N.Z.)--in materially similar terms) operated to enable the stevedore to take advantage of the exemption clause as against the consignee, as to which Richmond J. expressed considerable doubt. The stevedore's propositions to the Board Since the argument before us proceeded in some respects on significantly different lines than that before the New Zealand courts, it is desirable to set out in counsel's own words the propositions advanced on behalf of the stevedore: 1. The bill of lading constituted or was evidence of an immediately binding contract between the [consignor] and the [stevedore], made through the medium of the [carrier] as agent for the stevedore and supported by consideration. It was a term of that contract that the [stevedore] should have the benefit of every exemption from, and limitation of, liability contained in the bill of lading. 2. The bill of lading constituted or was evidence of an immediate bargain between the [consignor] and the [stevedore], made through the medium of the [carrier] as agent for the [stevedore], which matured into a binding unilateral contract when the [stevedore] made the bargain unconditional and supplied consideration by per- forming services in relation to the goods. It was a term of the bargain that if the [stevedore] performed services in relation to the goods [it] should have the benefit of every exemption from, and limitations of, liability contained in the bill of lading. 3. The bill of lading oontained an offer by the [consignor] to the [carrier] as agent for the [stevedore] to enter into a unilateral contract whereby if the [stevedore] performed services in relation to the goods the [consignor] would give [it] the benefit of every exemption from, and limitation of, liability contained in the bill of lading. The offer matured into a binding contract when the [stevedore] accepted the offer and supplied consideration by per- forming services in relation to the goods. 4. Whether or not there was any contract between the [consignor] and the [stevedore], the bill of lading evidenced the consent of the [consignor] to the performanoe of services in relation to the goods upon terms that the [stevedore] should have the benefit of every exemption from, and limitation of, liability contained in the bill of lading. This consent nullified the duty of care which the [stevedore] would otherwise have owed at common law. Alterna- tively, the consent excluded or qualified the liability of the [steve- dore] for breaches of that duty. The stevedore's first proposition (a binding contract from the beginning supported by consideration) was the first contention advanced to, and rejected by, both Beattie J. and the Court of Appeal. The stevedore's third proposition (a contract of the Carlill-type) was that accepted by Beattie J. and rejected by the Court of Appeal. The stevedore's second proposition is apparently new, being an attempt to frame a slightly different type of contract based on an offer which matures into a contract by later performance supplying the consideration, which would meet some of the objections raised by the Court of Appeal to the stevedore's third pro- position. The stevedore's fourth proposition seems to be entirely new. The stevedore's second and third propositions allege a " unilateral contract." This may seem a quaint expression in the law of contract, but it is well understood. For example, Chitty on Contracts, 23rd ed. (1968), vol. 1, para. 13 states: " By a unilateral contract is meant, . . . a contract in which only one party is bound. Bilateral contracts, on the other hand, are those in which both parties are bound. Instances of unilateral contracts are as follows: a covenant by one party in a contract under seal; the making of a promissory note; the acceptance of a bill of exchange; the offer of a reward for the return of lost property; the grant of an option to purchase property. Bilateral contracts comprise the exchange of a promise for a promise." To this it may be useful to add a quotation from Williston on Contracts, 3rd ed. (1957), vol. 1, section 106, headed " Insufficient bilateral agreement may by performance on one side become valid unilateral contract ": " . . . each promise in a bilateral contract must be sufficient con- sideration for the other, or both promises may not be enforced. Accordingly, if either promise is too indefinite for enforcement, or if either promise for any reason is insufficient consideration, both promises fail. But a promise that was originally too indefinite, may by performance become definite. The other party to the bargain must be regarded as continuously assenting to receive such performance in return for his own promise, and a valid unilateral contract arises on receipt of such performance. . . . The promise on one side of a bilateral agreement may be insufficient as consideration . . . Yet if performance is made of the counter-promise and that performance was something detrimental to the promisor or beneficial to the promisee, the promise which was itself insufficient as consideration, thereupon becomes binding." The stevedore's first proposition propounds a bilateral contract. The stevedore's second and third propositions propound different types of unilateral contract. The stevedore's fourth proposition does not depend on contract. The stevedore's first, second and third propositions are alternative to one another and mutually exclusive--counsel for the stevedore was throughout explicit on this point. The stevedore's fourth proposition is alternative to the first three and stands by itself. It is only on the stevedore's first proposition that any question of consideration arises: if the stevedore's second or third proposition is valid, performance undoubtedly provides consideration; while the steve- dore's fourth proposition does not depend on contract at all. The stevedore's admissions/submissions to the Board In addition to reframing their positive case, counsel for the stevedore made two admissions or assumptions or submissions which also make the case as submitted to the Board significantly different from that argued in the New Zealand courts. (1) Whereas in the New Zealand courts it was argued that the bill of lading disclosed an implied obligation on the steve- dore to unload the drill, which supplied the consideration for the alleged immediate bilaterai contract between the consignor and the stevedore, it was accepted before us that the bill of lading disclosed no implied obligation on the stevedore to do anything at all. (2) The bill of lading contained two contracts in one document--by the consignor with the carrier on the one hand, and by the consignor with the stevedore on the other. These two admissions are, in my view, of fundamental importance to the decision of this appeal. I shall only note at the moment, as regards the stevedore's second admission, first, that clause 1 of the bill of lading speaks of " the contract " in the singular (" all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading") and, secondly, the stevedore's second admission is in any event an over-simplification--on the stevedore's argument the bill of lading contained not two but a multitude of contracts--by the consignor with the carrier on the one hand, and on the other with all those who were then or who might at any relevant future time become employees or agents of or independent contractors for the carrier all over the world, some of whom might not even be in existence as corporate bodies at the time of the issue of the bill of lading (yet all are deemed to be parties " to the contract in or evidenced by the bill of lading," and the carrier to be contracting as their agent). Further general observations on clause 1 I respectfully agree with Richmond J. that the common law does not tend to favour clauses which limit or exclude liability for negligence: see, e.g., Fullagar J., Dixon C.J. agreeing, in Wilson v. Darling Island Steve- approval by Viscount Simonds in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446, 472. Richmond J. added, at p. 181 : "I would in any event be reluctant to give efficacy to an exemption clause by reading into it some stipulation which the draftsman had not himself seen fit to formulate." I agree. Certainly a court should not go out of its way to re-word an exemption clause in order to give it efficacy where, as here, " act, neglect or default " would appear to extend to theft or even malicious damage. Then there is the provision that " the carrier is or shall be deemed to be acting as agent or trustee [etc.]." It is difficult to see how the beneficiary of a trust created by clause 1 can also be a principal contractor in respect of the same subject matter; nor does this make it any easier to read the provision as an offer leading to a unilateral contract. Then again there is the reference to persons who " might be " servants or agents " from time to time," to which I have already adverted with reference to the stevedore's second admission: this would seem to mise formidable difficulties on any issue of ratification. Finally, on the stevedore's arguments in favour of its first three propositions, the carrier seems, even allowing for the stevedore's second admission, to be doing what Viscount Haldane L.C. in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] A.C. 847, 854 said could not be done--namely, to contract as principal and agent " in the same breath." The stevedore's first proposition The whole basis on which the stevedore contended for an immediate bilateral contract in the New Zealand courts has disappeared with the stevedore's first admission. But the two admissions together involve that the alleged contract between the consignor and the stevedore does not go beyond clause 1 (" for the purpose "; " to this extent"). I confess to difficulty in grasping the very concept of a contract consisting only of an exemption clause: I am not satisfied that clause 1 establishes a pactum between the consignor and the stevedore, quite apart from nudum pactum. Moreover, exemption from what? There was, admittedly now, no con- tractual obligation on the stevedore to do anything at all, Faced with this question, counsel for the stevedore answered that it meant exemption from tortious liability if any servant or agent of or independent contractor for the carrier did anything in relation to the goods in connection with their carriage under the bill of lading. But this is reading into clause 1 what is not there expressed--indeed, rewriting it. In any case, counsel's construction, even if correct, would establish, not an immediate bilateral contract, but a unilateral contract (such as is proposed in the stevedore's second and third propositions)--sometimes, indeed, actually called " an if contract." Since, in the light of the stevedore's new admissions before the Board, there was, in my opinion, no immediate pactum created between the consignor and the stevedore at the time of the issue of the bill of lading, it is strictly unnecessary to consider the new ways in which counsel for the stevedore formulated his case to support consideration moving from the stevedore at that time, which would be required to support an immediate bilateral contract--to prevent it being nudum pactum. Never- theless, I advert briefly to the arguments, in deference to their interest and ability and in view of the importance of the juridical points raised. Consideration based on an implied promise by the steyedore to unload the drill having been abandoned, the stevedore's case on oonsideration had perforce to be framed anew. This was done in two alternative ways. First, it was said, consideration moving from an agent of the promisee is sufficient to support a promise to the promisee. For this proposition Fleming v. Bank of New Zealand [1900] A.C. 577 was cited. But I do not think that such a reading of Fleming's case is consistent with the decision in Dunlop v. Selfridge, which proceeded (except for Lord Parmoor's speech) on the assumption that Dews were Dunlop's agents, and where consideration certainly moved from Dews to Selfridge. Fleming's case does not purport to be laying down any such general principle of law as contended for by the stevedore. That case would be, in my opinion, an unsafe foundation for establishing a rider to Dunlop v. Selfridge, which was, of course later in date. In any event, I do not think that any consideration was given by the carrier as the stevedore's agent. The carrier was the stevedore's agent only " for the purpose of " clause 1. The consideration given by the carrier was given, not as the stevedore's agent, but as principal in respect of the alleged separate contract of carriage contained in the bill of lading. The second way in which the stevedore tried to formulate consideration to support an immediate bilateral contract was based on the proposition that consideration furnished to A by joint promisee B is sufficient to support a promise made to joint promisee C. Though this proposition rests only on dicta (see McEvoy v. Belfast Banking Co. Ltd. [1935] A.C. 24, 36, 43, 52; and Coulls v. Bagot's Executor and Trustee Co. Ltd. [1967] A.L.R. 385, 395, 400, 405), it seems to be an attractive pro- position in respect of genuine joint promises. As Windeyer J. said in his dissenting judgment in Coulls' case, speaking of "a contract made with two or more persons jointly," at p. 405: "The promise is made to them collectively. It must, of course, be supported by consideration, but that does not mean by considerations furnished by them separately. It means a consideration given on behalf of them all, and therefore moving from all of them." But that is not the case here. The only joint promise is in respect of clause 1, to which alone the stevedore was allegedly a party. The carrier did not fumish consideration in respect of this joint promise, but in respect of the alleged separate contract of carriage, to which the stevedore was not a party (even though, ex hypothesi, clause 1 was a common term of both alleged contracts). It would be pure fiction to hold that the carrier was giving consideration on behalf of the stevedore (and all the other alleged parties to the contract, some not yet ascertained, some possibly not yet in existence). The stevedore's third proposition It is convenient next to consider the stevedore's third proposition, based on Carlill's case, before considering the stevedore's new formulation of a unilateral contract in its second proposition, since the former was the way in which the case on unilateral contract was submitted in the New Zealand courts. It is sufficient to say that I respectfully concur with the views of the Court of Appeal (summarised above) in this part of the case. In par- ticular, I agree that clause 1 contains no express offer; that it does not have the essential characteristics of a Carlill-type offer, in that it does not conduct or otherwise; and that its attempted construction as an offer is inconsistent with the words of the clause itself, which purport to make the carrier's servants and agents "parties to the contract in or evidenced by this bill of lading " (namely, the contract of carriage made between the consignor and the carrier), not mere offerees to some other separate and different (unilateral) contract. The stevedore's second proposition This was a new way of putting the case, no doubt to obviate some of the points made by the Court of Appeal in relation to the stevedore's third proposition. The difference between the two ways of putting the case can be illustrated by two simple types of unilateral contract. In the first, A says to B, " If you will dig over my kitchen garden next Tuesday I will give you #2." B replies, " Agreed! If I dig over your kitchen garden next Tuesday I will get #2 from you." Though there has been what the stevedore's second proposition calls " a bargain," neither party is con- tractually bound at this stage, and A can, aart any reasonable period before the time for performance, communicate the withdrawal, of his offer without incurring liability. But, if the offer is not so withdrawn, and if B on Tues- day does dig over A's kitchen garden (the mode of performance being clearly indicated), the contract is complete and A is bound to pay B #2. The acceptance is verbal, and performance fumishes the consideration moving from B. In the second type, A may say to B, "If you dig over my kitchen garden next Tuesday, I will pay you #2." B does not verbally communicate his acceptance of the offer, A having impliedly waived such requirement. But if A does not communicate any withdrawal of his offer and if B on Tuesday does dig over A's kitchen garden, the offer is consideration: A is bound to pay B #2. This latter type of unilateral contract--the Carlill-type contract--is that propounded in the stevedore's third proposition; the former type of unilateral contract in the stevedore's second proposition. As counsel for the stevedore rightly submitted, they are mutually exclusive. Nevertheless, both require an offer, and one stipulating a mode of performance. Here, for the reasons given in the stipulation of a mode of performance which would constitute acceptance soundness of which has never been doubted. But it is far removed tender. The plaintiffs invited tenders for goods which they might require in the following year; the defendant wrote offering to supply the goods at specified prices in such quantities as the company's storekeeper might order from time to time "; and the plaintiffs accepted the tender. There was at this stage no completed contract since no consideration had moved. But the defendant's letter constituted an offer specifying a mode of acceptance--namely, ordering the goods as required--which, if not with- drawn, the plaintiff could accept by placing such order. On their doing so the contract was complete--the defendant had made an express offer; it had been accepted expressly; and consideration had moved from the plaintiffs to the defendant in the shape of their promise to pay for the goods on delivery. The facts have only to be stated for it to be obvious how that case differs from the instant. Great Northern Railway Co. v. Witham is a classic example of the case postulated by Williston whereby an agreement fails to have initial contractual force by reason of want of consideration but is capable of subsisting as an open offer susceptible of acceptance by a stipulaed mode of performance, which also simultaneously supplies the consideration. Here, however, for the reasons given by the Court of Appeal, clause 1, having failed as an immediate bilateral contract which is what it p$urportsand is ex-ressed to be), ~canot ~withut re- writing subsist as an open offer; and such rewriting is not permissible. As Cardozo J. said, giving the majority judgment of the New York Court of Appeal in Sun Printing & Publishing Association v. Remington Paper & Power Co. Inc. (1923) 139 N.E. 470, 471 : " There is need, it is true, of no high degree of ingenuity to show how the parties, with little change of language, could have framed a contract to which obligation would attach. The difficulty is that they framed another. We are not at liberty to revise while professing to construe." The stevedore's fourth proposition It is really sufficient to dispose of this proposition in the circumstances of the instant case to say that, were it correct, all five of Lord Reid's conditions, which were common ground between the parties, would be entirely irrelevant: Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446 should have been decided the other way. Furthermore, in my opinion, the stevedore's fourth proposition is inconsistent with both the reasoning and the actual decision in Cosgrove v. Horsfall (1945) 175 L.T. 334. It was argued for the stevedore in Midland Silicones [1962] A.C. 446, 465, that Cosgrove's case was wrongly decided; but the decision in Midland Silicones was inconsistent with that contention (cf. Lord Derning, dissenting, at p. 489). In Cosgrove's case, 175 L.T. 334, the plaintiff, an employee of a transport company, was travelling in one of their omnibuses on a free pass, when a collision occurred with another of the company's omnibuses, causing the plaintiff injuries. One of the conditions to which the gmnt of the free pass was subject was that neither the company nor their servants were to be liable to the holder of the pass for personal injury however caused. The plaintiff sued the driver of his omnibus and recovered damages. The defendant's appeal to the Court of Appeal was dismissed, on the ground that the defendant was not a party to the oontract between the plaintiff and the company, the condition of exemp- tion from liability not having been imposed by the company as agent for the efendant. On the steevdore's fourth proposition (unlike the first thfree agency is quite irrelevant; moreover, the stevedore's fourth proposition, if valid, merely needs rephrasing to fit the facts of Cosgrove v. Horsfall so that the defendant should have succeeded. Counsel relied for the stevedore's fourth proposition on the cases where a licence is coupled with a disclaimer of liability and on Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465. In all these cases, however, the right or servioe extended was gratuitous; and obviously any person making a gift can delimit its extent. The cases give no ground, in my opinion, for any such general principle of law as is implicit in the stevedore's fourth proposition, which, if valid, would seem to provide a revolutionary short cut to a jus quaesitum tertio. Since I cannot accept the stevedore's fourth proposition, it is unnecessary to discuss the fine and difficult distinctions which oounsel sought to draw between this proposition and the doctrine of volenti non fit injuria. Conclusion For the foregoing reasons I respectfully agree with the judgment of the Court of Appeal. In so concluding I must not be taken to be doubting that a suitably drawn instrument could bring a consignor and a stevedore into a relation- ship of obligation and meet Lord Reid's five conditions in such a way that a stevedore could claim the benefit of an exemption clause even against a consignee. In this connection I note that the clause instantly in question ppeared in b~ills of lading before the Midland Silicones case and was not drawn in the light of the case. Alternatively, no doubt, exemption could in practice be secured by a suitably drawn indemnity clause. Finally, there seems no reason to question that; as Turner P. thought, a bill of lading could, if appropriately drafted, contain an offer giving rise to a unilateral contract with a stevedore. Solicitors: Richards, Butler & Co., Wray, Smith & Co R. W. L.S. [COURT OF APPEAL] * COURTNEY & FAIRBAIRN LTD. v. TOLAINI BROTHERS (HOTELS) LTD. AND ANOTHER [1971 C. No. 6262] 1974 Nov. 28 Lord Denning M.R., Lord Diplock and Lawton L.J. Contract--Formation--Agreement to negotiate--Building contract --Agreement to negotiate fair and reasonable price--Whether binding contract The defendants, who wanted to develop a site, discussed their plans with the plaintiffs, who were buildig contractors well placed to obtain finance for the development. It was proposed that the plaintiffs should introduce someone to provide finance to the defendants and should themselves be employed to do the construction work. On April 10, 1969, the plaintiffs wrote to the defendants saying that they were able to introduce someone who had the necessary finance. The letter, which stressed the plaintiffs' interest as builders, asked whether, if their introduction led to an acceptable financial arrangement, the defendants would instruct their quantity surveyor " to negotiate fair and reasonable sums " for the projects based on agreed estimates of net cost and overheads with a 5 per cent. profit margin. In reply on April 28 the defendants wrote to the plaintiffs agreeing " to the terms specified " in the letter of April 10. The plaintiffs introduced a financier who provided money for the projects. After differences of opinion about the price of the building work the defendants did not employ the plaintiffs but engaged other contractors for that work. Shaw J. held that the letters of April 10 and 28, 1969, gave rise to a binding and enforceable contract whereby the defendants undertook to employ the plaintiffs to carry out the work at a price to be calculted by the addition of 5 per cent. to the fair and reasonable cost and overheads. On the defendants' appeal:-- Held, allowing the appeal, (1) that since there had been no agreement upon such a fundamental matter as the price in a building contract, or the method by which it was to be calculated, there was no contract. (2) That the law did not recognise a contract to negotiate and where a fundamental matter was left to be the subject of negotiation there was no contract. Dictum of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, 515 disapproved. Decision of Shaw J. reversed. The following cases are referred to in the judgments : Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, H.L.(E.). Mountford v. Scott [1973] 3 W.L.R. 884; [1974] 1 All E.R. 245. The following additional cases were cited in argument: Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, H.L.(E.). Mountford v. Scott [1973] 3 W.L.R. 884; [1974] 1 All E.R. 245. The following additional cases were cited in argument: Brown v. Gould [1972] Ch. 53; [1971] 3 W.L.R. 334; [1971] 2 All E.R. 1505. National Coal Board v. Galley [1958] 1 W.L.R. J 6; [1958] 1 All E.R. 91, C.A. Smith v. Morgan [1971] 1 W.L.R. 803; [1971] 2 All E.R. 1500. INTERLOCUTORY APPEAL from Shaw J. The plaintiffs, Courtney & Fairbairn Ltd., claimed against the defen- dants, Tolaini Brothers (Hotels) Ltd. and the Thatched Barn Ltd., declara- tions that the defendants were in breach of contract with an inquiry as to damages and that the plaintiffs were entitled to a reasonable sum in respect of the services rendered to the defendants. At the trial before Shaw J. the parties (the first defendants being the effective defendants) agreed to proceed on the question " whether there was concluded any enforceable agreement in law between the plaintiffs and the defendants or one of them and if yes who were the parties to the agree- ment and what were its terms." Shaw J. gave judgment for the plaintiffs holding : ". . . the letter written by Mr. Courtney on behalf of the plaintiffs, dated April 10, 1969, addressed to Mr. Sidney Tolaini, and the reply thereto, dated April 28, 1969, gave rise to a binding and enforceable contract whereby the defendants undertook to employ the plaintiffs to do and the plaintiffs undertook to carry out the work referred to in their said letter at a price to be calculated by the addition of 5 per cent. to the fair and reasonable cost of the work and the general overheads relating thereto." The first defendants appealed on the grounds that (1) the judge was wrong in law in holding that the letters of April 10 and 28, 1569, between the parties amounted to an enforceable agreement; (2) the letters con- stituted, on their clear and natural meaning, an agreement to agree con- tract sums before any work should be carried out, and such agreement was not enforceable; (3) if and in so far as the judge gave any weight to the terms of a conversation between Mr. Tolaini and Mr. Courtney on April 21. 1969, in construing the letters in any sense other than their clear and natural meaning, he was not entitled in law to do so in the absence of any plea for rectification of the written agreement; (4) alternatively the judge was wrong in law in not holding that the letters constituted an finance) the first defendants agreed to instruct their quantity surveyor to negotiate contract sums on the basis of estimates to be made of net costs plus 5 per cent., and accordingly that if such negotiation did not produce an agreement as to the estimates, there was no further obligation on the defendants; (5) if and in so far as the judge purported to make any findings or express any views about the eventual negotiation on the between the parties in October 1970 and/or attached any weight thereto, he erred in so doing in that, inter alia, no issue as to the breach of any enforceable agreement was before the judge. The facts arc stated in the judgment of Lord Denning M.R. David Sullivan for the defendants. John Dyson for the plaintiffs. LORD DENNING M.R. The question in this case is whether two letters give rise to a concluded contract Mr. Tolaini, managing director of the defendants, wanted to develop a site in Hertfordshire. It was the Thatched Barn Hotel together with five acres of land. He got in touch with a property developer, a Mr. Courtney the managing director of the plaintiffs. It appears that Mr. Courtney was well placed to obtain finance for building development. He was also a building contractor himself. The two met and discussed ways and means at the office of S. Sacks, an architect. The proposal was that Mr. Courtney should introduce some one to provide the money and lend it to Mr. Tolaini. Mr. Tolaini was to develop the site by building a motel and the construction work After the meeting on April 10, 1969 Mr. Courtney wrote to Mr. Tolaini this letter: " Re: Thatched Barn Hotel. "... I am now in a position to introduce you to those who: (a) are interested in your proposals, (b) have access to the necessary finance subject to agreement on terms. . . . " I think I should mention, at this point, that my commercial interest in this matter is that of a building contractor. I am interested in it due to the fact that Mr. Sacks whom I have known for some years, is aware that I work for a number of large investing and development concerns, and thought it possible that I might be in a position to be of service to you. " You will understand, therefore, that in addition to making myself useful to you, my objective is to build three projects mentioned, namely, the motel, the filling station, and the future hotel, or other development, on the ' Green Belt ' area of your site." Then follow these important words: and arrangements with interested parties lead to an introductory meeting, which in turn leads to a financial arrangment acceptable to both parties you will be prepared to instruct your quantity surveyor to negotiate fair and reasonable contract sums in respect of each of the three projects as they arise. (These would, incidentally be based upon agreed estimates of the net cost of work and general overheads agree, is indeed reasonable. . . ." On April 21, 1969, there was a meeting between the parties at the Thatched Barn Hotel. Mr. Courtney said he wanted to have something in did write a letter on April 28 1969 in the terms : "In reply to your letter of April 10, I agree to the terms specified therein, and I look forward to meeting the interested party regarding finance." Those are the two letters on which the issue depends. But I will tell the subsequent events quite shortly. Mr. Courtney did his best. He found a person interested who provided finance of #200,000 or more for with a view to negotiating with Mr. Courtney the price for the constructin work. But there were differences of opinion about the price. And nothing was agreed. In the end Mr. Tolaini did not employ Mr. Courtney or his was agreed. In the end Mr. Tolaini did not employ Mr. Courtney or company to do the construction work. Mr. Tolaini instructed other con- tractors and they completed the motel and other works. But then Mr. Tolaini took advantage of the finance which Mr. Courtney had made possible, but he did not employ Mr. Courtney's company to do the work. Naturally enough, Mr. Courtney was very upset. He has brought this action in which he says that there was a contract by which his company were to be employed as builders for the work, and it was a breach of contract by Mr. Tolaini or his company to go elsewhere and employ some- body else. Mr. Courtney's company claimed the loss of profits which they would have made if they had been employed as builders for this motel. At the trial the parties agreed to proceed on the following question: "Whether there was concluded any enforceable agreement in law between the plaintiffs and the defendants or one of them and if yes, who were the parties to the agreement and what were its terms." Shaw J. heard the evidence on the point, both as to the initial interview and as to the circumstances in which Mr. Courtney's company were not employed to do the work. He held that there was an enforceable agree- ment. He found that the parties were Mr. Courtney's company and Mr. Tolaini's company: and that the terms were inter alia, contained in the letters of April 10 and 28, 1967, which I have read. He said in his judg- ment that the letters " gave rise to a binding and enforceable contract whereby the defen- dants undertook to employ the plaintiff to carry out the work referred to in [Mr. Courtney's letter of April 10; 1969] at a price to be calcu- lated by the addition of 5 per cent. to the fair and reasonable cost of the work and the general overheads relating thereto. I am afraid that I have come to a different view from the judge. The reason is because I can find no agreement on the price or on any method by which the price was to be calculated. The agreement was only an agreement to " negotiate " fair and reasonable contract sums. The words of the letter are " your quantity surveyor to negotiate fair and reasonable contract sums in respect of each of the three projects as they arise." Then there aIr words which show that estimates had not-yet been agreed, but were yet to be agreed. The words are : " These " (the contract sums) " would, incidentally be based upon agreed estimates of the net cost of work and general overheads with a margin for profit of 5 per cent.' Those words show that there were no estimates agreed and no contract sums agreed. All was left to be agreed in the future. IT was to be agreed between the parties themselves. If they had left the price to be agreed by a third person such as an arbitrator, it would have been different. But here it was to be agreed between the parties themselves. Now the price in a building contract is of fundamental importance. It is so essential a term that there is no contract unless the price is agreed or there is an agreed method of ascertaining it, not dependent on the negotiations of the two parties themselves. In a building contract both parties must know at the outset, before the work is started, what the price i to be, or, at all events, what agreed estimates are. No builder and no mployer would ever dream of entering into a builddin contraact for over #200,000 without there being an estimate of the cost and an agreed means mitted to the contractors. They work out the figures and tender for the work at a named price: and there is a specified means of altering it up or down for extras or omissions and so forth, usually by means of an architect's certificate. In the absence of some such machinery, the only contract which you might find is a contract to do the work for a reasonable sum, or for a sum to be fixed by a third party. But here there is no such contract at all. There is no machinery for ascertaining the price except by negotiation. In other words, the price is still to be agreed. Seeing that there is no agreement on so fundamental matter as the price, there is no contract. But then this point was raised : even if there was not a contract actually to build, was not there a contract to negotiate? In this case Mr. Tolaini did instruct his quantity surveyor to negotiate, but the negotia- tions broke down. It may be suggested that the quantity surveyor was to blame for the failure of the negotiations. But does that give rise to a cause of action? Mere is very little guidance in the books about a contract to negotiate. It was touched upon by Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, 515, where he said : " There is then no bargain except to negotiate, and negotiations may be fruitless and end without any contract ensuing; yet even then, in strict theory, there is a contract (if there is good consideration) to negotiate, though in the event of repudiation by one party the damages may be nominal, unless a jury think that the opportunity to negotiate was of some appreciable value to the injured party." That tentative opinion by Lord Wright does not seem to me to be well founded. If the law does not recognise a contract to enter into a contract (when there is a fundamental term yet to be agreed) it seems to me it cannot recognise a contract to negotiate. The reason is because it is too uncertain to have any binding force. No court could estimate the damages because no one can tell whether the negotiations would be successful or would fall through : or if successful, what the result would be. It seems to me that a contract to negotiate, like a contract to enter into a contract, is not a contract known to the law. We were referred to the recent decision of Brightman J. about an option. Mountford v. Scott [1933] 3 W.L.R. 884: but that does not seem to me to touch this point. I think we must apply the general principle that when there is a funda- mental matter left undecided and to be the subject of negotiation, there is no contract. So I would hold that there was not any enforceable agree- ment in the letters between the plaintiff and the defendants. I would allow the appeal accordingly. LORD DIPLOCK. I agree and would only add my agreement that the dictum, for it is no more, of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd., 147 L.T. 503, 515, to which Lord Denning M.R. has referred, though an attractive theory, should in my view be regarded as bad law. LAWTON L.J. I agree with both the judgments which have been delivered. Appeal allowed with costs in Court of Appeal and below. Action dismissed. Solicitors : Pollards, Boreham Wood, Herts; Doyle, Devonshire. Box & Co. A. H. B. [COURT OF APPEAL] * TANNER v. TANNER 1975 April 30 Lord Denning M.R., Browne L.J. Licence or Tenancy--Implied licence-Occupation of house--House purchased as home for mistress and children--Nature of licence --Purported termination--Mistress and children leaving after eviction order--Compensation for loss of licence In November 1969 the defendant, a spinster, gave birth to twin daughters of whom the plaintiff was the father. In early 1970 the plaintiff and the defendant decided that a house should be purchased to provide a home for the defendant and her baby daughters. In July 1970 the plaintiff bought a house on mortgage, and the defendant left her rent controlled flat and moved with the babies into the house. Three years later the plaintiff offered the defendant #4,000 to move out of the house. The defendant refused on the ground that the house was hers and the children's until the latter left school. The plaintiff's solicitor wrote to the defendant purporting to terminate her licence to live in the house and asking her to leave. When she did not do so the plaintiff brought possession proceedings in the county court. The defendant counterclaimed for a declaration that she was entitled to a beneficial interest in the house. The county court judge rejected the defendant's contentions and made an order for possession, in pursuance of which the defen- dant and her children were rehoused by the local authority. On appeal by the defendant:-- Held allowing the appeal, (1) that the inference to be drawn from all the circumstances was that the defendant had a contractual licence to have accommodation in the house for herself and the children so long as the children were of school 1351E, 1352B--C); and that, accordingly, the order for possession ought not to have been made. (2) That, in the circumstances, the just and equitable order was to award the defendant compensation of #2,000 for the loss of the licence (post, pp. 1351B--C, F, 1352D--F). The following cases are referred to in the judgments: Binions v. Evans [1972] Ch. 359; [1972] 2 W.L.R. 729; [1972] 2 All E.R. 70, C.A. Combe v. Combe [1951] 2 K.B. 215; [1951] 1 All E.R. 767, C.A. Cooke v. Head [1972] 1 W.L.R. 518; [1972] 2 All E.R. 38, C.A. Eves v. Eves [1975] 1 W.L.R. 1338, C.A. Gissing v. Gissing [1971] A.C. 886; [1970] 3 W.L.R. 255; [1970] 2 All E.R. 780, H.L.(E.). Leeds Industrial Co-operative Society Ltd. v. Slack A.C. 851, H.L.(E.). No additional cases were cited in argument. APPEAL from Judge Stockdale sitting at Barnet County Court. By summons dated September 17, 1973, the plaintiff, Eric Robert Tanner, claimed possession of the ground floor of 4 Theobalds Avenue, London N.12, from the defendant, Josephine Tanner, alleging that she was in occupation of the premises as a trespasser following the termina- tion of her licence to occupy. The defendant denied that she occupied the premises as a licensee and/ or trespasser and counterclaimed for a declaration that the plaintiff held the premises on trust for himself and the defendant as joint tenants or tenants in common in equity. On June 19, 1974, Judge Stockdale ordered the defendant to give possession to the plaintiff on July 31, 1974. By an amended notice of appeal the defendant appealed on the grounds, inter alia, that the judge was wrong in law in finding (1) that the plaintiff was not estopped from claiming possession; and (2) that no trust express or implied was imposed on the plaintiff as legal owner for the benefit of the defendant. The facts are stated in the judgment of Lord Denning M.R. J. Melville Williams for the defendant. Dennis Levy for the plaintiff. LORD DENNING M.R. In 1968 Mr. Eric Tanner, the plaintiff, was a milkman during the day and a croupier at night. He had been married for many years. He had a daughter then aged 19 and a son aged 12. They lived together at 26 Achilles Road in West Hampstead. But, to use his own words he got " disgusted " with his marriage and went out and had " a good time." He went out with three women, he said, " simultaneously," meaning separately but during the same weeks or months. One of these women was an attractive Irish girl, Miss Josephine MacDermott, the defendant. She was a cook in a nursing home. She had a flat in 33 Steels Road, Hampstead, on the third floor. He visited her frequently. She became pregnant by him. She took his name and became known as Mrs. Tanner. In November 1969 she gave birth to twin daughters. They decided it was best to get a house for her and the twin babies. They found one at 4 Theobalds Avenue, North Finchley. The plaintiff borrowed a sum on He said that he was 45. His wife was 41. He had a son aged 14, a misleading application, because he was not getting it for his wife and his older children. He wanted it for the defendant and the twin babies. By means of that misrepresentation the plaintiff got the house on mortgage. It was in his own name. The defendant and the baby twins moved in there. She brought a good deal of her furniture and spent #150 on furnishings for it. She moved into the ground floor. They let the first floor. She managed the lettings and collected the rent. Previously, whilst she was in her flat in Steels Road, Hampstead, the plaintiff had paid her #5 a week maintenance for the twins. But after she moved into Theobalds Avenue he paid her nothing for them or for her. She got a supplemen- tary allowance under social security from the local authority. She got an increased amount from them for rent : because she told them she was paying him #3 a week for rent. Now all this time, unknown to the defendant, the plaintiff was associating with another woman--a married one--Mrs. Metcalfe, who had a house in Willesden. Eventually the defendant got to know about it; and the plaintiff did not visit her very often at Theobalds Avenue. By 1971 the time came when the defendant was suggesting that the house should be sold. In one letter to the plaintiff she said: " It's not fair on the twins; they deserve a much better deal from life than this. It's best you sell this house and let me and them have the cash to start a new life in some country." In another letter she said: " Sold furnished it should fetch around #6,400 for it as things are at the moment. I don't know how much the mortgage people will want from yon, then, take out of it any money yon have spent on mortgaging it and on rates, electric etc. Then what's over I will have for the twins and for the loss of my Hampstead flat." The plaintiff did not reply to those letters. But he talked to her and said he wanted her to get out of the house. He offered her #4,000. The defendant's evidence was: " He offered me #4,000 for something else. I refused as the house was supposed to be ours until the children left school." The plaintiff's evidence was: " I offered #4,000 to the defendant when I was still single in June 1973. I offered it for a bungalow in the country. But she said this was her house and she would not leave." So she stayed there. By this time the plaintiff had got a divorce from his first wife. He married Mrs. Metcalfe--the lady in Willesden--and moved into her house at Willesden. She too became pregnant. He found himself in financial difficulty. So much that he determined to get the defendant with the twins out of the house in Theobalds Avenue and to move in there himself, if he could. On July 16, 1973, his solicitor wrote to the defendant : " We act for Mr. E. R. Tanner and we understand that you have, together with your two daughters, been occupying part of the above property which belongs to him for some time past under licence. We are instructed to inform you that Mr. Tanner revokes the licence forthwith and to ask you please to let us know the date you will be vacating with your children. We are instructed further to tell you that as from the date you vacate our client will pay you the sum of #6 per week for the keep of the two children Valerie and Gloria until they attain the age of 16 years. Mr. Tanner feels that he has been more than generous to you in the past and hopes that you will be able to vacate within the next three or four weeks." The defendant did not vacate, and the plaintiff brought proceedings in the county court to turn her out. She put in a cross claim saying she was entitled to a share in the house, and that she ought not to be turned out. In the county court counsel for the defendant submitted that she was in the house under a licence which the plaintiff was estopped from terminating; and that he could not transfer the house while the children were of school age. For this he relied on Combe v. Combe [1951] 2 K.B. 21 5, 220. Alternatively counsel submitted that a tmst could be inferred whereby the defendant obtained a beneficial interest in the property for herself and children. For this he relied on Gissing v Gissing [1971] A.C. 886, 905; and Cooke v. Head [1972] 1 W.L.R. 518, 520. The judge rejected these contentions. He found that this man never intended to marry the lady: and made it clear to her that marriage was out of the question. She was quite aware of this. The judge said that she made the move to Theobalds Avenue because she thought it best for herself and the twins, not on the basis of future security. The judge found that the defendant had no right to stay in the house. He said : " Had there been discussion about a home until remarriage, or money handed over, things might have been different. Although one's sympathies are with the defendant, it would be wrong to stretch the authorities improperly to find estoppel or tmst. . . . Even though the defendant is the cause of the problems, he is not to be punished; he is entitled to ask the court to protect his rights. Accordingly the plaintiff is entitled to an order for possession." He made an order for possession in six weeks and rejected the we have cases about a deserted mistress The case is different from Cooke v. Head and a case we had earlier this week, Eves v. Eves [1975] 1 W.L.R. 133B. In those cases the man and his mistress obtained the house m- contemplation of marriage. Here they did not. Nevertheless it seems to me plain on the evidence that the house was acquired in the contemptation and expectation that it would provide a home for the defendant and the twin daughters. The babies were only eight months old at the time. She gave up her flat in Steels Road (where she was protected by the Rent Acts) to move into this house. It was obviously provided for her as a house for herself and the twins for the foreseeable future. It is said that they were only licensees--bare licensees--under a licence revokable at will: and that the plaintiff was entitled in law to turn her and the twins out on a moment's notice. I cannot believe that this is the law. This man had a moral duty to provide for the babies of whom he was the father. I would go further. I think he had a legal duty towards them. Not only towards the babies. But also towards their mother. She was looking after them and bringing them up. In order to fulfil his duty towards the babies, he was under a duty to provide for the mother too. She had given up her flat where she was protected by the Rent Acts-- at least in regard to rent and it may be in regard also to security of tenure. She had given it up at his instance so as to be able the better to bring up the children. It is impossible to suppose that in that situation she and the babies were bare licensees whom he could turn out at a moment's notice. The plaintiff recognised this when he offered to pay the defendant #4,000 to get her out. What was then their legal position? She herself said in evidence: " The house was supposed to be ours until the children left school." It seems to me that enables an inference to be drawn, namely, and the children so long as they were of school age and the accommoda- tion was reasonably required for her and the children. There was, it is true, no express contract to that effect, but the circumstances are such that the court should imply a contract by the plaintiff--or, if need be, impose the equivalent of a contract by him--whereby they were entitled to have the use of the house as their home until the girls had finished school. It may be that if circumstances changed--so that the accommo- dation it was not reasonably required--the licence might be determinable. But it was not determinable in the circumstances in which he sought to determine it, namely, to turn the defendant out with the children and to bring in his new wife with her family. the kind which is specifically enforceable on her behalf: and which the plaintiff can be restrained from breaking; and he could not sell the house over her head so as to get her out in that way. That appears from Binions v. Evans [1972] Ch. 359, 367 to 368. If therefore the defendant had sought an injunction restraining the plaintiff from determining the licence, it should have been granted. The order for possession ought not to have been made. It was said that this point (of an implied contract) was not pleaded. But to my mind it arose on the claim itself. The plaintiff pleaded a licence which had been determined. So the question was, what was the licence and what were the terms of it? Points about estoppel were raised too. Those are all ways of stating the legal effect of the facts. The facts were sufficiently pleaded, it seems to me, for the court to deal with it on the basis of an implied contract. But what is to be done? The judge ordered possession in six weeks. Thereupon the local housing authority (as they usually do when an order for possession is made) provided accommodation for the defendant and the children. She moved out in pursuance of the order and does not ask to be put back now. Seeing that the order ought not to have been made and we reverse it, what is to be done? It seems to me that this court has ample power, when it reverses an order of the court below, to do what is just and equitable to restore the position as fairly as it can in the circumstances. The plaintiff has obtained an unjust benefit and should make restitution. In the circumstances the court can and should assess compensation to be payable by him. He has not been paying any maintenance for these children for years--ever since the defendant went into the house. It seems to me a reasonable sum for loss of this licence (which the defendant ought not to have lost) would be #2,000. So I would allow the appeal and say that the order for possession shall be set aside, and as compensation to her for being wrongly turned out, the sum of #2,000 to be payable by the plaintiff. I would allow the appeal accordingly. BROWNE L.J. I agree that the appeal should be allowed and that the order proposed by Lord Denning M.R. should be made. I agree that this is not a case like Cooke v. Head [1972] 1 W.L.R. 518 or Eves v. Eves [1975] 1 W.L.R. 1338 where the defendant has any sort of proprietary interest in the property. But I agree that there was here a licence by the plaintiff to the defendant for good consideration: it could not be revoked at will. What has troubled me is what the duration of this licence was to be. With some hesitation I agree with Lord Denning M.R.'s view of what it was to be; that is, in substance it was a licence to the defendant to occupy accommodation in the house so long as the children were of school age and such accommodation was reasonably required for her and the twins, subject to any relevant change of circumstances, such as her remarriage. I agree that the order by the judge on the application of the plaintiff involved a breach of that licence and that this court is entitled to compensate the defendant for the plaintiff's breach of contract in revoking the licence on the lines indicated by Lord Denning M.R. BRIGHTMAN J. I also agree. On the evidence the county court judge was entitled to find that there was no express agreement between the parties that the defendant was to have any proprietary interest in the house, and that she had made no contribution in cash or kind from which such an agreement could be inferred. The case before us has nothing in common with Eves v. Eves [1975] 1 W.L.R. 1338 which we decided two days ago. In the latter case Pennycuick V.-C. found that there was an understanding between the parties that the lady should have a beneficial interest in the house, and that she was tricked out of having her name on the title deeds. On the faith of that understanding, she had done far more towards the rehabilitation of the house than would be expected of a wife or a mistress. It was quite different from the present case. Here the lady was provided with accommodation for herself and the twins. That fact is not enough to give her any proprietary interest in such [CHANCERY DIVISION] * BUSHWELL PROPERTIES LTD. v. VORTEX PROPERTIES LTD. SAME v. SAME [1969 B. No. 4041] [1971 B. No. 7257] 1974 Nov. 19, 20, 21, 22, 25, 26; Oliver J. Dec. 9 Contract--Formation--Consensus ad idem--Uncertainty--Agree- ment to purchase land--Purchase price to be paid in stages-- " Proportionate part " of land to be conveyed on each occasion --No agreement as to areas to be thus conveyed--Whether contract void for uncertainty Interest-Statutory right--" Interest upon interest "--Breach of contract for sale of land forcing purchasers to borrow to pay purchase price--Claim for damages calculated on interest paid on debt--Whether jurisdiction to award interest--Law Reform (Miscellaneous Provisions) Act 1934 (24 & 25 Geo. 5, c. 41), s. 3 (1) (a) On June 20, 1$8, the plaintiffs entered into an agreement with the defendant to purchase some 51 1/2 acres of land for housing development at a total price of #500,000 but payment of the purchase price was to be phased as to #250,000 on a first thereafter and as to the balance of #125,000, a further year thereafter, and on each completion a " proportionate part of the land " was to be released forthwith to the plaintiffs. The plaintiffs were to be allowed into occupation of the whole land on the exchange of formal contracts. The defendants, for pany who would start development before it was conveyed to the plaintiffs and, on May 6, 1969, wrote to the plaintiffs saying in effect that there was no contract in existence. The plaintiffs issued the writ in the first action claiming specific performance and damages. In July, the defendants in breach of contract conveyed the land to an associate company over which they had no legal control and offered the plaintiffs a contract whereby the associate company would convey the whole of the land in one conveyance for #500,000. The plaintiffs accepted that offer in mitigation of their damages and the associate company conveyed the land to the plaintiffs. The plaintiffs began a second action against the defendants claiming damages for the breach of contract resulting from their having to provide the purchase money sooner than they would have done under the original contract. The damages claimed included interest on the money the plaintiffs had had to borrow to find the purchase price and they also claimed interest, under section 3 (1) of the Law Reform (Miscellaneous Provisions) Act 1934,1 on those damages. On the questions whether the original contract was void interest on any damages awarded :-- Held, giving judgment for the plaintiffs, (1) that, although the contract of June 20, 1968, did not expressly state the manner in which the " proportionate part of the land " was to be ascertained, it was not void for uncertainty since it was clear that the area to be conveyed was an area proportionate in value to the sum do be paid on each such conveyance; that in the absence of any reservation to the vendor of the any machinery for determining such area, the purchaser, as the owner in equity of the land, had the right to select which area should be conveyed, subject only to the overriding limita- tion that such area must not exceed " a propotionate part " in relation to the price paid (post, pp. 1656B-D, H-1657B). May and Butcher Ltd. v. The king (Note) [1934] 2 K.B. 17, H.J.(E.); Brown v. Gould [1972] Ch. 53 and Lake v. Bayliss [1974] 1 W.L.R. 1073 applied. (2) That although proviso (a) of section 3 (1) of the Law Reform (Miscellaneous Provisions) Act 1934 prevented the court from awarding interest on an interest-bearing debt, the sum claimed by the plaintiffs was damages for breach of contract although it caculated by reference to the interest which they had had to pay on the money borrowed in order to provide the full purchase price at an earlier date than pro- vided for in the contract of June 20, 1968, and consequently the court would not be precluded by propiso (a) from exercis- ing its discretionary power under the Act of awarding interest on the amount of damages to be awarded; that the court would direct an inquiry to ascertain the extent of the plain- tiffs' damages and the question whether interest should be allowed must await the conclusion of that inquiry (post, pp. 1659H-1660E). 1 Law Reform (Miscellaneous Provisions) Act 1934, s. 3 (1): " In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judg- ment is given interest at such rate as it thinks fit on the whole or any part of the the cause of action arose and ~e date of the judg~t: Pro~ded that no~ng in this section--(a) shall authorise the giving of interest upon interest;..." The following cases are referred to in the judgment:- Asten v. Asten [1894] 3 Ch. 260. Branca v. Cobarro [1947] K.B. 854; [1947] 2 All E.R. 101, C.A. British Westinghouse Electric and Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd. [1912] A.C. 673, H.L.(E.). Brown v. Gould [1972] Ch. 53; [1971] 3 W.L.R. 334; [1971] 2 All E.R. 1505. Cottrill v. Steyning and Littlehampton Building Society [1966] 1 W.L.R. 753; [1966] 2 All E.R. 295. Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, C.A. Houndsditch Warehouse Co. ttd. v. Waltex Ltd. [1944] K.B. 579; [1944] 2 All E.R. 518. King's Motors (Oxford Ltd. v. tax [1970] 1 W.L.R. 426; [1969] 3 All E.R. 665. Lake v. Bayliss [1974] 1 W.L.R. 1073; [1974] 2 All E.R. 1 114. Lee-Parker v. Izzet (No. 2) [1972] 1 W.L.R. 775; [1972] 2 All E.R. 800. May and Butcher Ltd. v. The King (Note) [1934] 2 K.B. 17, H.L.(E.). Pagnan (R.) & Fratelli v. Corbisa Industrial Agropacuaria Limitada [1970] 1 W.L.R. 1306; [1971] 1 All E.R. 165, C.A. Payzu Ltd. v. Saunders [1919] 2 K.B. 581, C.A. Reigate v. Union Manufacturing Co. (Ramsbottom) ttd. [1918] 1 K.B. 592, C.A. Sweet & Maxwell Ltd. v. Universal News Services Ltd. [1964] 2 Q.B. 699; [1964] 3 W.L.R. 356; [1964] 3 All E.R. 30, C.A. Whitworth Street Estates (Manchester) Ltd. v. James Miller and Partners Ltd. [1970] A.C. 583; [1970] 2 W.L.R. 728; [1970] 1 All E.R. 796, H.L.(E.). Wickman Machine Tool Sales Ltd. v. L. Schuler A.G. [1974] A.C. 235; [1973] 2 W.L.R. 683; [1973] 2 All E.R. 39, H.L.(E.). The following additional cases were cited in argument: Harvey v. Pratt [1965] 1 W.L.R. 1025; [1965] 2 All E.R. 786, C.A. Jones v. Lipman [1962] 1 W.L.R. 832; [1962] 1 All E.R. 442. McCallum v. Country Residences Ltd. [1965] 1 W.L.R. 657; [1965] 2 All E.R. 264, C.A. Marks v. Lilley [1959] 1 W.L.R. 749 [1959] 2 All E.E. 647. Slough Estates Ltd. v. Slough Borough Council (No. 2) [1971] A.C. 958; [1970] 2 W.L.R. 1187; [1970] 2 All E.R. 216 H.L.(E.). Smith v. Morgan [1971] 1 W.L.R. 803; [1971] 2 All E.R. 1500. Synge v. Synge [1894] 1 Q.B. 466, C.A. Winn v. Bull (1877) 7 Ch.D. 29. CONSOLIDATED ACTION On June 20, 1968 the plaintiff Bushwall Properties Ltd., entered into a written agreement to purchase approximately 511/2 acres of land lying to defendants, Vortex Properties Ltd, for development. The contract pro- vided that the payment of the purchase price was to be " phased as to #250,000 upon first completion, as to #125,000 twelve months thereafter, and as to the balance of #125,000 a further twelve months theresfter," and on " each competion a proportionate part of the land " was to be " released forthwith " to the plaintiffs. The contract was subject to the fulfilment of certain conditions as to the obtaining of outline and detailed planning permission, the conclusion of an agreement with the local authority under section 37 of the Town and Country Planning Act 1962, as to the housing density to be allowed, and proof of title. The date of the first completion was to be eight weeks from the fulfilment of the conditions but the plaintiffs were to be allowed into possession of the whole of the land on the exchange of formal contracts, so as to permit operationss to commence as the plaintiff~ might think fit. All the conditions were filfilled by April 10, 1969, but on the question as to the exact area of land to be conveyed on the first conveyance the parties failed to reach agreement and, on July 7, 1969, the plaintiffs issued a writ against the defendants claiming specific performance and damages. On July 24, 1969, the defendants, in breach of contract, conveyed the land to Medina Estates Ltd., an associated company over which they had no legal control. After negotiations in which the defendants offered an alter- native performance of the contract, by tendering a formal draft contract on the original terms but with Medina instead of the defendants, as vendor, and in which repeated efforts were made by both sides to resolve the dis- and different contract with Medina, whereby the whole of the land would be conveyed at once against an immediate payment of the whole purchase price of #500,000. The letter was headed " Re Bushwall v. Vortex " and read: " In a final efford to dispose of this matter we are instructed to make the following open offer. Our clients are prepared to dispense with any formal contract and offer to convey the whole of the land in one conveyance for #500,000, completion to take place within a reason- able time, which we would suggest is two months from today's date." The plaintiffs accepted that offer and the land was conveyed by Medina in November 1970. In April 1971 the plaintiffs wrote claiming that they they were bound to suffer from the defendants' self imposed inability to carry out their original contract, and not as the defendants were alleging in settlement of the whole matter. On May 14, 1971, the plaintiffs issued a second writ claiming damages actions were consolidated. D. M. Burton for the plaintiffs. Michael Barnes for the defendants. Cur. Adv. vult. December 9. OLIVER J. read the following judgment. This is a con- solidated action. In the first action the plaintiffs9 Bushwall Properties Ltd., claimed specific performance of a contract for the sale of land, and in the second they claimed damages for breach of the same contract. In the event the only claim now pursued is for damages. [His Lordship stated the facts summarised above, considered the defendants' claim that the plaintiffs had accepted the conveyance from Medina Estates Ltd., the defendants' associate company, in settlement of their action, referred to Lake v. Bayliss [1974] 1 W.L.R. 1073; Payzu Ltd. Saunders [1919] 2 K.B. 581; Houndsditch Warehouse Co. Ltd. v. Waltex Ltd. [1944] K.B. 579; Cottrill v. Steyning and Littlehampton Building Society [1966] 1 W.L.R. 753; Wickman Machine Tool Sales Ltd. v. L. Schuler A.G. [1974] A.C. 253 and Whitworth Street Estates (Manchester) Ltd. v. James Miller and Partners Ltd. [1970] A.C. 583, and found that the plaintiffs had accepted the conveyance in mitigation of damages and not in= the settle- ment of the action. His Lordship continued: ] Mr. Barnes makes three i dd h ubmitted that there never was a binding contract suasive address, he submitted that there never was a binding contract between the plaintiffs and the defendants. Whatever they may have said or done, whatever they may have intended by what they said, the agree- ment which they made failed to have any contractual effect because of the uncertainty with which it was expressed. This submission is really an elaboration of the point made by Messrs. Linklaters & Paines in their letter of March 3, 1970, namely, that the provisions of clauses 2 and of the letter of June 20, 1968, were too uncertain to be given effect to. I had better read those clauses again - " 1. The purchase price to be phased as to #250,000 upon first com- pletion, as to #125,000 twelve months thereafter and as to the balance of #125,000 a further twelve months thereafter. 2. On the occasion of each completion a proportionate part of the land shall be released forthwith to us." The submissions here may be summarised as follows: first, "proportion- ate" is a word of uncertain meaning in this context. It may mean pro- portionate in area, or in value, or a combination of the two. Secondly, even allowing that this can be overcome--assume for instance that " pro- portionate " means proportionate in area--there are infinite variants of this. One-third of the land may be on the east or the west, or it may consist of two or more pieces in different parts. Thirdly, there are only three ways in which so general an expression can be rendered sufficiently certain to avoid the agreement failing altogether and these are (a) through the document itself--that is to say, the court may arrive at certainty by a process of construction; (b) where the document itself contains a for- mula by which the requisite certainty can be reached--for instance, a formula such as "a reasonable price" or "a fair market rent"; (c) where there is no inherent certainty--for instance an arbitration clause. Here, says Mr. arriving at certainty--for instance an arbitration clause. Here, says Mr. Barnes, there is nothing to help the court to construe the document with certainty; the word is "proportionate" and it is completely at large. Nor, he says, is there any formula such as " reasonable " or " fair," nor is there by a further agreement between the parties. So this is nothing more than an agreement which, if it is to operate at all, requires a further butcher Ltd. v. The king (Note) [1934] 2 K.B. 17 and the more recent decision of Burgess V.-C. in King's Motors (Oxford Ltd. v. Lax [1970] 1 W.L.R. 426. A summary of the principles may be found in the speech of Viscount Dunedin in May and Butcher Ltd. v. The King (Note) [1934] 2 KB 17 21 and in the judgment of Maugham L.J. in Foley v. Classique Coaches Ltd. [1934] 2 K.Q. 1 in the same volume. Viscount Dunedin says, at p. 21. ' To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties. In the system of law in which I was brought up, that was expressed by one of those brocards of which perhaps we have been too fond, but which often express very neatly what is wanted: ' Certum est quod certum reddi potest.' Therefore, you may very well agree that a certain part of the contract of sale, such as price, may be settled by someone else. As a matter of the general law of contract all the essentials have to be settled." Maugham L.J. says, at p. 13: " It is indisputable that unless all the material terms of the contract are agreed there is no binding obligation. An agreement to agree in the future is not a contract; nor is there a contract if a material term is neither settled nor implied by law and the document con- tains no machinery for ascertaining it." Mr. Barnes was good enough to refer me to a number of authorities and I hope it will not be considered disrespectful of his arguments if I do not deal with them at length here. They were in truth merely helpful examples of the same principle on one side of the line or the other. Thus, n Sweet g&M~axwll Ltd. v. Universal News Services Ltd. [1964] 2 Q.B. required " and the court was able to arrive at a certain meaning. On the 1 W.L.R. 426 where there was an option for a lease at such rent as might be agreed, and Lee-Parker v. Izzet (No. 2) [1972] 1 W.L.R. 775, where there was a condition precedent of obtaining a satisfactory mortgage--a case where a formula was provided but where the formula itself was too uncertain. The approach of the courts to cases such as these was recently considered by Megarry J. in Brown v. Gould [1972] Ch. 53, and I take the following extract from his judgment in that case as the guideline, at p. 56: " In an unreported case; In re Lloyds' Trust Investments, June 24, 1970, to which I referred counsel, I endeavoured to state the basic principles applicable in cases of uncertainty. What I said there was: 'I think the starting point on any question of uncertainty must be that of the court's reluctance to hold an instrument void for uncer- tainty. Lord Hardwicke L.C. once said: ' A court never constues a devise void, unless it is so absolutely dark, that they cannot find out the testator's meaning " : Minshull v. Minshull (1773) 1 Atk. 411, amounts to an impossibility, the doubt so grave that there is not Perratt (1843) 9 Cl. & F. 606, 689. In a well known statement, Sir George Jessel M.R. said that the court would not hold a will void for uncertainty " unless it is utterly impossible to put a meaning upon it. The duty of the court is to put a fair meaning on the terms used, and not, as was said in one case, to repose on the easy pillow of say- ing that the whole is void for uncertainty ": In re Roberts (1881) 19 one which applies to other instrumcets, such as planning pcemissions is shown by cases such as Fawcett Properties Ltd. v. Bucking- ham County Council [1961] A.C. 636, where, by a majority, the delphic language of a condition in a planning permission escaped from being held void for uncertainty largely because of its resem- blance to a section to be found in a modern Act of Parliament. The second question is that of the types of uncertainty. The basic type (and on one view thec only true type) is unrcertainty of concept as contrasted with mere difficulty of application: see, for example, In one of a condition subsequent, in which special considerations apply. In Fawcett's case [1961] A.C. 636, 670, Lord Keith of Avonholm said: "The point is one of uncertainty of concept. If it is possible, on construction of the condition, to reach a conclusion as to what was in the draftsman's mind, the condition is meaningless and must be read as pro non scripto." Putting it another way, the question is one of linguistic or semantic uncertainty, and not of difficulty of ascertainment: see In re Baden's Deed Trusts [1971] A.C. 424, 457, per Lord Wilberforce. If there is a trust for "my old friends," all concerned are faced with uncertainty as to the concept or idea enshrined in these words. It may not be difficult to resolve that old " means not " aged " but " of long standing "; but then there is the question how long is " long." Friendship, too, is a concept with almost infinite shades of meaning. Where the concept is uncertain, tracing and discovering those who are entitled normally does not invalidate the gift.' To the authorities mentioned in that passage must now be added Greater London Council v. Connolly [1970] 2 Q.B. 100, a landlord and tenant case concerning a condition on the rent card of a council tenant. This condition provided that the rent and other sums shown on the rent card ' are liable to be Appeal unanimously held that the condition was not void for un- certainty. Lord Denning M.R. said, at p. 108 : ' The courts are always loath to hold a condition bad for uncertainty. They will give it a reasonable interpretation wherever possible. It is possible here.' Lord Pearson said, at p. 110: ' As my Lord has said, the courts are always loath to hold a clause invalid for uncertainty if a reasonable meaning can be given to it, and it seems to me easy to give a reason- able meaning to this condition.' Sir Gordon Willmer agreed. No doubt there may be cases in which the draftsman's ineptitude will succeed in defeating the court's efforts to find a meaning for the provision in question; but only if the court is driven to it will it be held that a provision is void for uncertainty." What I have to determine in this case is whether the draftsman of the letter of June 20, 1968, does by ingenuity or ineptitude succeed in defeat- ing the efforts which I have to make to find a certain meaning. I agree with Mr. Barnes that there is no formula expressly provided here and it is equally clear that there is no machinery expressly provided. As Mr. Barnes submits, the only way that the court can possibly arrive at a meaning is by construction. You either have to imply that the pro- portionate part has to be detemined by agreement, in which event you are back to May and Butcher v. The King [1934] 2 K.B. 17, or you have to find that one party or the other has a right to nominate what part is to go. This is, he says, an important term of the contract because there is a large part of the price left outstanding for two years and the vendor is very much concerned with his security for that money in case of the purchaser's default. The purchaser is very much concerned with ensur- ing that the proportion which he gets on each completion is a proportion which includes land for which planning permission has been granted. Therefore, he says, the only logical thing is that what is to go on each completion has to be agreed between the two; but if this is wrong, he continues, then you can only get certainty by implying a term in the agreement. As to that he says there are two points : first of all, no implied term has been pleaded--there has merely been a joinder of issue on the question of certainty or uncertainty, and secondly, you can only imply a term within the limits of the " officious bystander " test pro- pounded by Scrutton L.J. in Reigate v. Union Manufacturing Co. (Rams- bottom) Ltd. [1918] 1 K.B. 592, 605. But here, he says, if anyone suggested to the parties that either the vendor or the purchaser should have the right to dictate which land was to go at each stage, the other would immediately have protested. I should be sorry to think that I am compelled to treat what appears to me to be a sensible agreement, clearly intended to have contractual force, as incapable of enforcement on the ground of uncertainty and, despite Mr. Barnes's extremely persuasive advocacy, I do not think that I am so compelled. In the first place, I feel no real difficulty over the meaning of the words " proportionate part." When a contract speaks of a " part " of the land, that clearly as a matter of common sense refers to an area. This clause is providing for the release to the purchasers of a proportionate area. Proportionate to what? Well, clearly proportionate to the sum paid for it. It seems to me tolerably plain that all that this clause is doing is limiting the purchaser's right to have a conveyance on payment, to a conveyance of an area of land bearing the same propor- tion to the whole 511/2 acres as the amount paid to the vendor bears to the whole purchase price. This clause appears in a contract for the sale of land for development and in which there is a condition precedent relating to the conclusion of an agreement under section 37 of the Town and Country Planning Act 1962, the whole purpose of which is to give an assurance that, as the development proceeds, planning permission will be given for a certain housing density for the whole of the land. Thus variations in value between one part of the land and another are unlikely to be very substantial. As to the selection of the area to be conveyed, I feel no particular difficulty, nor do I think that it is necessary to imply any term beyond what is implied into an agreement for sale of land by law or the custom of conveyancers in any event. From the date of the contract the vendor is a qualified trustee of the whole of the lands of the urchaser, and the purchaser, subjectt o paayig the purchase money, is the owner in equity. A recent example of the operation of this is to be found in the decision of Walton J. in Lake v. Bayliss [1974] 1 W.L.R. 1073 to which Mr. Burton has referred me previously. In the instant case it was an express condition of the contract that the purchaser was to be put into possession of the whole of the land on exchange of formal contracts. Further, the preparation of the conveyance of the land is, in all contracts for sale of land, in the absence of an express stipulation to the contrary, a duty to be assumed by the purchaser. He can if he wishes insist upon the conveyance to a nominee, and he may, where the nature of the land renders it desirable, insist, within limits, upon taking separate conveyances of different parts and upon apportioning the purchase money between them : see Dart an Vendors and Purchaser, 8th ed. (1929) vol. 1 purchase money, unless the contract otherwise specifies, but in the instant ase the contract doce so specify. It providce that an area sh~allbe released proportionate to the amount of purchase price paid, and it seems to me implicit in the relationship arising between vendor and purchaser on a contract of sale where there is a provision in these and no other machinery provided for determining it, that the purchaser, as the owner in equity, has the right to select the land to be included in the draft conveyance which he sends to the vendor for approval, subject only to the overriding limitation that it must not exceed a proportionate part. Mr. Barnes points to the hardship of this from the vendor's point of view, and he takes the perhaps rather fanciful case of a purchaser directing conveyance of innumerable small lots in various parts of the estate. I am not impressed by this. The underlying assumption in all commercial contracts is that the parties are going to behave as reasonable men of business. In any event, if the vendor wishes to protect himself from such risks, then he must stipulate some machinery for selection. I did ask Mr. Barnes whether, if these clauses had beeen contained in an option conferred by a will, the court would be forced to hold the pro- vision void. He did not feel able so to contend and he referred me to the decision of Romer J. in Asten v. Asten [1894] 3 Ch. 260, but he sub- mitted that whilst the giving of a right of selection to a legatee is one are implicit in the relationship created by the particular type of transaction into which the parties have entered. Certainly the passage which I have quoted from the judgment of Megarry J. in Brown v. Gould [1972] Ch. 53 indicates that the approach of the courts to Problems of uncertainty is the same regardless of the type of document under consideration. I am therefore unimpressed by the points taken on the pleadings. The point of uncertainty, which is one of law, emerged with clarity only upon the service of the particulars of the defence. I suppose that it would technically have been possible then to have served a reply, but it seems to me unnecessary. The conclusion at which I arrive derives not from an implied term such as is required to give business efficacy to the contract, but from the marrying of the provisions of clauses 1 and 2 with the rights and duties arising as a matter of law from the contract for the sale and purchase of land. Mr. Barnes's second point was that the only breach alleged in the statement of claim was the conveyance to Medina Estates Ltd. That, he said, gave rise to nominal damages only so long as Medina was itself willing to convey. But there was at June 12, 1970, no obligation upon the vendor to convey, because the land to be conveyed had not in fact then been determined and such determination was a condition precedent to liability. Thus, he said, the only breach alleged was one giving rise to nominal damages only. I am not at all sure that I follow this argument, and I hope that I have not mis-stated it. The plaintiffs' complaint is that they did not get what they were entitled to, that is to say, a conveyance of the land in stages from the defendants with two years to pay the balance of the purchase price. The reason they did not get that was that the defendants put it out of their power to convey by a conveyance to Medina. Medina clearly stated on June 5, 1970, that it was prepared to convey only on terms of getting an immediate payment of the whole price--that was its final effort, its last word--and that offer, in order to mitigate their claim against the defendants, the plaintiffs felt bound to accept, thus confining their claim for damages to the loss of the two-year credit which they would have had under their contract with the defend- ants. It seems to me wholly immaterial whether, at the particular moment of the contract with Medina, the defendants were under an obligation to make an immediate conveyance to the plaintiffs. The defendants had repudiated in July 1969 by conveying the land away, and the fact that the plaintiffs did not then elect to treat the contract as at an end did not prevent them from availing themselves of that breach subsequently, if in fact it was never cured and the contract was never completed. The plaintiffs' election merely gave the defendants a locus penitentiae of which in the event they were unable or unwilling to avail themselves. Mr. Barnes's third and final submission on the issue of liability is that the agreement constituted by the letters of June 20, 1968, was subject to contract in that it contemplated a further exchange of formal contracts, as indeed the letter itself states. I need I think say very little about this. Mr. Barnes himself did not feel able to argue this point with much enthusiasm and in my judgment it is clearly unarguable, the parties themselves having expressly stated that it was to constitute a binding agreement. If authority is needed that such an agreement constitutes a contract notwithstanding the contemplation of an exchange of more formal documents later, it is to be found in the decision of the Court of Appeal in Branca v. Cobarro [1947] K.B. 854. In my judgment therefore the plaintiffs are entitled to succeed in their claim. I turn therefore to the matter of the damages recoverable. Under their original contract the plaintiffs were entitled to be put into possession of the whole of the land but to have credit for part of the price--#250,000# for one year and f#25,~000for a further year. In the result thce had to put the whole purchase price down at once, although of course against this they received the conveyance of a legal title to the whole of it, as opposed to a conveyance merely of a proportionate part. The additional interest charged or lost, as the case may be, is calculated at #38,464 in all and this is the sum claimed by the plaintiffs together with a small item stated in the statement of claim to be #203, but actually I was told #108, for additional legal costs incurred in negotiations with Medina which would not have been incurred under the original contract. It emerged in the course of the hearing that there had been a misunderstanding between the parties. It was thought by the plaintiffs, as a result of a telephone con- versation between their solicitors and the defendants' solicitor, that the damages were agreed subject only to the question of liability. In fact it transpired at the hearing that the agreement was limited to this: that Mr. Barnes did not quarrel with the computation or the rate of interest paid, or indeed with the proposition that the prima facie measure of damage was the additional expense incurred as a result of the loss of the two years credit; but he did not concede that the loss so computed had actually been suffered. As a result of this misunderstanding the plaintiffs did not come to the court armed with evidence of what had actually happened and their only witness, Mr. Crompton was able to give me only very general help on this question. It was therefore suggested that the right course in the event of liability being established was for an inquiry to be directed. Mr. Burton however has submitted that this is unnecessary because, he says, first the new contract vith Medina gave the plaintiffs no advantage which they did not already enjoy under the original agreement. The plaintiffs would not want to sub-sell part of the land in respect of which no planning permission was yet available, so that the immediate conveyance of the legal estate in the whole conferred no advantage. Indeed, it was a positive disadvantage because it encouraged the plaintiffs to sell earlier than they might have done in order to keep down interest charges on the extra #250,000 which the plaintiffs had had to raise. In any event, he says, it was perfectly open to the plaintiffs to sub-sell under the original agreement, although actual completion would have had to be delayed if the part sub-sold was included in the proportion retained by the vendor. Secondly, and in any event, Mr. Burton says that if there was in fact any financial advantage conferred by the immediate conveyance of the legal estate, this cannot, as a matter of law, be relied upon by the defendants in reduction or mitigation of damage. Any evidence therefore as to how the plaintiffs actually dealt with the land is,he submits, irrelevant. I am at the moment, at any rate, and in the absence of evidence of what actually happened, not persuaded that this is right. I think it may very well turn out that the plaintiffs derived no advantage at all from an earlier conveyance of the legal estate--indeed, this seems to me to be likely. But I do not think that I can simply assume it. And if, for instance, it were to be established that the plaintiffs had in fact made a profit which they would not have made if the original contract had been carried out, it does not seem to me to be right simply to ignore this in the computation of damages. Mr. Burton likened the situation to that of a dealer in goods who, as a result of a breach of contract, has to pay cash to increase his turnover so as to counterbalance the loss by an increased profit, this cannot be prayed in aid in mitigation. This may very well be was actually done here, that the analogy is a perfect one. There have to be borne in mind the principles which were enunciated by Viscount Haldane L.C. in British Westinghouse Electric and Manufaturing Co. Ltd. v. 688-690. A recent example of the application of those principles is to be [1970] 1 W.L.R. 1306 where the purchasers of defective goods, who had self-same goods from the same seller at a greatly reduced price as a result of which they made a profit which in fact eliminated any damage arising from the original breach, and they were held entitled to nominal damages only. I do not want to say too much at the moment about this, because these cases may in the event be easily distinguishable and the matter has not been fully argued before me. I do not know the facts here and, without seeking in any way to preempt any argument that either side may wish to raise when the full circumstances have been ascertained by evidence, and has not been reduced by steps taken in mitigation by the plaintiffs. I propose therefore to direct an inquiry, what loss the plaintiffs have suffered as a result of the failure of the defendants to fulfil the contact pleaded in the statement of claim. There is a further point in this connection which Mr. Barnes has raised. The amended statement of claim claimed interest under the Law Reform the court a discretionary power to award interest on damages. Mr. Barnes ' draws attention to the fact that the damages here claimed are calculated by reference to interest paid or lost and relates that fact to the provisions of proviso (a) to section 3 (1) where it is provided that " . . . nothing in this section--(a) shall authorise the giving of interest upon interest. ." Thus, he argues, in this case the court has no statutory discretion. I cannot accept this submission. It appears to me that the proviso was clearly. aimed at the sort of case where an interest-bearing debt is sued for, for instance, a mortgage debt or an instalment of interest in arrear. In such a case the court is not to award interest upon such part of the sum claimed as represents contractual interest. Although what is claimed here is simply a replacement of a sum of money, the quantum of which is calculated by reference to interest which the plaintiffs have had to pay, the sum so claimed is not in any relevant sense interest itself; it is the sum payable by way of damages for breach of contract, and I see no reason why it should not be capable of carrying interest in the ordinary way. In my judgment, therefore, the discretion conferred by the Act of 1934 remains exercisable. Inasmuch as the plaintiffs have had to incur pay- ments which have depleted their general funds, or have lost the use of money which would, had it not been paid out for the immediate purchase, have produced an addition to their general funds by way of interest earned, which addition would itself have been available to earn interest, I do not see why in principle interest under the Act of 1934 should not be awarded. But the matter is one for the court's discretion and it does not seem to me to be right that the court should exercise such a discretion before having before it all the relevant material with regard to the loss actually sustained. Subject therefore to hearing what counsel has to say as to this, I would propose that the question whether interest should be allowed, and as from what date or dates, and at what rate, should be deferred until the conclusion of the inquiry. Judgment for plaintiffs. Inquiry as to damages. Solicitors : Blyth, Dutton, Robins, Hay, for Coffin, Mew & Clover, Portsmouth ; Linklaters & Paines. T. C. C. B. [HOUSE OF LORDS] * ESSO PETROLEUM CO. LTD. . . . . - RESPONDENTS AND CUSTOMS AND EXCISE COMMISSIONERS . . APPELLANTS 1975 Nov. 10, 11, 12; Lord Wilberforce, Viscount Dilhome, Lord Simon Dec. 10 of Glaisdale, Lord Fraser of Tullybelton and Revenue--Purchase tax--Chargeable goods-Coins bearing impres- sion of heads of football players -- Distributed " free " to purchasers of petrol on advertised basis of one coin for every four gallons--Whether " produced in guantity for general side ' --Sale of Goods Act 1893 (56 & 57 Vict. c. 71), s. 1 (1) i-- Purchase Tax Act 1963 (c. 9), Sch. 1, Group 25 By the Purchase Tax Act 1963, Sch. 1, Group 25: " Pictures, prints, engravings, photographs, figures, busts, reliefs and similar articles of a kind ' photographs, figures, busts, reliefs and similar articles of a kind produced in quantity for ' eneral sale " were enunerated as being liable to the tax. The plaintiffs ("Esso"), suppliers of and dealers in petrol, commissioned the manufacture of coins bearing on one side the head of one of the 30 English footballers chosen for the 1970 World Cup competition and on the other the word " Esso." To promote sales the coins were, as advertised, distributed free to any motorist buying petrol from Esso filling stations and that the coins were goods chargeable to purchase tax within " produced in quantity for general sale," and claimed tax accordingly. Pcnnycuick V.C. dismissed Esso's summons for a declamtion that the coins were not chargeable goods under the provisions of the Act of 1963. The Court of Appeal reversed his decision. Held, dismissing the appeal (Lord--Fraser of Tullybelton dissenting), that, on the basis that the plaintiffs intended to create a legal obligation to supply the coins, the consideration for the entry into that contract was the entry by the motorist ingly there was no contract to transfer the coins " for a money VOL. 1 coins (post, pp. 5A, B, 10s--G). Scott & Co. Ltd. v. Solomon [1905] 1 K.B. 577, D.C., R.P. 62 and dictum of Lord Monlton in Heilbut, Symons & Co. v. Buckleton (1913) A.C. 30, 47, H.L.(E.) considered. Decision of the Court of Appeal [1975] 1 W.LR. 406 affirmed. The following cases arc referred to in their Lordships' opinions: Bulpitt & Sons Ltd. v. S. Bellman & Sons Ltd. (1962) L.R. 3 R.P. 62. Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A. 169; [1959] 2 All E.R. 701 H.L.(E.) Edward v. Skyways Ltd. (1964) 1 W.L.R. 349; [1964] 1 Al E.R. 494. Heilbut, Symons & Co. v. Buckleton [1913] A.C. 30, H.L.(E.). Rose and Frank Co. v. J. R. Crompton and Brothers Ltd. [1923] 2 K.B. 261, C.A. Scott & Co. Ltd. v. Solomon [1905] 1 K.B. 577; 69 J.P. l, D.C. Taylor v. Smetten (1883) 11 Q.B.D. 207, D.L. The following additional cases were cited in argument: Attorney-General v. Boden [1912] 1 K.B. 539. Garnac Grain Co. Inc. v. H. M. F. Faure g Fairclough Ltd. (Note) (1968] A.C. 1130- (196q 3 W.L.R 142 (1967) 3 All E R 353 H L t 760; [1971] 2 W.L.R. 55, P.C. Inland Revenue Commissioners v. Wesleyan & General Assurance Society (1946) 62 T.L.R. 741; [1946] 2 All E.R. 749, C.A. Kirkness v. John Hudson & Co. Ltd. [1955] A.C. 696; [1955] 2 W.L.R. 1 W.L.R. 335; [1953] 1 All E.R. 469. Weeks v. Tybald (1605) Nov 11. Whitbread & Co. Ltd. v. Bell [1970] 2 Q.B. 547; [1970] 2 W.L.R. 1025: [1970] 2 All E.R. 64, D.L. APPEAL from the Court of Appeal. This was an appeal from an order of the Court of Appeal (Lord Denning M.R., Stephenson and Geoffrey Lane L.JJ.) on January 31, 1975, allowing an appeal by the present respondents, Esso Petroleum Co. Ltd., from an order made by Pennycuick V.-C. on June 20, 1973. By his order he had dismissed the originating summons herein by which the respondents sought dismissed the originating summons herein by which the respondents sought a declaration that certain coins manufactured to their order and supplied by them to petrol service station proprietors were not chargeable goods discharge provisions of the Purchase Tax Act 1963. The Court of Appeal discharged the order of Pennycuick V.C. and granted the declaration asked but gave leave to appeal to the House of Lords on terms as to costs. The facts are stated in their Lordships' opinions. C. S. Staughton Q.C. and P. L. Gibson for the appellant. D. C. Potter Q.C., Peter Scott and Peter Whiteman for the respondent company. Their Lordships took time for consideration. December 10. LORD WILBERFORCE. My Lords, I have had the benefit of reading in advance the opinion prepared by my noble and learned friend Lord Simon of Glaisdale. I agree with his analysis of the transaction. The case being one of impression, as to an essentially simple situation, I do not consider it useful to add any fresh arguments of my own. Viscount DILHORNE. My Lords, the only question for decision in this appeal is whether the coins distributed by the respondents to garage pro- prietors, for them to give to customers who bought four gallons or more of petrol, were coins " produced in quantity for general sale." If they were, then they came within Group 25 in Schedule 1 to the Purchase Tax Act 1963, and the respondents are liable to pay purchase tax on them to That the com. s were produced in quantity and for general distribution is the respondents to some 4,900 retailers of petrol for #3 per thousand, but it does not detemine the tax liability. The question to be decided is, were they sold or intended to be sold by the garage proprietors to purchasers of petrol? Each coin bore the head of one of the 30 members of the English squad for the World Cup and was wrapped in an opaque covering. The respon- dents' intention was to promote the sale of their petrol by tempting persons to buy petrol from their dealers in the hope of securing a complete set of in the press and on television. They distributed to garages posters for exhibition on the forecourts. One series of posters had on it " Collect the complete set. One coin given with every four gallons of petrol." Another series had the words " Collect the full set of thirty coins. One coin given when you buy four gallons of petrol." They sent each of their dealers who participateed in the campaign a pamphlet telling him to give one coin to each customer buying four gallons; two coins if eight gallons were bought and so on, and that if he did so and gave a free collection card in which the coins could be placed he would " then ensure the success of this promotion by increasing gallonage Qals on your station." The d~ealrs were also supplied withh" luxury collector " cards which they were told to sell for 2s. 6d. each. If the coins were a free gift to every customer who purchased four gallons of petrol or multiples of that quantity, then the appeal must be dismissed. If, on the other hand a legal contract was entered into between thecustomer and the ddeale which, in a~dditon to the supply of petrol, involved the dealer in a legally binding obligation to transfer a coin or coins to the customer, and if that legal contract amounted to a sale, then the appeal must be allowed. Was there any intention on the part of the garage proprietor and also on the part of the customer who bought four gallons, or multiples of that quantity, of petrol to enter into a legally binding contract in relation to a coin or coins? In Rose and Frank Co. v. J. R. Crompton Ltd. [1923] 2 K.B. 261, 288, Scrutton L.J. said: " Now it is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations. The reason of this is that the parties do not intend that their agreement shall give rise to legal relations. This intention may be implied from the subject matter of the agreement, ' but it may also be expressed by the parties. In social and family relations such an intention is readily implied, while in business matters the opposite result would ordinarily follow." And Atkin L.J. said, at p. 293: " To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly." The facts of that case were very different from those of this. In that case there was an agreement dealing with business matters. In this case the question has to be considered whether there was any agreement as to a coin or coins between the garage proprietor and the customer and also, if there was, was it intended on both sides to be one having legal relations? If a coin was just to be given to the motorist, it would not be necessary for there to have been any agreement between him and the garage proprietor with regard to it. In Edwards v. Skyways Ltd. [1964] 1 W.L.R. 349, where the facts were also very different from those in this case and where the plaintiff was seeking to recover the amount of an ex gratia payment, Megaw J. referred to these passages in Rose and Frank Co. v. J. R. Crompton and Brothers Ltd. and said, at p. 355: " In the present case, the subject matter of the agreement is business relations, not social or domestic matters. There was a meeting of minds--an intention to agree. There was, admittedly, consideration for the company's promise. I accept the propositions of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one." I do not wish in any way to criticise or qualify these statements, but I do not feel that they provide a sound foundation for the decision of this appeal. True it is that the respondents are engaged in business. True it is that they hope to promote the sale of their petrol, but it does not seem to me necessarily to follow or to be inferred that there was any intention on their part that their dealers should enter into legally binding contracts with regard to the coins; or any intention on the part of the dealers to enter into any such contract or any intention on the part of the purchaser of four gallons of petrol to do so. If in this case on the facts of this case the conclusion is reached that there was any such intention on the part of the customer, of the dealer and of the respondents, it would seem to exclude the possibility of any dealer ever making a free gift to any of his customers however negligible its value to promote his sales. If what was described as being a gift, which would be given if some- thing was purchased, was something of value to the purchaser, then it could readily be inferred that there was a common intention to enter into legal relations. But here, whatever the cost of production, it is clear that the oins were of little intrinsic value. I do not consider that the offer of a gift of a free coin is properly to be regarded as a business matter in the sense in which that word was used by Scrutton L.J. in the passage cited above. Nor do I think that such an offer can be comprehended within the " business relations " which were in the Skyways case, as Megaw J. said " the subject-matter of the agreement." I see no reason to imply any intention to enter into contractual relations from the statements on the posters that a coin would be given if four gallons of petrol were bought. Nor do I see any reason to impute to every motorist who went to a garage where the posters were displayed to buy four gallons of petrol any intention to enter into a legally binding contract for the supply to him of a coin. On the acceptance of his offer to purchase four gallons there was no doubt a legally binding contract for the supply to him of that quantity of petrol, but I see again no reason to conclude that because such an offer was made by him, it must be held that, as the posters were displayed, his offer in- cluded an offer to take a coin. The gift of a coin might lead to a motorist returning to the garage to obtain another one, but I think the facts in this case negative any contractual intention on his part and on the part of the dealer as to the coin and suffice to rebut any presumption there may be to the contrary. If, however, there was any contract relating to the coin or coins, the consideration for the entry into that contract was not the payment of any money but the entry into a contract to purchase four gallons or multiples of that quantity of petrol, in which case the contract relating to the coin or coins cannot be regarded as a contract of sale. I therefore, while of opinion that there was no legally binding contract as to the coins and so that it has not been established that they were pro- duced for sale, am also of opinion that if there was any such contract it was not one for sale. In my opinion this appeal should be dismissed. LORD SIMON OF GLAISDALE. My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Russell of Killowen. I beg to take advantage of his explanation of the facts that have led to the appeal and the statutory provisions by which they are to be judged. I am, however, my Lords, not prepared to accept that the promotion material put out by Esso was not envisaged by them as creating legal rela- tions between the garage proprietors who adopted it and the motorists who yielded to its blandishments. In the first place, Esso and the garage pro- prietors put the material out for their commercial advantage, and designed it to attract the custom of motorists. The whole transaction took place in a setting of business relations. In the second place, it seems to me in general undesirable to allow a commercial promoter to claim that what he has done is a mere puff, not intended to create legal relations (cf. Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256). The coins may have been themselves of litile intrinsic value; but all the evidence suggests that Esso contemplated that they would be attractive to motorists and that there would be a large commercial advantage to themselves from the scheme, an advantage to which the garage proprietors also would share. Thirdly, I think that authority supports the view that legal relations were envisaged. In Rose and Frank Co. v. J. R. Crompton and Brothers Ltd. [1923] 2 K.B. 261, 288 Scrutton L.J. said: " Now it is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations. The reason of this is that the parties o not intend that their agreement s~hallgive rise to le~galrelations. This intention may be implied from the subject matter of the agree- ment, but it may also be expressed by the parties. In social and family relations such an intention is readily implied, while in business matters the opposite result would ordinarily follow." In the same case Atkin L.J. said, at p. 293: " To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly. Such an intention ordinarily will be inferred when parties enter into an agreement which in other respects conforms to the rules of law as to the formation of contracts. It may be negatived impliedly by the nature of the agreed promise or promises, as in the case of offer and acceptance of hospitality. or of some agreements made in the course of family life between members of a family as in Balfour v. Balfour [1919] 2 K.B. 571." In Edwards v. Skyways Ltd. [1964] 1 W.L.R. 349, 355 Megaw J. quoted these passages and added: " In the present case, the subject matter of the agreement is business relations, not social or domestic matters. . . . I accept the propositions . . . that in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one." I respectfully agree. And I venture to add that it begs the question to assert that no motorist who bought petrol in consequence of seeing the promotion material prominently displayed in the garage forecourt would be likely to bring an action in the county court if he were refused a coin. He might be a suburban Hampden who was hot prepared to forgo what he conceived to be his rights or to allow a tradesman to go back on his word. Believing as I do that Esso envisaged a bargain of some sort between the garage proprietor and the motorist, I must try to analyse the trans- action. The analysis that most appeals to me is one of the ways in which Lord Denning M.R. considered the case [1975] 1 W.L.R. 406, 409B-D, namely a collateral contract of the sort described by Lord Moulton in Heilbut, Symon & Co. v. Buckleton [1913] A.C. 30, 47: " . . there may be a contract the consideration for which is the making of some other contract. ' If you will make such and such a contract I will give you #100,' is in every sense of the word a complete lega] contract. It is collateral to the main contract, . . ." So here. The law happily matches the reality. The garage proprietor is saying, " If you will buy four gallons of my petrol, I will give you one of these coins." None of the reasons which have caused the law to consider advertising or display material as an invitation to treat rather than an offer applies here. What the garage proprietor says by his placards is in fact and in law an offer of consideration to the motorist to enter into a contract of sale of petrol. Of course, not every motorist will notice the placard, but nor will every potential offeree of many offers be necessarily conscious that they have been made. However, the motorist who does notice the placard, and in reliance thereon drives in and orders the petrol, is in law doing two things at the same time. First, he is accepting the offer of a coin if he buys four gallons of petrol. Secondly, he is himself offering to buy four gallons of petrol: this offer is accepted by the Wing of his tank. Has there the-n been a sale of the coins, so that they can be said to have been " produced in quantity for general sale " within Group 25 of Schedule 1 to the purchase Tax Act 1963? I think that the main emphasis here is on " quantity " and " general." But it would be contrary to all principles of sound statutory construction not to give each word its full significance. I agree with my noble and learned friend, Lord Russell of Killowen, for the reasons which he gives, that the definition of " purchase " in section 40 (1) throws no light on the meaning of " sale" in the Schedule. " Sale " must therefore be interpreted in the primary sense demanded by the context of a taxing statute (unless some secondary meaning must be preferred in order to avoid injustice, absurdity, anomaly or stultification of the statutory objective). The primary sense of " sale " in this context is its primary meaning in ordinary legal usage. This is expressed in section 1 of the Sale of Goods Act 1893 (which codified the common law), namely " a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price." Here the coins were not transferred for a money consideration. They were transferred in consideration of the motorist entering into a contract for the sale of petrol. The coins were therefore not produced for sale, and do not fall within the Schedule. They are exempt from purchase tax. I would therefore dismiss the appeal. LORD FRASER OF TULLYBELTON. My Lords, the facts in this case have been ftilly set out in the speech which is about to be delivered by my noble been ftilly set out in the speech which is about to be delivered by my noble and learned friend, Lord Russell of Killowen, and which I have had the advantage of reading in print. I need not therefore rehearse them. The only question for decision is whether these coins were " produced . . . for . . . sale." In my opinion they were, and I would therefore hold that they fell within the Group 25 of Schedule 1 to the Purchase Tax Act 1963. The matter that is in my view of decisive importance is the wording on the posters which were displayed in the forecourts of Esso petrol retailers during the promotion scheme. The originals of these posters were large, 60" X 40", and each poster was headed in large letters " Free World Cup Coins." Below that was a picture either of one of the coins or of a group of the coins and below the picture on one poster were the words " Collect the complete set. One coin given with every four gallons of petrol" and on the other poster " Collect the full set of thirty coins. One coin given when you buy four gallons of petrol." The feature of that wording, which is of special significance, is the correlation of one coin to every four gallons; a definite scale of issue, or ration, was thus promised, and the plain in- ference is that any motorist who bought four gallons of petrol would have a right also to receive a coin. It is as if a baker had a poster in his shop window promising that any person who bought a dozen buns would be given one extra bun free of charge to make up a " baker's dozen." Standing that promise by the retailer, it is in my opinion impossible to avoid the inference that when a motorist ordered some petrol he was offering to enter into a contract on the terms advertised by the retailer, and therefore that wen hisoffer was accepted he had a contractual~riht to- ne coin iwth every four gallons of petrol. The analysis by the Vice-Chancellor in [ 1973] 1 W.L.R. 1240, 1245 of what would happen when a motorist ordered petrol is in my opinion the correct one. Various reasons have been suggested for taking the contrary view, and the one that appears to me to be the strongest is also the simplest, namely, that the poster and advertisements repeatedly use the words " gift " " given " and "free." It is said that the use of these words, together with the small value of the coins and the fact that the price of petrol was not increased during the promotion period shows that the coins were truly given away. But the purpose of the promotion scheme was to attract motorists, and perhaps their children, and to persuade them to buy Esso rather than some other brand of petrol, and it cannot be right that a motorist who had been end of the transaction with a refusal to give him a coin. No doubt it was unlikely that any Esso retailer who was taking part in the promotion would fail to deliver a coin with four gallons of petrol, because he would lose goodwill if he did. But the same is true in greater or less degree of every retailer who may be tempted to give short weight or inferior quality in breach of his contract, and the unlikeliness of such an event cannot in my opinion affect the legal quality of the transaction. It was even more unlikely that any motorist would sue to enforce his right to the coin or to recover damages for failure to deliver one. But the same is true of many small retail transactions which are undoubtedly contracts capable of being en- forced by legal proceedings, but not worth enforcing. Accordingly I regard that also as irrelevant. The fact that the inclusive price could not be apportioned so as to attribute any particular part of it to the coin is also irrelevant, and does not by itself indicate that the coin was not bought along with the petrol for one inclusive price--see Taylor v. Smetten (1883) 11 Q.B.D. 207, Scott & Co. Ltd. v. Solomon [1905] 1 K.B. 577; 69 J.P. .137. It was argued that these cases, where coupons carrying valuable rights were included in packets of tea, were distinguishable because the coupons were either physically inside the packet or were part of the wrapper, so that it was impossible to buy the tea without the coupons. But I cannot see that that makes any difference, because here the delivery of the coin would be, for all practical purposes, contemporaneous with delivery of the petrol, so that both would form part of the one transaction just as the tea and the coupon did. I recognise that the reason why an advertisement or display of goods for sale at a stated price is only an invitation to treat and not an offer for sale (as explained by my noble and learned friend, Lord Russell of Killowen, in his speech) has no application to the advertisement of the coins, because the petrol retailer could always remove the advertisement if the supply of coins threatened to run out. But while that is so, I do not regard it as a sufficient reason for declining to recognise what seems to me a simple operation of acquiring four gallons of petrol and a coin as a sale of both articles in one transaction, nor as a reason for breaking it up into two separate operations, a sale of the petrol and a collateral contract for acquiring the coin. For these reasons I would allow the appeal. LORD RUSSELL OF KILLOWEN. My Lords, the question in this appeal is whether certain goods were chargeable for the purposes of the now defunct purchase tax: and that depends upon whether, being goods of a type within the description contained in Group 25 of Schedule 1 to the Purchase Tax Act 1963, they were " produced in quantity for general sale." As will be seen the goods were undoubtedly produced in quantity, and, if produced for sale, it is not disputed that the sale envisaged in the production was " general " sale. Thus the argument has centred on the question whether the goods were " produced . . . for . . . sale." Pennycuick V.C. concluded that they were: the Court of Appeal (Lord Denning M.R. and Stephenson and Lane L.JJ.) concluded that they were not. The amount of purchase tax involved is the substantial sum of #200,000. The goods in question were medals bearing the likenesses of the 30 members of the England soccer squad which went to Mexico in 1970 for the World Cup, together with reproductions of their signatures and their names, one player to each medal, the other side bearing the word Esso and the words " England World Cup Squad. Mexico 1970. " The respondents (" Esso ") conceived in 1970 a petrol sales promotion scheme. Esso had some 6,000 petrol outlets in this country, some owned by Esso subsidiaries but most by other proprietors. The scheme involved the production of millions of these medals, the intention being that these medals should be distributed, to use a neutral phrase, by petrol pump proprietors to motorists buying Esso petrol on the basis of one medal to each motorist buying four gallons of petrol, two if eight, and so on. The medals were to be in opaque wrappers, and it was hoped that a motorist would persist in buying Esso petrol in the hope of collecting the full set of 30. It was to be, according to Esso, the biggest promotion scheme ever promoted by Esso. The promotion scheme was extensively advertised by Esso in the press and on television, the public being urged to start collecting the set of 30 medals. Typical extracts from such advertisements were the phrases " Free from Esso ": " Going free, at your Esso Action Station now ": " We are giving you a coin with every four gallons of Esso petrol you buy ": " We are also giving you a free collector card to mount them in. (For only 2/6, you can buy the handsome permanent mounting board . . .) ": " One free coin with every 4 gallons." Esso circularised the 6,000 outlets, of which some 4,900 adopted the scheme. The medals were made available to outlet proprietors at 30s. for 500--slightly under three farthings each--the temporary collector cards without charge, permanent mounting cards at 2s. each. A folder circulated by Esso to the outlets to encourage their promotion scheme contained these phrases : " One coin should be given to every motorist who buys four gallons of petrol--two coins for eight gallons and so on ": " Free collector cards should be offered to all motorists at the start of the promotion." Large posters (60 by 40 inches) were supplied by Esso to the forecourts of pro- prietors joining the scheme. The most prominent lettering in the posters is " Free World Cup coins "; one also says " One coin given with every four gallons of petrol " : the other example says " One coin given when you buy four gallons of petrol." A further pamphlet of instructions to outlets said " Give one coin to each customer buying four gallons of petrol. ...": " Give free collector cards to every customer you serve ": " Try to sell luxury collector card at 2/6 each ": " You will then ensure the success of this promotion by increasing gallonage sales on your station." The last ocument to which reference should be made is the free collector's card, which includes the phrase " You will be given a coin each time you buy four gallons of petrol from an Esso station.... This temporary collector card is free...." My Lords, it is not in dispute that unless the medals were produced at the instance of Esso for the purpose of, i.e., with a view to, their being sold by garage proprietors to motorists there cannot be the suggested charge of purchase tax. The first question accordingly is whether, notwithstanding the liberal references in the documents attending the promotion scheme to " giving," " gifts," and " free," that which would and did take place gave rise to a contract, enforceable by a motorist who bought four gallons from a participating proprietor, that he should receive one of these medals. It is to be borne in mind in this connection that the mere fact that Esso and the garage proprietors undoubtedly had a commercial aim in promoting the scheme does not deprive the delivery of a medal of the quality of a gift as distinct from a sale: for benevolence is not a necessary feature of a gift, which may well be motivated by self interest. On the other hand it is trite law that if on analysis a transaction has in law one character, the fact that the parties either accidentally or deliberately frame the transaction in lan- guage appropriate to a transaction of a different character will not deny to it its true character. We have here, my Lords, a promotion scheme initiated by Esso, who procured the production of the medals. Each medal was of negligible intrinsic value, though the incentive to soccer enthusiasts to collect all 30 may have been strong. Plainly it was never in Esso's mind that this negli- gible intrinsic value should be reflected in an increase in the pump price of petrol, and it never was: indeed the price of a gallon could not be increased by 3/16 of a penny. In my opinion it would have been thought by Esso, and rightly, that there could have been no occasion, in order to ensure success of the scheme, for an outlet proprietor to subject himself to a contractual liability to deliver a coin to a motorist who had bought four gallons. The subject matter was trivial: the proprietor was directly interested in the success of the scheme and would be in the highest degree unlikely to renege on the free gift offer, and indeed there is no suggestion that a motorist who qualified and wanted a medal ever failed to get one: from the motorist's viewpoint, if this had ever happened, I cannot think that he would have considered that he had a legal grievance, though he might have said that he would not patronise that outlet again: similarly in my opinion if a garage advertised " Free Air " and after buying petrol or oil the motorist was told that the machine was out of order that day. In my opinion, the incentive for the garage proprietor to carry out the scheme was such as to make it quite unnecessary to invest, or for Esso to intend to invest, the transaction with the additional compulsion of a contractual obligation, and in all the circumstances of the case I am unable to regard that which under the scheme was intended by Esso to take place in relation to the medals, and did take place, as something which would be intended to or regarded as creating a legal contractual relationship. In forming that opinion I regard the minimal intrinsic value of a medal as important. I would not wish it to be thought that my opinion, if correct, would, in other cases in which a sales promotion scheme involves substantial benefits, give carte blanche to participants to renege on " free " offers. I am simply of opinion, in agreement with the Court of Appeal, though not I fear with the majority of your Lordships, that in the instant case, because of the absence of any contractual element, it should not be said that any medal was produced for general sale. Suppose, however, that there was a contractual obligation on the pro- prietor to deliver a medal to the motorist who had bought four gallons of petrol, the further question arises whether there was a contract for sale of the medal for a price in money, which (subject to a point taken by the respondents under section 40 of the Purchase Tax Act 1963) is involved in the reference in Group 25 to " sale." The learned Vice-Cicellor analysed the transaction as being, by a combination of the medal posters and the price marked on the petrol pump, one invitation to treat by the proprietor: the motorist by ordering four gallons made an offer to pay the pump price on the terms of that invitation to treat: the proprietor accepted that offer by supplying the petrol: consequently an unascertained part of the price paid was for the right to receive the medal: therefore it was a sale of the medal for a price in money. (My Lords, when I embark upon a considera- tion of these niceties, I confess to being fortified in some measure in my view on the first point.) Now it is of course clear that a mere statement of the price of petrol on the pumps is not itself an offer to sell petrol at that price: this follows the ordinary situation that the display of goods in a window, or advertisement of goods for sale, even at a stated price is not to be treated as itself an offer capable of acceptance, but is only an invita- tion to treat. The reason for this is the eminently sound one that the vendor might otherwise find himself bound to a series of contracts that he would be quite unable to fulfil: since it is a mere invitation to treat he reserves to hiinself the ability to refuse an offer from a would-be purchaser. But, my Lords, those considerations have no relevance to the matter of these medals. The question of liability to hand over medals remains at all times under the control of the proprietor: knowing his gallonage of saleable petrol he knows at all times whether he has his maximum liability of one-quarter in number of medals: further if he has no medals available he retains the ability, before accepting a motorist's order for four gallons, to cancel or withdraw the offer of a medal. There are no reasons why the posters, assuming them to as in themselves an offer to the motorist that if he buys four gallons of petrol the proprietor will hand him one medal. This, if the matter lies in contract, appears to me to be the simple and straightforward approach. That is what, ignoring words such as " gift " and " free " the posters say: " If you buy four gallons of petrol I will hand you one medal." The motorist entitles himself (if he wishes one) to receive a medal by carrying out a contract for the purchase of petrol. This is not, my Lords sale of the dedal at a price in money. An alternative argument was advanced on behalf of the respondents, supposing that there was not a sale at a price in money. Section 40 (1) of the Purchase Tax Act 1963 defines "purchase" in the following terms: " 'purchase' means any contract which is a contract of sale within the meaning of the Sale of Goods Act 1893 and also a contract similar to such a contract in other respects but made for a consideration wholly or partly in . . . money, and includes any transaction, in whatsoever form expressed, in so far as its effect is in substance the same as the effect of such a contract as aforesaid; and references to goods being bought include, in relation to a purchase made for a consideration not, or not only, in money, and in relation to any such transaction as aforesaid, references to goods being acquired in any manner;". In the instant case on the above analysis, it is said that the contract for the delivery of the medal was " a contract similar to such a contract in other respects but made for a consideration wholly or partly in money's worth and not, or not only in money." If, it was argued, that is what " purchase " means " sale " in Group 25 must have the complementary meaning. I leave aside, my Lords, the question whether the carrying out of contract to purchase four gallons is properly to be described as money's worth. I do not derive any guidance from this definition on the meaning of sale" in Group 25. It would indeed be odd if the prima facie meaning in Group 25 was designed to be extended merely by a definition of purchase and not by a definition of sale. But the truth of the matter is that " pur- chasse " is so defined for the purpose of recognising the circumstances which constitute a tax point, when tax is charged in respect of a purchase by a etailer frooma wholesaler: see section 9. It is true that section 9 (4) refers to a " seller " and in that instance he is a seller notwithstanding that the goods ui question may not have been disposed of solely for a price in money: but that is because he is " the seller under the purchase" which necessarily imports into the transaction the definition of " purchase." I find no justification for importing from the definition of " purchase," inserted for quite other and particular reasons, a construction of " sale in Group 25 other than its prima facie meaning. I refer, my Lords, to certain authorites to which your Lordships' attention was called. Bulpitt & Sons Ltd. v. S. Bellman & Sons Ltd. (1962) L.R. 3 R.P. 62 (Ungoed-Thomas J.) was a case in which a trader sought to avoid an in- junction against selling below the minimum fixed retail selling price by the device of "giving," with goods sold, coupons worth a considerable amount in terms of entitlement to other goods. He rightly failed. But this does not assist in the present appeal; it was a mere and barefaced device to avoid an obligation: moreover if what had been done had been a distribution of medals of minimal intrinsic value the decision might well have been other- wise. In Taylor v. Smetten (1883) 11 Q.B.D. 207 a man sold pound packets of tea for 2s. 6d. each, each purchaser acquiring at the same time a right chaser of the tea not knowing what his prize was to be until he had bought the tea and found the prize described on a coupon within the packet. The man was convicted of running a lottery. The pound of tea was worth the money paid, but, as was said in the judgment of the court at p. 211, it was " impossible to suppose that the aggregate prices charged and obtained for the packages did not include the aggregate prices of the tea and the prizes." It appears from the report that this was the man's constant method of trading. The purchaser was held to be buying the tea and a chance. I do not doubt the correctness of the decision, but I do not find it persuasive on either of the main points in the present appeal. In Scott & Co. Ltd. v. Solomon (1905) 69 J.P. 137 the appellants were convicted of dealing in plate without a licence. They sold tea and with each packet were coupons which in sufficient numbers would entitle the presenter of the coupons to claim from the tea vendor valuable articles of various sorts, depending upon the number of the coupons, some of which were articles of plate such as watches. The argument for conviction was that there was a binding contract with the tea purchasers as soon as sufficient coupons were presented, to transfer the ownership of the watch, the con- sideration being the payment of money for tea and coupons. There was no evidence of any increase in the price of the tea upon the introduction of the coupons. Lord Alverstone C.J. said, at p. 139: " [This evidence] seems to me to point to one view of the facts, namely, that it was all one transaction. In respect of the payment for the tea, the various purchasers each of them got what has been called this ' coupon.' Mr. Danckwerts does not dispute, and I do not think he could dispute, that that was a sale of coupons. The suggestion that there is full value given for the tea, meaning that there is nothing charged for these coupons, is simply absurd. This very large business, to the extent of thousands of pounds, of Scott and Company, the appellants, could not possibly be carried on if there were no charge for the coupons. The coupons having been delivered out with the tea, the persons who received them either having purchased them them- selves or having obtained them from other purchasers, on presenting them become entitled to receive certain articles, and, amongst others, became entitled in certain events, according to the number of coupons they presented, to receive a very considerable number of articles of plate, watches, and other things of the kind. It seems to me that, looked at in its real essence, this transaction is a trading in watches by means of receiving payment for them by instalments when the money is paid for the tea, and by afterwards recognising the value of those various instalments as evidenced by the coupons by giving back various articles--in this particular case, watches." Again, I do not doubt the correctness of that decision, but I do not find it persuasive on either of the two points in the present appeal. Finally the decision in this House in Chappell & Co. Ltd. v. Nestle Co. Ltd. [1960] A.C. 87 affords in my opinion no assistance: it merely decided that there was no " ordinary retail selling price " of the records in question, having regard to the fact that Nestle would not have sold them at the price of 1s. 6d. had the purchaser not produced evidence of the consumption of a required amount of Nestle's chocolate. For the reasons that I have stated, I am of opinion that the decision of the Court of Appeal was correct and that this appeal should be dismissed. Appeal dismissed. Solicitors: Solicitor for Customs and Excise; Durrant Piesse. F. C. [COURT OF APPEAL] * HORROCKS AND ANOTHER v. FORRAY 1975 Nov. 6,7 Megaw, Scarman and Bridge L.JJ. Licence or Tenency -- Implied licence -- Occupation of house -- House purchased as home for mistress and child--Nature of licence--Whether contractual licence to be inferred--Whether licence terminated by death of purchaser The defendant was the mistress of S and in 1961 bore him a daughter. Thereafter S wholly maintained and supported the defendant and the daughter providing living accommoda- tion, clothing, holidays and all day to day expenses. In 1973 S bought a house. He told the solicitor that he was buying it for the defendant and her daughter, but he did not ask for it to be conveyed to her, although he installed them in it. After completion he inquired about transferring the property to the defendant but on learning there would be fiscal charges he decided not to do so. In 1974 S was killed in a motor accident. By his will S left all his estate to his wife. Neither [Reported by A. G. B. HELM, ESQ., Barrister-at-Law] she nor the plaintiffs, S's executors, knew of his association with the defendant or of the purchase of the house. The plaintiffs brought an action in the county court for possession of the premises on the ground that the defendant's licence to occupy the house terminated on S's death. The defendant contended that she had a contractual leicence whereby she was entitled to live in the house for her life or while her daughter was of school age. The judge held that she could not infer such an agreement and he made an order for possession. On appeal by the defendant:-- Held, dismissing the appeal, that the fact that S intended to bring into existence a binding contract in the nature of a licence and in all the circumstances there was no evidence justifying the inference that the defendant had a contractual licence to live in the same house (post, pp. 238H--239A). Tanner v. Tanner [1975] 1 W.L.R. 1346, C.A. distinguished The following cases are referred to in the judgments: Tanner v. Tanner [1975] 1 W.L.R. 1346; [1975] 3 All E.R. 776, C.A. Ward v. Byham [1956] 1 W.L.R. 496; [1956] 2 All E.R. 318, C.A. The following additional case was cited in argument: Brinions v. Evans [1972] Ch. 359; [1972] 2 W.L.R. 729; [1972] 2 All E.R. 70. C.A. APPEAL from Judge McDonnell sitting at West London County Court. By particulars of claim dated March 21, 1975, the plaintiffs, executors of the will dated August 15, 1963, of William Charles Ayshford Sanford, the testator, who died on April 6, 1974, the owner of a freehold dwelling- house at 7, Farm Place, London, W.8, which the defendant, Maxine Forray, had occupied since about May 1973, pursuant to the leave and licence of the plaintiffs, claimed that the licence terminated with the death of the testator or, alternatively, was determined by the plaintiffs' letter of August 2, 1974, calling for the defendant to vacate the dwellinghouse by November 30, 1974, and sought an order for possession of the dwelling- house and payment of mesne profits from December 1, 1974, until possession. By her re-amended defence and counterclaim the defendant contended that the licence was a contractual licence entitling her to remain in the house for life or for so long as her daughter was of school age or either of them required the accommodation. The judge found that the testator was under no contractual obligation not to revoke the licence during his lifetime and gave judgment for the plaintiffs. The defendant appealed on the ground that the licence bound both the testator and the plaintiffs. The facts are stated in the judgment of Megaw L.J. Simon Goldblat Q.C. and John Laws for the defendant. Walter Blum for the plaintiffs. MEGAW L.J. On April 6, 1974, Mr. William Charles Ayshford Sanford was killed in a motor accident. He was 68. He had been married twice. His second marriage was in 1951. There was one child of that marriage, a son born in 1952. By his will, Mr. Sanford appointed Mr. Arthur Edward Leslie Horrocks and Mr. John Stephen Lloyd as his executors. They, in their capacity as executors, are the plaintiffs in the action out of which this appeal arises. The defendant in the action is Mrs. Maxine Forray. She had been Mr. Sanford's mistress for, it is said, some 17 years, and had so continued up to the time of his death. It would seem that he first met her when she was 15 years old. Though there was evidence, given by the defendant herself, as to the circumstances in which she met Mr. Sanford and became his mistress, I do not think that that evidence--or indeed a good deal of the rest of the evidence relating to her subsequent life and activities--is of relevance to the issue which this court has to decide. The evidence has been carefully reviewed by Judge McDonnell, who heard the action out of which this appeal arises in the West London County Court on July 7, 1975. He delivered his judgment on July 18. There has been no substantial criticism of the judge's findings of fact, based upon the evidence of the witnesses whom he saw and heard giving evidence. I shall refer hereafter to such of the facts found by him as appear to me to be relevant to the issues now found by him as which are substantially more limited in scope than those which the judge had to consider on the basis of the much more wide-ranging arguments which were presented before him on behalf of the defendant. The claim by the plaintiffs is a claim for possession of a house, 7, Farm Place, Kensington, W.8. That house is, and has since about May 1973, been occupied by the defendant and, as I understand it, two children of hers. One of those children, a girl born in July 1961, is the child of the late Mr. Sanford. The other, a boy bom in July 1968, is the son of another man, a Mr. Forray, whom the defendant married in September 1966. As I understand it, that marriage ended in divorce. But during its continuance, the defendant continued to be the late Mr. Sanford's mistress. She has also had not infrequent sexual intercourse with another man apparently a reat friend of the late Mr. Sanford, and apparently with his knowledge. She has sometimes been known by the name of that other man. Mrs. Sanford, the widow of Mr. Sanford, had no knowledge or inkling of her husband's relationship with the defendant, whom she never met. Mrs. Sanford, as the judge records, throughout her marriage regarded her husband as a " marvellous husband." It was only after his death that his widow came to know of the defendant and of this relationship which had in fact existed, concealed from her by her husband for many years. It was only after his death that she or the plaintiffs became aware of his ownership of 7, Farm Place, which the late Mr. Sanford had bought and which had been conveyed to him in his own name in May 1973, and which, since then, had been the residence of the defendant and her children. He had paid #36,500 for it in May 1973. Mr. Sanford had at one time been a wealthy man, but he had lived extravagantly for many years. At the time of his death he was, as the judge says, "coming to the end of his financial tether." If the plaintiffs are unable to sell 7, Farm Place with vacant possession, it is probable that the estate will be insolvent. The widow, to whom Mr. Sanford by his will left all his estate for life with a gift over on her death to their son would in those circumstances receive nothing from the estate. She, like the defendant's daughter, the late Mr. Sanford's illegitimate child, may recover compensation under the Fatal Accidents Acts as being dependants of Mr. Sanford, if negligence resulting in his death is proved as against the driver of the car, who was understood to be his brother. But so far as anything from Mr. Sanford's own estate is concerned, the widow, if the defendant is permitted by the law to remain in possession of 7, Farm place, is likely to be left with nothing. If, on the other hand, 7, Farm Place can be sold with vacant possession --that is, if this claim against the defendant for possession succeeds-- the estate is likely to be, at least, solvent. The widow will get something. As to the defendant's daughter, she may be entitled to damages under the Fatal Accidents Acts as being a dependant of the late Mr. Sanford. She would also be entitled to claim against the estate--should the estate have anything to make such a claim fruitful--under the Inheritance (Family Provision) Act 1938, as amended. In the county court proceedings it was thought that there might be a conflict of interest between the defendant and her daughter, so the Official Solicitor became guardian ad litem of the daughter. We are given to understand that he does not think that there is a conflict which requires any intervention on his part. It is in those circumstances that the plaintiffs, as executors, started the proceedings which have led to this appeal. By their particulars of claim, which are dated March 21, 1975, they set out the late Mr. Sanford's ownership of 7, Farm Place. This is not challenged. They aver that the defendant, since about May 1973, has occupied the house pursuant to licence of the plaintiffs. That is not challenged; indeed, it is asserted on behalf of the defendant. The plaintiffs in their particulars of claim, assert that the licence terminated with the death of Mr. Sanford or was deter- mined by a letter dated August 2, 1974. By that letter the plaintiffs' solicitors wrote to the solicitor who was then acting for the defendant, in these terms: " With reference to 7, Farm Place, London, W.8, this property clearly falls into the estate and we shall be obliged if you will let us have the deeds of the property as soon as possible. The executors require vacant possession of the house but think it reasonable that Mrs. Forray and her daughter should be given a reasonable period in which to make arrangements for alternative accommodation. We would there- for suggest that Mrs. Forray make arrangements to vacate the premises by November 30, 1974." The defence and counterclaim, which was originally delivered on April 28, 1975, has been amended and re-amended, the re-amendment being by leave of the court at the trial in the county court. It is a formidable document, but as events have turned out a substantial part of it is not now relevant. The defence " admits and avers " that the defendant and her daughter had a licence from the late Mr. Sanford to occupy 7, Farm Place. There was then an allegation, which is no longer pursued in this court, that the property was held in trust for the defendant or her daughter or for both. There was also a defence that the defendant had acquired a beneficial interest in the property as a result of contribution made by her to expendi- ture. It was also said that the plaintiffs were estopped from disputing the beneficial ownership of the house by the defendant or her daughter or both; and various particulars were given which are said to give rise to that estoppel. We in this court need not trouble about those defences because they are no longer pursued. It is not now, in this court, contended for the defendant that she has any proprietary right to--any right of ownership in--7, Farm Place. Her claim is solely that she is entitled to remain in occupation by reason of a lience--in ordinary language, by reason of permission to occupy--given to her by the late Mr. Sanford. So the defence which, having been pleaded by amendment, still remains There is authority of this court, partictilarly the decision in Tanner v. Tanner [1975] 1 W.L.R. 1346, that a woman who had been a man's mistress was entitled to remain in occupation of a house which had been provided for her and her child by the man whose mistress she had been. The facts of that case are accurately, though briefly, summarised in the headnote which says this. " In November 1969 the defendant, a spinster, gave birth to twin daughters of whom the plaintiff was the father. In early 1970 the plaintiff and the defendant decided that a house should be purchased to provide a home for the defendant and her baby daughters. In Jtily 1970 the plaintiff bought a house on mortgage, and the defendant left her rent controlled fiat and moved with the babies into the house Three years later the plaintiff offered the defendant #4,000 to move out of the house. The defendant refused on the ground that the house was hers and the children's until the latter left school. The plaintiff's solicitor wrote to the defendant purporting to temunate her licence to live in the house and asking her to leave. When she did not do so the plaintiff brought possession proceedings in the county court. The defendant counterclaimed for a declaration that she was entitled to a beneficial interest in the house. The county court judge rejected the defendant's contentions and made an order for possession, in pur- suance of which the defendant and her children were rehoused by the local authority." The defendant appealed and this court allowed the appeal. There was a complication there which does not arise in the present case, that as, by order of the county court, the defendant had gone out of possession, there was not any order by the court restoring her to possession of the house; but she was in lieu of that given damages because what had been done at the instance of the plaintiff had been inconsistent with her contractual rights. Continuing with the headnote: " Held, allowing the appeal, (1) that the inference to be drawn from all the circumstances was that the defendant had a contractual licence to have accommodation in the house for herself and the children so long as the children were of school age and reasonably required the accommodation; and that, accordingly, the order for possession ought not to have been made." That is a decision of this court which any other division of the court would, of course, follow. We have got to ascertain, as that is the case principally relied upon in support of the defendant's contention, what Tanner v. Tanner [1975] 1 W.L.R. 1346 decided, and then apply that to the facts of this case. What was decided in Tanner v. Tanner was really very simple. It was decided that on the evidence that had been adduced in that case there was a fair inference to be drawn that the man and his mistress had entered into a contract by which the man had agreed, for consideration, that the house which was being bought by him for the occupation of the woman and her children should remain available to her, with a continuing licence for her to occupy it so long, at any rate, as the children were of school age, or unless some other circumstances arose meanwhile which would make it reasonable for the possession to cease. It was, therefore, a decision on the facts of that case that there was a contract. There was not an express ontract: that is to say, there was no evidence tha oncehad ~sai to thhe other " I promise that I will do so-and-so." But of course this court is entitled to infer a contract, even though it is clear that words have not been spoken expressly stating a contractual promise or an offer and acceptance in express words. The court is entitled to infer the existence of a contract. In the circumstances of that case, this court inferred that there was a contract such as I have mentioned. There is really no doubt about what was the basis of the decision there. It may be that the bringing in of the conception of contract into situations of this sort does give rise to difficulties. It may be that some other approach to situations of this sort would be preferable. But that is not a matter for us. We have got to take the law as it is and to apply it as it stands. The law as it stands does involve that the defendant can only succeed in this case, on the submission now made on her behalf, if she shows that it is proper to infer the existence of a contract which permitted her to remain in this house for one or other of the three alternative periods which have been put forward and which I have already mentioned. And, of course, she has to establish that that is a contract which, properly viewed and in accordance with the terms which have to be applied, was one which continued to exist as a matter of law after the death of the late Mr. Sanford. Now, in order to establish a contract, whether it be express or implied by law, there has to be shown a meeting of the minds of the parties with a definition of the contractual terms reasonably clearly made out and with an intention to affect the legal relationship, that is, that the agreement that is made is one which is properly to be regarded as being enforceable by the court if one or the other fails to comply with it; and it still remains a part of the law of this country, though many people think that it is time that it was changed to some other criterion, that there must be consideration moving in order to establish a contract. All those elements on thc facts in Tanner v. Tanner [1975] 1 W.L.R. 1346, and on the evidence accepted by the court, were present. Are they present in this case? The county court judge thought not, and therefore he held that there was no contract and, therefore, no contractual licence, and the question did not fall to be con- sidered whether, if there was a contract, its terms were alternative (a) or alternative (b) or alternative (c), as to the length of the period for which the defendant was to be entitled to remain in this house. The basis of the assertion that there existed here a contractual licence s really this: that there was evidence tht over a p~erid of a g~oodm~an years, beginning at any rate soon after the birth of the daughter, the late r. Sanford had continuously provided accommodation for the ddeendant and her daughter: That accommodation had, I think we were told, involved about nine different addresses at one time or another. In addition to continuing to provide accommodation for the defendant, the late Mr. Sanford had expended a very great deal of money, either by way of buying things for the defendant and her child or children or by way of providing her with money with which she could herself buy things; and it is apparent that she was provided with what one could fairly describe as a reasonably luxurious existence. Her own evidence, as summarised by the judge in his judgment, was that the deceased had expended on her and her children something of the order of #4,000 or #5,000 a year. That was, as I understand it, in addition to the provision of accommodation. There was also evidence that the late Mr. Sanford had at some earlier time indicated to a solicitor a desire to make some provision for the defendant. But the principal matter which is put forward as supporting the existence of a contract is what happened in relation to the purchase of 7, Farm Place itself. That is summarised, and as I think quite fairly and lucidly summarised, by the judge. He said: " In 1973 the deceased "--that is Mr. Sanford--" decided to buy the house at 7, Farm Place, the subject matter of this action. He did not instruct the first-named plaintiff, who was his family solicitor, but a Mr. Signy to whom the defendant had introduced him. He told Mr. Signy that he was buying it for the defendant and her child so that they should have some security if anything happened to him but he did not ask for the house to be conveyed to the defendant. Completion of the purchase took place on May 10, 1973, and the deceased was registered as the owner of the freehold on May 24, 1973. After com- pletion the deceased consulted Mr. Signy about transferring the property to the defendant. When he was told that there might be a liability to capital gains tax and that ad valorem stamp duty would be payable, he decided against doing so. On a later occasion he suggested to Mr. Signy that a tmst should be created for the benefit of his child and was advised that ad valorem stamp duty would still be payable and so he took the matter no further. He later asked Mr. Signy to draft a codicil to his will leaving the house in trust for the child; Mr. Signy said he would like to see the will itself before doing so and the matter proceeded no further." Pausing at that point in the judge's judgment, it may well be said that those facts, which were not really in dispute, at any rate indicated that the late Mr. Sanford, however anxious he was to make provision for the defendant, baulked at the financial responsibility that he was told would be involved by way of tax and stamp duty if this step were to be taken to transfer this house to the defendant. That he was not prepared to do. Nor, apparently, having thought about the completely different idea of leaving the house by his will in trust for the child, had he done anything about that at the time of his death. Of course, all those things do not make it impossible that he also had agreed with the defendant, or was nunded to agree thereafter with the defendant, that she should, without obtaining any ownership of the property, nevertheless have a right to continue to live there under one or other of the three alternatives which have been put forward. The judge then goes on: "The defendant said in evidence that for 16 years the deceased had said that he would eventually get her a house and I accept that he may well have expressed such an intention in general terms from time to time. When No. 7, Farm Place was purchased she may well have believed that it would become her property but I do not believe that the deceased ever expressly told her so. . . . Then the judge, having reviewed the evidence and having dealt with various other issues, which no longer arise in this court because they have been decided against the defendant and are not the subject of appeal, went on to deal with Tanner v. Tanner [1975] 1 W.L.R 1346. He analysed that decision, as I think entirely correctly, and went on to say: " In the present case I can find no circumstances whatsoever from which to infer an agreement that the defendant was entitled to live in the house for her life or whilst the daughter was of school age. There is a strong moral obligation on a man to provide and care for Vol. 1 12 his illegitimate child and an additional obligation for the deep wrong he has done to that child by inflicting illegitimacy on her: In re T.B. [1967]-Ch. 247. At common law there was no obligation on the father to provide for his illegitimate child--Seaborn v. Maddy (1840) 9 C. & P. 497--but he may be ordered to provide weekly payments mother, the Supplementary Benefits Commission or a local authority under the Affiliation Proceedings Act 1957, as amended. It is also well settled that a putative father may make a binding contract with the mother to contribute to the child's maintenance for which her undertaking to care for the child affords the consideration." Then the judge referred to Ward v. Byham [1956] 1 W.L.R. 496. He said: " In the present case there was no such contract because the deceased provided handsomely for the maintenance of the child during his lifetime. Where an affilliation order has been made the death of the putative father puts an end to the order and arrears are not recover- able from his estate . . . I therefore hold that the right of the child or its mother to maintenance from the putative father continues only during the latter's lifetime." Then the judge referred to the provisions of the Inheritance (Family Pro- vision) Act 1938, to which I have referred, which would enable this estate from which a claim could be met. The judge, in substance, as I see it, was saying that on the facts of this case, as contrasted with the facts that emerged in Tanner v. Tanner [1975] 1 W.L.R. 1346, he was unable to hold that there were shown any events or facts from which the inference could fairly be drawn, on the balance of probability, that there was a contract such as is suggested giving this defendant a legal right to remain in possession of the house for any of the periods suggested. Mr. Goldblatt in this court summarised his submission to the contrary in this way. He submitted that on the facts, over a period of years the defendant was, at the request and the instance of the late Mr. Sanford, subordinating her mode of life, or her " life-style," and her choice of residence to his directions on the " understanding " that he, Mr. Sanford, would generously maintain the defendant and her family in the meanwhile and would, when circumstances permitted, provide her with a permanent home. Then Mr. Goldblatt, as I understand it, submitted that the contract was made long before the purchase of 7, Farm Place, but soon after the birth of the daughter. But, said Mr. Goldblatt, that contract, made earlier and being in existence earlier, was varied when 7, Farm Place was bought, and was varied so that the home that was to be given to the defendant on these terms was now no longer left uncertain, but was now defined as being 7, Farm Place. The " understanding " which is referred to in that summary of the position was amplified by Mr. Goldblatt as involving that a promise--- a contractually binding promise--had been given by the late Mr. Sanford, and that it related to the occupation of 7, Farm Place. With great respect to Mr. Goldblatt's argument, I am quite unable to see, on the facts and circumstances of this case, that there was here any conceivable basis for an implication that any such binding promise had been made by Mr. Sanford as is suggested. The fact that he had it in mind to seek to provide some security for the defendant in the event of his death certainly does not go anyithing like far enough to bring into existence what is necessary to show a binding contract of this nature. There was here, in my judgment, simply nothing on the evidenoe that would have entitled the judge to come to the conclusion that there was any such contractual licence. I say that without going on to consider what I think might well be an extremely difficult further barrier in the way of the defendant. Supposing that she had established something which otherwise could be regarded as being a contract, where is the consideration for that contract to be found? In Tanner v. Tanner [1975] 1 W.L.R. 1346 the consideration was perfectly clear: the lady had given up her rent-controlled flat as a part of the bargain that she would move into the other accommo- dation. There is no such consideration here. However, I do not wish to decide this case, as far as I am concerned, on any question relating to absence of consideration. But I am satisfied that the judge was completely right in his view that the defendant had wholly failed to show the existence of a contractual licence. I would accordingly dismiss the appeal. SCARMAN L.J. So fully do I agree with the judgment of Megaw L.J. that I wish to add only a few comments. When an illegitimate child has been born, there is certainly nothing contrary to public policy in the parents coming to an agreement, which they intend to be binding in law, for the maintenance of the child and the mother. Parents of an illegitimate child have obligations towards the child. So far from its being contrary to public policy that those obligations should be regulated by contract, I would have thought it was in the public interest that they should be so. Certainly it seems to me far better that parents in such a situation should seek to regulate their position by contract than that they should have to resort to the court under the Affiliation Proceedings Act 1957. But it does not follow that, because there exists a relationship which can be regulated by contract, the proper inference is that the parties in their particular circumstances have so regulated their relationship. In the present case there is no express contract. Mr. Goldblatt, for the defendant, has sought to persuade the court that a contract is to be inferred from a course of conduct, from the development of the relationship between the parties and its course over a period of years. This submission is, as a matter of law, open to him. That has been clearly decided, as I understand it, in two cases in the Court of Appeal to which he has referred us, Ward v. Byham [1956] 1 W.L.R. 496 and Tanner v. Tanner [1975] 1 W.L.R. 1346. In each of those cases, however, the relationship of man and mistress was either broken or on the point of collapse. The parties to the relationship, the man and the woman, had to consider what best should be done for the innocent product of their relationship, the illegitimate children. In a very real sense, both in Ward v. Byham and in Tanner v. Tanner, the man and the woman were making arrangements for the future at arm's-length. The woman was concerned for herself and her children, the man was concerned to limit and define his financial responsibilities towards the woman and the children. Here is a fertile area for the growth of an inference of a legally binding contract; and for myself I do not find it surprising, when I look at the facts in Ward v. Byham or Tanner v. Tanner, that the court came to the conclusion that a contract was to be inferred from the conduct of the parties. But how different is this case. Right up to the death of the man there was a con- tinuing, warm relationship of man and mistress. He was maintaining his mistress in luxurious, even, so the judge thought, extravagant style, and, we now know, in a style beyond his means: his estate is now at risk of being insolvent. Mr. Goldblatt has tried to tempt us to draw an inference of contract by dangling in front of our eyes various contracts that might be inferred. It one looks at that sort of fishing exercise with a dispassionate lawyer's eye, one begins to wonder whether he is not in difficulty in finding in the relationship any one, certain, contract. Since he is saying that three or four possibilities arise (Megaw L.J. has analysed them), one wonders whether these parties, in fact, entered into a legally binding agreement or intended to create legal relations upon the basis of terms sufficiently formulated to be clear and certain. But his real difficulty is that, whatever relationship did exist between these two, it could as well be referable to the continuance of natural love and affection as to an intention to enter into an agreement which they intended to have legal effect. In the other two cases, that relationship had ended and it was necessary to tie up the bits. In the present case the relationship was continuing until the unhappy and unexpected death of the man. Therefore Mr. Goldblatt is in difficulty with the facts of the case. Fortunately for this court, the facts have been subjected to a most careful and detailed analysis by the trial judge, who, as Megaw L.J. has already commented, directed himself absolutely correctly on the question of law, that is to say, the effect and scope of Tanner v. Tanner [1975] 1 W.L.R. 1346. In the course of his analysis of the facts, the judge commented that the deceased had said, according to the defendant in evidence, that he would eventually get her a house, and the judge accepted that the deceased may well have expressed such an intention in general terms from time to time. But then the judge went on to find as follows: " When No. 7 Farm Place was purchased she may well have believed that it would become her property but I do not believe that the deceased ever expressly told her so." The judge later commented on the luxurious provision that this man chose to make for his mistress and their child (the relevance of that I have already mentioned); and then at the very end of his judgrnent, when he came to consider the effect of his findings, he said--rightly, in my judgment-- " It is well settled that a putative father may make a binding contract with the mother to contribute to the child's maintenance for which her undertaking to care for the child affords the consideration." Then he said: " In the present case there was no such contract because the deceased provided handsomely for the maintenance of the child during his lifetime." When I first read those words I was puzzled. But now that I have had the benefit of Mr. Goldblatt's argument on behalf of the defendant, I see exactly what the judge was saying. Here was a generous provision made for a woman who was still the mistress and for the child of that relation- ship. It was generous beyond what one would reasonably expect the man to accept a legally binding obligation to provide. It was generous, not because he was bound or was binding himself, to be generous, but because he chose o be generous to the woman for vhom there was a big place in his hhear. Once one reaches that situation, one can see how the judge inferred that this was a case -where there was no contract and where really it was unreasonable to infer a contract. For those reasons, as well as for the reasons developed by Megaw L.J., I think this appeal should be dismissed BRIDGE L.J. I agree with both the judgments in this court, and indeed with the careful, reserved judgment of the judge who tried the case in the Appeal dismissed with costs. Order for vacant possession in 28 day's. Solicitors : Rendall & Co., Frere, Cholmeley & Co. [COURT OF APPEAL] * BUSHWALL PROPERTIES LTD. v. VORTEX PROPERTIES LTD. SAME v. SAME [1969 B. No. 4041] [1971 B. No. 2257] 1976 Jan. 23, 27, 28, 29 Buckley and Orr L.JJ. and Sir John Pennycuick Contract--Formation--Consensus ad idem--Uncertainty--Agree- ment to purchase land--Purchase price to be paid in stages-- "Proportionate part " of land to be conveyed on each occasion--No agreement as to selection of land to be so con- veyed--Whether contract void for uncertainty In June 1968 it was agreed between the parties in an exchange of letters that the plaintiff would purchase land from the defendant in three phases, a certain amount of the purchase price being paid and a " proportionate part " of the land being released on each phase. Following an attempt on behalf of the defendant to alter the terms of the agreement the plaintiff on July 7, 1969, issued a writ claiming specific performance and damages. On July 24, 1969, the defendant conveyed the land to a subsidiary company of the defendant's parent company. During subsequent negotiations between the the plaintiff " in a final effort to dispose of this matter " one plaintiff accepted the offer and in November 1970 the land was conveyed accordingly. In May 1971 the plaintiff com- menced the second action, later consolidated with the earlier action, claiming damages from the defendant for breach of the contract made in June 1968. Oliver J., ordering an enquiry as to the loss sustained by the plaintiff' rejected the defendant's contention that the contract purported to have been made in 1968 failed by reason of uncertainty in that there was no allocation of the power to select the land to be released at each phase, holding that the plaintiff, as owner of the land that the plaintiff had not accepted the conveyance in 1970 in settlement of the first action. On appeal by the defendant:-- Held, allowing the appeal, (1) that in a contract for the sale of land with completion in phases the power to select the land to be included in each phase represented an element uncertain and for that reason unenforceable (post, p. 599c-D); that there was no ground on which, as a matter of law, the power to select the land where no provision had been made had to be regarded as vested in the purchaser (post, p. 599A-B): June 1968 was unenforceable by reason of uncertainty (post. pp. 600A 604D--E, 605c--F). (2) That, further, as a matter of construction, the in 1970 had disposed by way of compromise of the plaintiff's claim for damages (post, pp. 602A--D, 604D--E, 606D--F). Decision of Oliver J. [1975] 1 W.L.R. 1649; [1975] 2 All E.R. 214 reversed. The following cases are referred to in the judgments: Abdulla v. Shah [1959] A.C. 124; [1959] 2 W.L.R. 12, P.C. Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, C.A. Hussey v. Horne-Payne (1879) 4 App.Cas. 31 1, H.L.(E.). Miller (James) & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. [1970] A.C. 583; [1970] 2 W.L.R. 728; [1970] 1 All E.R. 796, H.L.(E.). Wickman-Machine Tool Sales Ltd. v. L. Schuler A.G. [1974] A.C. 235: [1973] 2 W.L.R. 683: [1973] 2 All E.R. 39, H.L.(E.). The following additional cases were cited in argument: Asten v. Asten [1894] 3 Ch. 260. Brown v. Gould [1972] Ch. 53; [1971] 3 W.L.R. 334; [1971] 2 All E.R. Clarke v. Ramuz [1891] 2 Q.B. 456, C.A. Cottrill v. Steyning and Littlehampton Building Society [1966] 1 W.L.R. 753; [1966] 2 AU E.R. 295. Courtney & Fairbairn Ltd. v. Tolaini Brothers (Hotels) Ltd. [1975] 1 W.L.R. 297; [1975] 1 All E.R. 716, C.A. Egmont (Earl) v. Smith (1877) 6 Ch.D. 469. Jones v. Lipman [1962] 1 W.L.R. 832; [1962] 1 All E.R. 442. London School Board and Foster, In re (1903) 87 L.T. 700, C.A. Marks v. Lilley [1959] 1 W.L.R. 749; [1959] 2 All E.R. 647. May and Butcher Ltd. v. The King (Note) [1934] 2 K.B. 17, H.L.(E.). Payzu Ltd. v. Saunders [1919] 2 K.B. 581, C.A. Pilkington v. Wood [1953] Ch. 770; [1953] 3 W.L.R. 522; [1953] 2 All E.R. 810. Serff v. Acton Local Board (1886) 21 Ch.D. 679. Talbot v. Talbot [1968] Ch. 1; [1967] 3 W.L.R. 438; [1967] 2 All E.R. 920, C.A. Thorpe v. Fasey [1949] Ch. 649; [1949] 2 All E.R. 393. Wright v. Dean [1948] Ch. 686; [1948] 2 All E.R. 415. APPEAL from Oliver J. By writ dated July 7, 1969, the plaintiff, Bushwall Properties Ltd., claimed specific performance of an agreement constituted by letters dated June 20, 1968, for sale by the defendant, Vortex Properties Ltd., to the plaintiff of 511/2 acres of land in Fareham, Hampshire, at the price of #500,000; and damages in addition to specific performance. By a second writ dated May 14, 1971, the plaintiff claimed damages for breach of the contract referred to in the first writ broken by the defendant's selling and conveying of the land to Medina Estates Ltd. on July 24, 1969. By order dated August 2, 1971, the actions were consolidated. By a defence dated August 30, 1971, the defendant alleged, inter alia, that the letters of June 1968 did not constitute a binding contract; that the first action had been settled between the parties by letters in June 1970; and that the plaintiff was not entitled to continue with either action since the subject matter of both was the subject of a binding compromise. On December 9, 1974, Oliver J., rejecting the defendant's contentions, ordered an inquiry as to what loss the plaintiff had suffered by reason of the defendant's failure to perform the agreement of June 1968. By notice of appeal dated February 24, 1975, the defendant appealed on the grounds, inter alia, that the judge was wrong in law in holding (1) that the letters in June 1970 did not constitute a binding settlement of the first action; (2) that the arrangement made in letters in June 1968 was sufficiently certain to constitute a contract enforceable in law for the sale of the land; and (3) that a term was to be implied into that arrange- ment either by law or by the custom of conveyancers to the effect that the plaintiff as purchaser was to be entitled to select what area of land was to be conveyed on each of the phased completions contemplated by the arrangement. By a respondent's notice dated June 9, 1975, the plaintiff gave notice of an intention to contend that the judgment on the issue of the compromise of the first action should be affirmed on additional grounds. The facts are stated in the judgment of Sir John Pennycuick. A. J. Balcombe Q.C. and Michael Barnes for the defendant. G.B.H. Dillon Q.C. and D.M. Burton for the plaintiff. BUCKLEY L.J. I will ask Sir John Pennycuick to deliver the first judg- ment in this case. SIR JOHN PANNYCUICK. We have before us an appeal from an order made by Oliver J. on December 9, 1974. The appeal raises two issues, namely, (1) did certain letters exchanged in June 1968 have contractual effect, or was the contract purported to be made void for uncertainty? (2) Was the plaintiff's claim for damages for breach by the defendant of that contract disposed of by way of compromise under letters exchanged in June 1970? If those two questions are answered in favour of the plaintiff, as they were answered by Oliver J., a further question as to measure of damages and duty to mitigate arises. The facts are set out fully and accurately by Oliver J. in his judgment, and I will summarise them fairly briefly but I hope sufficiently for the purpose of this appeal. In June 1968 the defendant was the freehold owner for building development. The defendant was then a subsidiary of a company known as Three Mile Developments Ltd. The plaintiff was anxious to acquire and develop the land. An interview took place on June 20, 1968, between one Duggan, a partner in the firm of Duggan, Turk & Co., as agent for the defendant, and one Crompton, the managing director of the plaintiff. Mr. Duggan and Mr. Crompton came to terms there and then, and a letter was typed and signed by Mr. Crompton. I will read that letter in full: "Dear Sirs, Re: Land West of Peak Lane, Fareham: approximately 511/2 acres. We hereby confirm our agreement to purchase the whole of the above mentioned land in your ownership at the price of #500,000 upon the following conditions: -- 1. The purchase price to be phased as to #250,000 upon first completion, as to #125,000 12 months there- after and as to the balance of #125,000 a further 12 months thereafter. 2. On the occasion of each completion a proportionate part of the land shall be released forthwith to us. 3. Upon your making a good and marketable title to the property. 4. Upon outline planning per- mission being granted for the whole of the property. 5. That a section 37 agreement affecting the land shall be made at a density of not less than 12 units per acre and with a period of not more than seven years. 6. That detailed planning permission for the first approximate 50 units shall be granted. 7. That upon formal exchange of contracts we shall be let into possession of the land to enable us to commence such operations as we may think fit. 8. The fulfilment of conditions 2-7 above shall be carried out in conjunction with the purchaser's archi- tects who shall henceforth join in all negotiations and arrangements in connection therewith for the purpose of agreeing and approving the same on our behalf. 9. That the date of first completion shall be eight weeks from the fulfilment of the conditions 1-7 above. Will you please let us have an identical letter to this signed by your solicitor, Mr. David A. J. Duggan, as your authorised agent." Mr. Duggan indeed did sign a letter accepting those terms on June 20, 1968. A number of matters are not in dispute. Mr. Crompton had authority to bind the plaintiff. Mr. Duggan had authority to bind the defendant. Both parties had a contractual intent. The reference to a proportionate part of the land in condition 2 refers to acreage and not to value. Conditions 3, 4, 5 and 6, which I think are the only true conditions amongst the conditions so described in the letter, have all been fulfilled, the last of the fulfilments being that of condition 5. A section 37 agree- ment was signed with the county council on April 10, 1969. The contention of the defendant is that condition 2 is uncertain in that the contract does not provide who is to have the power of selection of the proportionate part of land to be released. Immediately after that exchange of letters, the plaintiff's solicitors registered an estate contract. Shortly afterwards, a company known as Town and Commercial Properties Ltd. took over the control of Three Mile Developments Ltd. and with it the control of the defendant which had been a subsidiary of Three Mile Developments Ltd. Three Mile Developments Ltd. had another subsidiary company which comes into this story known as Medina Estates Ltd. The control of Medina Estates Ltd. likewise passed to Town and Commercial Properties Ltd. About the same time Linklaters & Paines took over as solicitors for the defendant and also Medina Estates Ltd., and I think they also act for their parent company, Town and Commercial Properties Ltd. There followed correspondence between Linklaters & Paines and Coffin, Mew & Clover for the plaintiff. That correspondence was in the first place conccerned with the preparation of a formal contract pursuant to the pro- vision contained in condition 7 of the letter of June 20. But it soon became apparent in the correspondence that Linklaters & Paines wanted to recast the terms contained in that letter, first by substituting Medina Estates Ltd. for the defendant as the vendor company, and also by converting the sale into a single one-phase completion instead of a completion in three phases. The plaintiff would not have objected to having Medina Estates Ltd. sub- stituted as its vendor, but was not willing to accept the contract on the proposed new terms with a single completion. In the course of correspond- ence Linklaters & Paines advanced several untenable grounds for their contention that no contract had been made by the letters of June 1968 such as that one or other condition had not been fulfilled or that the letter must be treated as " subject to contract." I need not pursue those contentions. They did, however, take another and altogether more serious point at a later date, March 3, 1970, quite a long time afterwards, namely, that the contract purported to be made by the letters of June 1968 was too uncertain to be enforced. In due course Linklaters & Paines tendered a draft contract on the pro- posed new terms. That was on June 26, 1969. Then, on July 4, Coffin, Mew & Clover replied refusing to accept a contract in those terms, and they concluded their letter with a paragraph in these terms: " My clients do not wish to be rigid about the personality of the actual vendor "--that refers to Medina Estates Ltd. instead of the defendant " if for tax reasons your clients wish to reorganise the matter but, unless and until some other binding agreement is reached, my clients will insist on their contract with Vortex Properties Ltd." From that position they did not resile. On July 7, 1969, a writ was issued in an action intituled " 1969 B. No. 4041," by which the plaintiff claimed specific performance of the agreement purported to have been constituted by the letters of June 1968, with damages in addition to specific performance. On July 31, 1969, the state- ment of claim in that action was delivered. I need not, I think, refer to that statement of claim. So far, no defence has been delivered. Between the date of the writ and the date of the statement of claim, namely, on July 24, 1969, the defendant conveyed the property to Medina Estates Ltd. It is accepted by Mr. Balcombe on behalf of the defendant that that was a breach by the defendant of the contract constituted by the letters of Jne 19668 assuming that there was a bmin~in con~ract Hcesays ~thatthce breach was only a technical one, bearing in mind that the defendant and Medina Estates Ltd. were both subsidiaries of a single company; but he accepts that it was a breach. At that stage the plaintiff could have joined Medina Estates Ltd. as a defendant in the action and continued its claim for specific performance; but the plaintiff did not elect to take that course. Shortly afterwards, on July 29, Linklaters & Paines submitted another draft contract, this time substantially in terms of the letters of June 1968, except that the vendor was Medina Estates Ltd. Further correspondence then ensued, the plaintiff through its solicitors at this stage raising a number of difficulties over the selection of the land to be comprised in the first phase. There was considerable delay, much of which I think it is right to say was occasioned by the plaintiff's solicitors, and at this stage Linklaters & Paines were pressing for the matter to be got on with. Then came the next two critical letters in this action. Linklaters & Paines wrote to Coffin, Mew & Clover a letter dated June 5, 1970, in these terms : " Dear Sirs, Re : Bushwall v. Vortex. In a final effort to dispose of this matter we are instructed to make the following open offer. Our clients are prepared to dispense with any formal contract and offer to convey the whole of the land in one conveyance for #500,000, completion to take place within a reasonable time, which we would suggest is two months from today's date. You have already satisfied yourselves as to our clients' title. May we please hear from you? " To that Coffin, Mew & Clover replied in a letter dated June 12, 1970: " Dear Sirs, Bushwall Properties Ltd. v. Vortex Properties Ltd. On behalf of our clients we accept the offer by your clients contained in your letter dated June 5, 1970, to convey the whole of the land in one conveyance for #500,000, completion to take place within a reasonable time. You are in error, however, in supposing that we have satisfied ourselves as to your clients' title. We enclose a list of the documents you have supplied to us relating thereto and request that you oomplete the abstract as soon as possible. We will contact you in due course with regard to your suggestion as to a date for completion, which must anyway depend on how soon you deduce your clients' title." Certain further correspondence followed, to which I will refer at a later stage. The purchase was in fact completed by a conveyance from Medina Estates Ltd. to the plaintiff on November 27, 1970. Subsequently, the plain- tiff commenced a second action against the defendant by a writ dated May 14, 1971. That action is intituled " 1971 B. No. 2257." The claim is for damages for breach of the contract made by the letters of June 1968, the breach asserted being the defendant's selling and conveying the land to Medina Estates Ltd. Again there was a statement of claim. Again I do not think the statement of claim takes the matter any further. The state- ment of claim was, however, amended and by the amended statement of claim particulars of damage are given. Those should be looked at, but I will not read them. They refer to mitigation of damages. There was a defence and amended defence to that action. The critical paragraphs in the amended defence run as follows: " 7. The writ in action 1969 B. No. 4041 was issued on July 7, 1969. Both prior to and after the said date the defendant through its solicitors asserted and continued to assert that the said letters of July 20, 1968, did not constitute a binding contract between the parties. The plaintiff asserted the contrary. By a letter dated June 5, 1970, to the plaintiff's soli~ciors the defendant finaUll offered to setite the a~ctin 1969 B. No. 4041 on terms that the whole of the land was conveyed for #500,000, completion to take place within a reasonable time. By a letter dated June 12, 1970, the plaintiff's solicitors accepted the said offer of ssettle- ment. The defendant has conveyed the land as aforesaid. 8. By reason of the matters pleaded in paragraph 7 hereof action 1969 B. No. 4041 was settled between the parties on the terms as aforesaid. In the premises the plaintiff is not entitled to continue with that action or with action 1971 B. No. 2257...." In that state of affairs, the action came before Oliver J. in late 1974. Evidence was given on both sides; but in the event no question of fact now arises and both parties I think are content to accept the judge's full and clear statement of the facts. The judge dealt with the two issues in the reverse order, for no doubt good reasons. I think, however, it will be convenient to deal with the two issues in the chronological order in which I have stated them. The issues were argued in that order by counsel before us. The first issue is whether the contract purported to be made by the letters exchanged in June 1968 fails by reason of uncertainty, the uncertainty going to the power of selection of the land to be allocated upon each phase. The general approach of the court to that question is not in dispute. The court will uphold a contract if it is possible to do so. On the other hand, as Maugham L.J. said in Foley v. Classique Coaches Lid. [1934] 2 K.B. 1, 13: " It is indisputable that unless all the material terms of the contract are agreed there is no binding obligation. An agreement to agree in the future is not a contract; nor is there a contract if a material term is neither settled nor implied by law and the document contains no machinery for ascertaining it." I must now read that part of the judgment in which the judge dealt with that matter. He first of all disposes of a number of points concerning uncertainty which are not now in issue and goes on [1975] 1 W.L.R. 1649, 1656--1657 : " As to the selection of the area to be conveyed, I feel no particular difficulty, nor do I think that it is necessary to imply any term beyond what is implied into an agreement for sale of land by law or the custom of conveyancers in any event. From the date of the contract the vendor is a qualified trustee of the whole of the lands of the purchaser, and the purchaser, subject to paying the purchase money, is the owner in equity. A recent example of the operation of this is to be found in the decision of Walton J. in Lake v. Bayliss [1974] 1 W.L.R. 1073 to which Mr. Burton has referred me previously. In the instant case it was an express condition of the contract that the purchaser was to be put into possession of the whole of the land on exchange of formal contracts. Further, the preparation of the con- veyance of the land is, in all contracts for sale of land, in the absence of an express stipulation to the contrary, a duty to be assumed by the purchaser. He can if he wishes insist upon the conveyance to a nominee, and he may, where the nature of the land renders it desirable, insist, within limits, upon taking separate conveyances of different parts and upon apportioning the purchase money between them: see Dart on Vendor and Purchaser, 8th ed. (1929), vol. 1, p. 461. He cannot of course insist upon a conveyance until he pays the pur- chase money, unless the contract otherwise specifies, but in the instant case the contract does so specify. It provides that an area shall be released proportionate to the amount of purchase price paid, and it seems to me implicit in the relationship arising between vendor and purchaser on a contract of sale that where there is a provision in these terms, with no reservation to the vendor of any right to select the area and no other machinery provided for determining it, that the purchaser, as the owner in equity, has the right to select the land to be included in the draft conveyance which he sends to the vendor for approval, subject only to the overriding limitation that it must not exceed a proportionate part. Mr. Barnes points to the hardship of this from the vendor's point of view, and he takes the perhaps rather fanciful case of a purchaser directing conveyance of innumerable small lots in various parts of the estate. I am not impressed by this. The underlying assumption in all commercial contracts is that the parties are going to behave as reasonable men of business. In any event, if the vendor wishes to protect himself from such risks, then he must stipulate some machinery for selection. I did ask Mr. Barnes whether, if these clauses had been contained in an option conferred by a will, the court could be forced to hold the provision void. He did not feel able so to contend and he referred me to the decision of Romer J. in Asten v. Asten [1894] 3 Ch. 260, but he submitted that whilst the giving of a right of selection to a legatee is one thing--for, after all, one is there looking only for a unilateral intention; that of the testator --the same cannot be applied to a bilateral transaction where one is seeking to find the common intention. To an extent this is no doubt true, but one has, of course, to look for that common intention against the background of the legal rights and duties which are implicit in the relationship created by the particular type of transaction into which the parties have entered. Certainly the passage which I have quoted from the judgment of Megarry J. in Brown v. Gould [1972] Ch. 53, 56, indicates that the approach of the courts to problems of uncertainty is the same regardless of the type of document under consideration. I am therefore unimpressed by the points taken on the pleadings. The point of uncertainty, which is one of law, emerged with clarity only upon the service of the particulars of the defence. I suppose that it would technically have been possible then to have served a reply, but it seems to me unnecessary. " The conclusion at which I arrive derives not from an implied term such as is required to give business efficacy to the contract, but from the marrying of the provisions of clauses 1 and 2 with the rights and duties arising as a matter of law from the contract for the sale and purchase of land." It will be observed that the judge rests his judgment on the general law, including the terms to be implied under the general law into an agreement for sale of land. He expressly disclaims the implication of any term into the express contract purported to have been made by the parties. Mr. Dillon, for the plaintiff, likewise expressly disclaimed the implica- tion of a term. The way he put it was: " I rely on the effect of the general law as emphasised and underlined by the terms of the particular contract." That, I think, really means the general law as applied to the express terms of the particular contract. He too disclaimed any implication of a term into the contract on what may be called in shorthand " the officious bystander principle." Having regard to that disclaimer, it is unnecessary to express any view as to whether a term as to selection could be implied from the conditions contained in the letter, in particular from conditions and 7 read together. Leaving aside the implication of a term, I see no ground upon which, under the general law as applied to contracts of the sale of land, where an intending vendor and an intending purchaser enter into a binding contract for sale with completion in phases, the power of selection as to what part of the land is to be included in each phase must be regarded as vested in the purchaser. It will be observed that this is no mere matter of machinery. Should the power of selection be vested in the purchaser, the vendor might be severely prejudiced by the manner in which that power completed the first phase, were then to make default in the next phase, leaving part but not the whole of the land with the vendor, the latter having over it the ordinary rights of a vendor where the purchaser has with the vendor might not be appropriate for advantageous development, and one can think of extreme instances such as a landlocked corner of land or pieces of land separated by the part taken by the purchaser. It seems to me that this is a point of substance and not a mere matter of machinery. It represents an element in a contract which if left uncertain would render the contract as a whole uncertain and for that reason unenforceable. The suggestion was made, but not pursued, that the court in such circumstances might leave it to a third party to determine which land should be selected at each phase. The cou1t might, for instance, direct an inquiry in chambers. The court would no doubt do that if one were concerned with a mere matter of machinery. For instance, if the contract was for the sale of land at the market price but the parties were unable to agree upon the market price and there was no provision in the contract for reference to some outside party, then I think the court might well direct an inquiry in chambers. Here, however, this is not a mere matter of machinery, and I do not think that course would be open to the court. The judge and also Mr. Dillon and Mr. Burton on the present appeal based their argument on the well-recognised principle that the vendor trustee (although a qualified trustee having regard to his rights with regard to unpaid purchase money) of the land for the purchaser. That is interests and to comply with the purchasers wishes in such matters as the grant of a new lease: see, for instance Abdulla v. Shah [1959] A.C. 124, in the Privy Council, for a recent instance. It seems to me, however, that this argument begs the question. It proceeds upon the assumption that there is a binding and enforceable contract and affords no help in deciding whether the uncertainty as to selection precludes the creation of a binding and enforceable contract. The same observation applies to the argument advanced by Mr. Burton to the effect that under a contract for sale of land it is for the purchaser to submit and decide on the form of the conveyance or, if he is so minded, a number of conveyances of separate parts of the land. That argument presupposes that there is indeed a binding and enforceable contract. No authorities have been cited to us which bear on the question of whether uncertainty as to the power of selection prevents the formation of a contract. For the reasons which I have given, I conclude that the contract purported to be made by the letters of June 1968 was indeed unenforceable by reason of uncertainty; in other words, it was not an effective contract. I turn now to the other point, namely, the effect of the letters exchanged in July 1970. Again, I think, in deference to the judge and to the arguments of counsel, I should read the part of his judgment in which he sets out his reasons on this issue. He says: "I find difficulty in accepting these submissions. If I am to construe this offer according to its terms, it is simply an offer by Medina Estates Ltd. to sell the land in respect of which it is, at the moment, under no direct contractual obligation to the plaintiff, for a lump sum of #500,000 payable in one sum on completion. No additional consideration is referred to, nor even suggested, in the letter. No reference is made to a surrender of the plaintiffs outstanding rights under the original contract with the defendant. No reference is made to the plaintiff's outstanding claim for costs in the proceedings. No reference is made to the plaintiff's obligation to discontinue or other- wise dispose of the action and to cancel the registered land charges. Furthermore there is no clear indication of the person on whose behalf the offer is being advanced. The expression ' our clients ' I had been used by Linklaters & Paines in the past correspondence sometimes to refer to Medina Estates Ltd. who, of course, was not a party to the action. The writer's ' clients ' were prepared to dispense with any formal contract, but the only formal contract discussed between the parties since July 1968 was a contract between Medina Estates Ltd. and the plaintiff. ' You have,' says the letter, ' already satisfied yourself as to our clients' title.' But the only clients who : had any title were Medina Estates Ltd. So that on any analysis the letter was written on behalf of Medina and the only offer being advanced was an offer by Medina. If then it is to be said that the letter was also written on behalf of the defendant and contained an offer by that company, one is left wondering what consideration the defendant was providing for the obligation which it is said the plaintiff was being invited to assume of foregoing its rights under the original contract and in the pending action and where the defendant's offer is to be found. On the face of it, the opening words of the letter do not form part of the offer at all; they merely indicate the writer's motive in writing the letter: up to date his clients had been prepared to entertain various proposals for making the con- veyance, but this was to be their last work on the subject. I do not think that a contract to compromise a pending action can be inferred from a vague and general expression, such as a desire to dispose of the matter, the more so when such desire itself forms no part of the terms offered and such terms themselves contain no reference at all, even inferentially, to any such compromise. " The suggestion now made is that, in addition to the consideration payable to Medina for the land, the plaintiff was being asked to agree to the provision of an additional consideration for the defendant in the form of a release of all rights under the subsisting agreements and all claims in the pending action to which no defence had been served. It is, as it seems to me, making these introductory words, ' In a final effort to dispose of the matter,' perform a heavier duty than they will bear to attribute to them the force which is so suggested. It is not a meaning which, in my judgment, a reasonable reader would be likely to attribute to them in the circumstances in which the letter was received. The plaintiff had, after a good many difficulties, executed its part of the contract with Medina and had put forward suggestions for division, after threats had been made to strike out the proceedings. It appeared on the face of it that Medina were being as obstructive as possible in agreeing the areas to be transferred on the completion date, whether or not such appearance arose from a misunderstanding. There then arrives a letter from Medina's solicitors, headed in the matter of the action, it is true, and propounding what is called an ' open offer,' that is to say one which is intended to be admissible in evidence on the hearing of the action, and this is stated in effect to be Medina's last word. The motive for writing the letter is stated to be ' a final effort to dispose of this matter.' There has been no previous effort to settle the action, so that the reference to a ' final effort' is hardly appropriate, if that is the matter referred to. But there had been many efforts to dispose of the matter of the phased completions, and that was the matter which up to that point had been troubling the parties, which Mr. Crompton in his letter of May 12, 1970, had invited Mr. Hines "--he is the managing director of Town and Commercial Properties Ltd.--" to consider and on which Linklaters & Paines had stated in their letter of May 22 that they were seeking their clients' instructions. Whilst therefore it might seem at first curious that in their next letter they adopt a new title by referring to ' Bushwall v. Vortex,' instead of, as heretofore, ' Land west of Peak Lane, Fareham,' the letter itself contains a clue to this. It is an open offer, that is to say one which it is intended to refer to in the action. In the light of what had gone before, I do not read ' this matter ' as being more than ' the matter which has been troubling us both for the past few months.' The inference in my view is that here is a reasonable proposal being made for getting rid of the problem of division and giving the plaintiff the land which it claims and thus mitigating its damages and that, if this is refused, such refusal will be referred to by the defendant in the action in support of a suggestion that the plaintiff was not behaving reasonably. As Mr. Burton has pointed out, a party to litigation concerning a commercial bargain is obliged to mitigate his damage, if reasonably possible, and such mitigation may in appropriate circumstances include the accept- ance of a new offer made by the party in default, as it did in Payzu Ltd. v. Saunders [1919] 2 K.B. 581. I do not consider that in these circumstances a letter couched in these terms can legitimately be construed as an unequivocal offer to give the plaintiffs a conveyance for some additional consideration on their part by way of settlement of the action which is nowhere expressed." I regret that on this issue likewise I take a different view from that of the judge. The circumstances prevailing at the date of the letters of July 1970 were these. In June 1968 the defendant and the plaintiff or their representatives had exchanged letters which were intended to be con- tractual. The defendant's solicitors were denying that any bindmg contract had been made. The plaintiff had issued a writ and delivered a statement of claim seeking sppecific performance, the title of that action being of course " Bushwall v. Vortex." Linklaters & Paines were the solicitors to the defendant in the action and were undoubtedly in the present context solicitors both for the defendant and for Medina Estates Ltd. Both sides were anxious to clinch the deal; and indeed the plaintiff was willing to accept Medina Estates Ltd. as its vendor, but negotiations had broken down. Then one comes to look at the actual terms of the letter of June 5, 1970. The letter is headed " Bushwall v. Vortex," and even more explicitly the reply of June 12 is headed " Bushwall Properties Ltd. v. Vortex Properties Ltd." That heading is a plain reference to the first action which was then on foot. Then the letter begins : " In a final effort to dispose of this matter. On the natural meaning of those words, " this matter " is the matter." On the natural meaning of those words, this matter " is the action of Bushwall v. Vortex. Then they say: " we are instructed to make the following open offer." Then they go on to make the proposal for the conveyance by Medina Estates Ltd. to the plaintiff with a single completion at the same price. It seems to me that on the natural meaning of that letter it is a letter written by Linklaters & Paines as solicitors for the defendant and for Medina Estates Ltd. containing an offer on behalf of both those companies. The offer is this : " As regards Vortex, we will settle the action to which Vortex is currently the defendant, though Medina could certainly have been joined as an additional defendant. As regards Medina, we offer to convey with a single completion at #500,000." That seems to me the natural meaning of that letter, and I so construe it. The acceptance was in the terms of the letter. For myself, I find it impossible to construe the letter of June 5 as referring only to the conveyance by Medina Estates Ltd. and not having any but an indirect reference to the action. I say " indirect reference " because it is suggested that it might have had relevance to the action in the sense that the letter could be read in open court and might go to the issue of mitigation of damages. I regard it as an offer to settle all matters in dispute between the three companies once and for all. It is not suggested that the expression " within a reasonable tiine " is too uncertain for the letters to constitute a binding agreement. What follows in the letter of June 5 is the suggestion that a reasonable time would be two months. Then in the letter of June 12 the plaintiff's solicitors repeat the same expression, " within a reasonable time," but make other suggestions as to what would be a reasonable time. There is, I think, nothing in that which deprives the two letters of certainty. To take an instance similar to one which I gave earlier in this judgment, if there had been an offer to sell at market price, followed by a suggestion " We think the market price is #10,000," and the reply had been an agreement to purchase at market price, followed by a statement " We think the market price is #12,000," that would certainly not have prevented the letters constituting a binding contract. It was not, I think, suggested that the agreement could not be binding on the plaintiff as against the defendant on the ground that there was no consideration moving to the plaintiff. That was plainly not so. The com- promise of the action, with the removal of a possible liability for costs, is of itself clearly a good consideration. It was I think suggested that such an agreement would be so unfavourable to the plaintiff that the plaintiff would be unlikely to make it. But I do not think that is by any means clear. The action would not necessarily suceed, nor would the damages necessarily be substantial. Only one further point remains. There took place certain subsequent correspondence between the solicitors, and I will refer to three letters in that subsequent correspondence. The correspondence runs from a letter dated June 16, 1970, from Linklaters & Paines to Coffin, Mew & Clover. I read these shortly. They have a certain significance upon an argument which is adduced. Linklaters & Paines say: " We are in receipt of your letter of June 12 and would state that the abstract of title which was prepared a little while ago is being rechecked, and we should be in a position to forward this to you not later than Friday, June 19. We shall therefore require completion to take place within two months . . ." Then, on June 18, 1970: "... we enclose the abstract of title ... we expect to hear from you fairly soon... " There was an acknowledgment. On July 2 there were requisitions; on July 3 the registration of a land charge; then on July 13 requisitions and the land charge. July 14, 16 and 17 are not, I think, material. Then on July 23, 1970, Coffin, Mew & Clover write: " Our clients have now given us their instructions concerning the reasonable date for completion of their purchase of the . . . land." The fourth paragraph is important: " Finally, we think it necessary to draw your attention to the damage suffered by our clients by virtue of the conveyance of the land by Vortex Properties Ltd. to Medina Estates Ltd. and the creation of the present contract in addition to the other registered contract." So there is a plain affirmation by Coffin, Mew & Clover that the plaintiff has suffered damage by virtue of the conveyance by the defendant to Medina Estates Ltd., and I think that clearly imports the statement that they still have a claim in damages. The next few letters are not material; but on August 6 Linklaters & Paines write, dealing with other matters concerning completion and concluding : " . . . our clients for record purposes categorically repudiate your clients' claim that damage has been suffered by your clients by virtue of the conveyance from Vortex Properties Ltd. to Medina Estates Ltd. The significance of that is that Linklaters & Paines deny that damage has been suffered, but do not set up the answer that any claim for damage has been deposed of by the earlier letters. Mr. Dillon took the point that where a contract is alleged to have been constituted by correspondence it is legitimate to look at the whole correspondence including subsequent letters, in order to determine whether by these letters alleged to constitute the contract the parties really intended at that stage to make themselves contractually liable. That principle is well established : see Hussey v. Horne-Payne (1879) 4 App.Cas. 311. So, Mr. Dillon says, when you read all of those letters up to and including the letter of August 6, then the proper conclusion is that the two letters of June 5 and 12 should not be held to be contractual in intention. I find it impossible to accept that contention. It seems to me that upon a proper reading of the two letters, whatever their construction may be, it is perfectly clear that by the letter of June 5 Linklaters & Paines were making an offer intended to be rendered contractual by acceptance, and that by the letter of June 12 Coffin, Mew & Clover intended to make that offer contractual by their acceptance. Once it is established that a contract has been concluded at any stage then subsequent matters cannot be taken into account in the construction of the letters. That applies in particular to anything which may have been said in the subsequent correspondence: see, for instance, the recent affirmation of that principle in James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. [1970] A.C. 583. I will cite a single sentence. All their Lordships agreed. Lord Reid said, at p. 603 : " I must say that I had thought that it is now well settled that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made." The same principle was affirmed by the House of Lords in Wickman Machine Tool Sales Ltd. v. L. Schuler A.G. [1974] A.C. 235. I will only add this. Even if one could take the subsequent letters into account upon the construction of the earlier letters, I think that they go only a little way to supporting the construction of the earlier letters put upon them by the judge and Mr. Dillon. I conclude then that on both the two issues the appeal should be allowed. It would have been sufficient to dispose of the appeal to determine on the first issue that there was no binding contract. I have, however, felt it right to deal fully with the second issue. If I had reached a different conclusion I would then have had to consider the issue of the measure of damages and mitigation. That issue, however, does not arise, and I do not think it is necessary to express a view upon it. I would allow this appeal. ORR L.J. I agree with the judgment delivered by Sir John Pennycuick; and, for the reasons given by him, I too would allow the appeal. BUCKLEY L.J. I also agree with the judgment which has been delivered, and I only add a few short observations out of courtesy to the judge from whom we are differing. On the first subject matter discussed by Sir John Pennycuick in his judgment, relating to the enforceability of the contract alleged to have been made by the letters of June 1968, the judge twice in the course of the assage read by Sir John Pewnncuick a~ffirmd that hcewas not rWeling upon any implied term, and that course has been followed also by the plaintiff's counsel in this court. What is relied upon is the fiduciary obligation which arises between the vendor and purchaser of land when a contract of sale is entered into between them which, it is said, in the circumstances of this case has the effect of putting the purchaser into him upon each of the three successive completions contemplated by the contract. That fiduciary relationship is very clearly set out and dealt with in Megarry and Wade, The Law of Real Property, 3rd ed. (1966), p. 5B8-5~84 It is there stated with much more Welaboa~tin than I propose to adopt that if a purchaser is potentially entitled to specific performance he obtains an immediate equitable interest in the property contracted to be old; the contract creates a relalti~nshipof t~rusee aQn be~nefiary tahe vendor being said to be trustee for the purchaser and the purchaser to be the beneficial owner of the land. But the authors then go on to point out that the vendor's trusteeship is of a peculiar kind because he has interests of his own in the land as an unpaid vendor under an uncompleted contract for sale, and finally they point out that all these consequences flow from the fact that the contract is a specifically enforceable one, equity proceeding upon the footing that that which ought to be done has been done or will be done when the due time for it to be done arrives. Those principles, it seems to me, cannot operate where there is not a specifically enforceable contract. The first question therefore must be whether the contract contained in the letters of June 1968 is on the face of it a specifically enforceable ontract, which involves consideration of the question whether the parties an be seen to have agr~eedall the essential terms of the bargain. I do not read the terms of the letter again, but it will be remembered that it provides for payment of the purchase price by three instalments at yearly intervals, and that on the occasion of each payment of an instalment there shall be a conveyance of a proportionate part of the land sold. No machinery is expressly provided for identifying the part of the land to be conveyed on any of those three completions. I fully accept that the court should be reluctant to hold any contract void for uncertainty if that consequence can be avoided; but, on the other hand, it is not the function of the court to make or to perfect contracts entered into between members of the public. In the present case, the contract does not provide any means of ascertaining with certainty what land should be conveyed on any of the three occasions when a partial completion is to be carried out; and, for reasons that have already been indicated by Sir John Penny- cuick, I agree that that is an important term of this contract, for the interests of the vendor are liable to be very substantially affected by the choice of the parcels to be conveyed. The contract (so to call it) itself does not provide any machinery for ascertaining the answer to that question, from which, in my judgment, it must follow that this contract is not one of which the court would decree specific performance. If the contract is not one of which the court would decree specific performance, the principles of law relied upon for supplying the defect in the contract cannot apply to the case, and so it is impossible by that means to arrive at the con- clusion that the purchaser ought to be regarded as the person having the power to decree what parcels should be included upon each of the occasions when completions are to take place. For that reason, it seems to me to be unavoidable that one must conclude that this is not a contract capable of being specifically performed and is not an enforceable contract. On the second point, which turns upon the meaning and effect of the letters of June 1970 which are relied upon for saying that there was a settlement of all matters in dispute between the plaintiff and the defendant and Medina Estates Ltd. at that stage, Mr. Dillon sought to rely upon subsequent letters, to which Sir John Pennycuick has referred in his judgment, for showing that there was not any concluded agreement in the two letters of June 5 and 12, 1970. Those subsequent letters all relate to conveyancing matters concerned with the completion of the sale by Medina to the plaintiff, more particularly the time when that transaction should be completed. Now, it is to be observed that in the letter of June 5, 1970, what is called an " open offer" is made to dispense with a formal contract and " to convey the whole of the land in one conveyance for #500,000 com- pletion to take place within a reasonable time." As I read the letter, that is the offer, and it is an offer made in order finally to dispose of whatever is described as "this matter." The writer then goes on to say: " We would suggest that two months from today's date would be a reason- able time." The two months to completion is not, as I read the letter, part of the offer that is made, but is merely a comment upon the offer and Vol. 1 an ex ression of the writer's opinion as to how the offer will operate. The offer is an offer made for the purpose of disposing of " this matter-" As Sir John Pennycuick has pointed out, the letter is given a subject heading " Bushwall v. Vortex," and I can feel no doubt whatever that " this matter " means the first action between the plaintiff and the defendant which was then pending and, of course, the dispute which underlay that action. As I construe this letter, contrary to the view taken by the judge, this was an offer made for the purpose of disposing of the action and if the offer was accepted, all those matters in dispute in the action and in the dispute which underlay the action were to be treated as disposed of. The offer was accepted in unequivocal terms by the letter of June 12, 1970. In fact, the writer restates the nature of the offer: " We accept the offer by your clients contained in your letter dated June 5, 1970, to convey the whole of the land in one conveyance for #500,000, completion to take place within a reasonable time." That is the offer which they are accepting. It was the offer which was made. Nothing is said there about the two months' period for completion, or anything of that kind. There is a comment in the final paragraph of that letter in which Coffin, Mew & Clover say: " We will contact you in due course with regard to your suggestion as to a date for completion, which must anyway depend on how soon you deduce your clients' title." In my opinion, those letters contain what one might call a clear offer and a clear acceptance. It is clear what one party is offering, and it is clear that the other party is accepting what is offered; and what is con- tained in the later letters does not, in my judgment, in any way conflict with the view that a concluded bargain was then reached. For the reasons I have endeavoured to express shortly, I cannot regard the reference in the letter of June 5 to " a final effort to dispose of this matter " as a mere recital of the motive for making the offer. It is, in my judgment, part and parcel of the offer. For these reasons, I also reach the conclusion that on June 12, 1970, the parties did arrive at a concluded contract to dispose of all matters in dispute in the first action and underlying that action upon the terms there set out. For these reasons, as well as for those more elaborately developed by Sir John Pennycuick in his judgment, I agree that this appeal should succeed. Appeal allowed with costs. Leave to appeal refused. Solicitors: Linklaters & Paines; Blyth, Dutton, Robins, Hay. C. N. Contract--Formation--Consensus ad idem--Council's negotiations with tenant for purchase of council house--Price fixed without formal contract--Council's change of policy after election-- Whether parties had reached agreement--Whether formal offer and acceptance necessary The plaintiff was the tenant and occupier of a council house owned by the defendant corporation by whom he had been employed for 16 years. Since 1968 he had been actively interested in buying his house. In 1970 the corporation resolved to offer council houses for sale on favourable terms to sitting tenants and in November 1970 they sent the tenant a form and a brochure giving details of how he could buy his house. The tenant completed the form and returned it to the corporation with a #3 administration fee and a request that he be told the price of buying the house. On February 10, 1971, the city treasurer of the corporation wrote to the tenant saying " the corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (free- hold) "; details of a corporation mortgage were given but the letter was not to " be regarded as a firm offer of a mortgage ; and the tenant was told that if he wanted to make formal application to buy his council house he should complete and return the enclosed application form. The tenant completed the form, leaving the purchase price blank, and returned it in a covering letter of March 5, 1971, asking for consideration to be given to defects in the path to the house. On March 12, 1971, the corporation wrote to the tenant to say that the price had been fixed according to the condition of the property. On March 18, 1971, the tenant wrote asking the corporation to " carry on with the purchase as per my application." The corporation took the house off the list of tenant occupied houses for whose maintenance they were responsible and the tenant did work to the house. Following a change in political control of the council in May 1971 the corporation resolved not to sell council houses to tenants except where legally binding contracts had been con- cluded and on August 4, 1971, notification was given by the town clerk that the sale of the house would not be proceeding. Judge Bailey held that the contract for sale of the house by the corporation to the tenant was complete and ordered specific performance. On appeal by the corporation: -- Held, dismissing the appeal (Geoffrey Lane L.J. dissenting), that in the light of the correspondence as a whole, the circum- stances and the conduct of the parties there was a concluded contract for the sale of the house by the corporation to the tenant which he was entitled to have specifically performed on the terms of the usual agreement for the sale of a council house by the corporation to the tenant (post, pp. 523H--524B, 525B, D, H, 527A, 528B). Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666, H.L.(E.) and Storer v. Manchester City Council [1974] 1 W.L.R. 1403, C.A. considered. Per Geoffrey Lane L.J. There was no unconditional acceptance by the tenant of an offer by the corporation to sell the house; the tenant's letter of March 5, 1971, was a counter-offer and he had not established the necessary ingredients of a contract (post, pp. 528F, G, sale, 533c). The following cases are referred to in the judgments: Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666, H.L.(E.). Storer v. Manchester City Council [1974] 1 W.L.R. 1403; [1974] 3 All E.R. 824, C.A. No additional cases were cited in argument. APPEAL from judge Bailey sitting at Manchester County Court. By particulars of claim of September 23, 1974, amended on November 29, 1976, the plaintiff, Robert Gibson, claimed, inter alia, specific per- formance of an agreement by the defendants, Manchester City Council, to sell to him the freehold dwelling house and premises known as 174 Charlestown Road, Blackley, Manchester, for #2,180. The particulars alleged that on February 10, 1971, the corporation by a document headed " Purchase of a Council House " offered to sell the property for #2,180 and enclosed an application form; that the plaintiff having signed the application form and returned the same to the corporation soon after February 10, 1971, unconditionally accepted the offer by letter to the defendants dated March 18, 1971; and that the corporation instructed their works department not to execute any works to the property except in an emergency whereby the corporation admitted that the property had been sold and the repairs were no longer their responsibility. On December 15, 1976, Judge Bailey held that " the application form together with the letter of March 18, 1971, constituted a perfectly valid acceptance of the corporation's offer of February 10, 1971, to sell the house to the plaintiff at #2,180 . . . the language amounted to an offer, which was accepted as such by the plaintiff " and that " it was proper case for specific performance." The corporation appealed on the grounds that (1) the judge was wrong in law in holding that the document relied on by the plaintiff in the amended particulars of claim as constituting an offer by the corporation to the plaintiff (a) constituted any such offer and (b) satisfied the require- ments of section 40 of the Law of Property Act 1925; (2) accordingly (a) the corporation never made any offer to the plaintiff, (b) the plaintiff never accepted any such offer, (c) no contract came into existence between the plaintiff and the corporation and (d) the requirements of section 40 were not satisfied in relation to any such contract. The facts are stated in the judgments. H. E. Francis Q.C. and A. W. Simpson for the defendant corporation. G. A. Carman Q.C. and B. Caulfeld for the plaintiff. LORD DENNING M.R. This is a test case affecting some 350 tenants of council houses in the City of Manchester. The council tenant is Mr. Robert Gibson, the plaintiff. He is a senior clerk in the works department of the corporation. He has been with them for many years. In 1968 Manchester began to sell houses to council tenants. But at that time it was very restricted. Only one-quarter of 1 per cent. of their houses were allowed to be sold to council tenants. Mr. Gibson was one of the very first who applied to buy his house. But there was a long list of applicants, and his name did not come up at that time. In June 1970 the restriction was lifted. Thenceforward the corporation was enabled to sell its houses to council tenants without any restriction at all. Mr. Gibson himself followed all the prescribed procedures. He made his application in good time and in good order. He was entitled to bene- ficial terms because of his long tenure. He was able to buy his house at 20 per cent. below the market price, and also to have a mortgage from the corporation on favourable terms. All was going well with his application until May 1971. Then, to his dismay, things went wrong for Mr. Gibson. There was a change in the control of the Manchester Corporation. Previously the COnservatives had been in control. Afterwards Labour gained control. Under the Conservatives the policy of the corporation had been to sell council houses to tenants, but when the Labour administration took over in May 1971 that policy was reversed. The Labour-controlled administration decided not to sell council houses to tenants. They realised however that they could not go back on existing contracts. So they gave instructions to their officers that they were to fulfil existing contracts but not to make any fresh contracts. The new Labour-controlled administration said to the town clerk: " You must fulfil those contracts by which we are legally bound, but not those by which we are not legally bound." We have had cases arising out of this new policy. There was Storer v. Manchester City Council [1974] 1 W.L.R. 1403. There were about 120 tenants like Mr. Storer. The corporation argued: " The contracts have not formally been exchanged. So we are not legally bound to sell council houses to Mr. Storer and the other tenants." This court held that, although there was not an actual exchange of contracts, neverthe- less there was an agreement with a sufficient note or memorandum to satisfy the Statute of Frauds. So the corporation were liable to sell the houses to those 120 tenants. Now we have Mr. Gibson and 350 tenants like him. The arrangements have not gone nearly as far as in Mr. Storer's case. The question is whether there was a concluded contract. The judge held that there was and he ordered it to be specifically performed. The corporation appeal to this court. So I must go through the material letters--to see whether there was a concluded contract between the parties. In November 1970 the cor- poration sent to the tenants a brochure. It gave details of the scheme which they were inaugurating for the purchase by the tenants of those houses, giving favourable terms as to price and as to mortgages. Mr. Gibson immediately replied. He paid #3 as the administration fee. He sent forward his application on the printed form: " Please inform me of the price of buying my council house. I am . . . interested in obtaining a mortgage from the corporation to buy the house. Please send . . . me details about the monthly repay- ments based on the following methods. . . ." He gave his name, and said that he had been a tenant of this house for 12 years or more. On February 10, 1971, the corporation sent to him the first of what I may call the contract documents. The city treasurer wrote saying: " I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold)." (That 20 per cent. was a discount allowed to Mr. Gibson. because of his tenancy.) The letter continued: " The details which you requested about a corporation mortgage are as follows: -- Maximum mortgage the corporation may grant: #2,177 repayable over 20 years. Annual fire insurance: Monthly repayment charge, calculated by: (i) fiat rate repayment method After some further details, the letters said: " This letter should not be regarded as a firm offer of a mortgage. If you would like to make formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible." That is just what Mr. Gibson did. He filled in his application form and returned the form. But he left the purchase price blank and wrote a covering letter of March 5, 1971. In it he said that there had been various defects in the house, all of which had been remedied with the exception of the tarmac path. He said that there was a lot of work to be done and he wanted either the price to be lowered or the corporation to repair the premises. The corporation replied on March 12, 1971, in the following terms: " Dear Sir, I refer to your letter concerning certain repairs to the path. Account is taken of the general condition of the property at the time of the survey and valuation and the price is fixed accordingly, allowing for such defects as there may be. I regret I cannot authorise repairs of this nature at this stage." So there it was. Mr. Gibson's suggestion was not accepted by the corporation. They said, in effect, that they would stand by their offer in the letter of February 10, 1971, but would not modify it. In reply, on March 18, 1971, Mr. Gibson wrote this letter: " Ref. your letter of March 12 . . . In view of your remarks I would be obliged if you will carry on with the purchase as per my application already in your possession." It seems to me clear that, by writing that letter, Mr. Gibson discarded the suggestion which he had made in the covering letter. He returned to the simple application which was already in their possession, of which they had intimated their acceptance. As I view this letter of March 12, 1971, they had intimated that they would accept his application if he did not press this point about repairs. We have had much discussion as to whether Mr. Gibson's letter of March 18, 1971, was a new offer or whether it was an acceptance of the previous offer which had been made. I do not like detailed analysis on such a point. To my mind it is a mistake to think that all contracts can be analysed into the form of offer and acceptance. I know in some of the text books it has been the custom to do so: but, as I understand the law, there is no need to look for a strict offer and acceptance. You should look at the correspondence as a whole and at the conduct of the parties and see therefrom whether the parties have come to an agree- ment on everything that was material. If by their correspondence and their conduct you can see an agreement on all material terms--which was intended - thenceforward to be binding--then there is a binding con- tract in law even though all the formalities have not been gone through: see Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666. It seems to me that on the correspondence I have read--and, I may add, on what happened after--the parties had come to an agreement in the matter which they intended to be binding. Let me say what happened afterwards. Mr. Gibson telephoned to the department and was told that his case was being dealt with. He did much work on the house in the belief that all was well. The corporation took the house off the list of maintenance to tenants and put it on the list of owner-owned houses where the owners had to do the maintenance themselves. Then on Wednesday, May 26, 1971, there was an announcement in the newspapers that all transactions might be stopped. He wrote, on Friday, May 28, this letter to the corporation : " . . . I have already put glass doors on internally at considerable expense, and have made enquiries for replacement of certain window- frames. It seems rather a high-handed decision to take at this stage of the proceedings, with little or no consideration for the feelings of the unfortunate tenant." The housing manager replied that all applications were being held in abeyance. Mr. Gibson wrote on June 25 saying: " . . . When the Tory council took control, we were contacted by phone to let us know of the change in the situation, and [saying] that it was in order for us to go ahead with alterations . . . I realise that it was done verbally but nevertheless the message was passed, and I feel sure that your officers will not deny that it was so." The whole story shows to my mind quite clearly that the parties were agreed and intended the agreement to be binding; and, if there had been no change in the control of the local authority, there can be no doubt whatever that this sale would have gone through. Mr. Gibson followed the matter up. He went to two local councillors who took it up with the town clerk. In a letter of July 2 the town clerk wrote to Councillor Goldstone, saying: " . . . In course of time Mr. Gibson's application was dealt with by the city estates and valuation officer, and also by the city treasurer, who forwarded to him details of the purchase price, the amount of mortgage which could be offered and the various methods for repayment. Mr. Gibson accepted this offer, but before the papers could be passed to me for preparation of the formal contract the local elections intervened. . . ." It is as plain as can be from that letter from the town clerk that he regarded everything as agreed. On August 4, 1971, the town clerk wrote this to Councillor Silverman: " Although Mr. Gibson's application had been processed by the housing, city estates and valuation officers and city treasurer's departments, formal contracts had not been prepared and exchanged prior to the suspension of the scheme for the sale of council houses on May 14 last. Accordingly, in view of the decision of the council on July 7, 1971, the sale of this property will not be proceeding." Then there followed a note about repairs: " Following the council decision of July 7 referred to above, the direct works department were instructed to deal with repairs to all council houses, except those where they had been notified that sales were proceeding. This property, therefore, will now have been replaced on the maintenance list." ' That shows that the house had been taken off the maintenance list on the footing that the sale was proceeding; and it was put on it again after the Labour administration cancelled the sale. It seems to me as plain as can be that there was a complete agreement of all the essential terms of this contract. As the judge said: " What more was the plaintiff to do? What more were the defendants to do? In my view the contract was complete," and so it was. It has been argued before us: " It was not complete in regard to the terms. If all the documents had been completed as expected, there would have been a simple short agreement which included a clause saying ' deeds of conveyance or transfer and mortgage to be in the corpora- tion's standard forms including conditions against use except as a private dwelling house and against advertising and a restriction not to sell or lease the property for five years.' " It seems to me that such a clause is to be imported into the corres- pondence: or alternatively, when granting specific performance, the court in its discretion should include such a clause. The order should be for specific performance of an agreement For the sale of a council house containing the clauses in the form in general use in Manchester. It is a contract for sale on the terms of the usual agreement for selling a council house. It seems to me, as it did to the judge, that Mr. Gibson ought not to have his expectations ruined by reason of the change of policy by the local government administration. To my mind there was a concluded contract--sufficiently evidenced by writing--which he is entitled to have specifically performed. I would agree with the judge and would dismiss the appeal. ORMROD L.J. I agree with the judgment of Lord Denning M.R., and would only add a little on my own behalf. In my judgment there are two ways in which this case can be approached. The first is to consider whether the parties to the alleged contract had reached a consensus for the sale of 174 Charlestown Road by the council to the plaintiff. To answer that question, it seems to me that one must look at the whole of the dealings between these parties. The plaintiff had been anxious to buy his council house for a long time. The council had been conducting a very limited sale of council houses for some years, limited by the Government restrictions. In June 1970 the restrictions were removed, and the docu- ments which are in the bundle before us show that the council reacted rapidly to that change of policy which freed them not only to sell council houses without restriction in number, but also enabled them to sell freeholds. They clearly went ahead with the intention of selling council houses to council tenants, and they published the brochure to which Lord Denning M.R. has already referred. It is necessary in considering this case, in my judgment, to remember that this is not a sale or an alleged contract of sale between two private individuals or between an individual and some form of industrial or commercial concern. We are dealing here with a policy decision by a council (a local authority) to sell council houses to tenants. The reason I say that is this: the council knew the tenant; they were proposing to sell at an extremely attractive price; they were prepared to offer very reasonable mortgage terms; and, of course, the reason for that was that the individual tenant concerned, instead of continuing to pay his rent to the council, if he bought the house and took on a mortgage, would continue to pay his mortgage instalments to tae council, so the two parties would continue in a fairly close relationship not so very different in day to day practical terms from what it was before the sale except that the responsibility for repairs and so on would be shifted to the tenant. It is against that background that we have to consider this matter. In November the brochure was published which was an open invita- tion to tenants to offer to buy their houses. It gave full details as to how to set about it. The plaintiff reacted immediately to that, filled in the form which was contained in the brochure, and applied to the council, asking the price: " Please inform me of the price of buying my council house. I am . . . interested in obtaining a mortgage from the corporation to buy the house. Please send . . . me details about the monthly repayments based on the following methods," . . . and he picked the fiat rate repayment method and filled in a few more details which the council wanted to make sure that he qualified as a purchaser. Then he was asked to pay a #3 administration fee, which he paid, and he received in return the letter of February 10, 1971, which informed him that " The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold)." The letter then went on to say that the council might grant a mortgage of #2,177 repayable over 20 years. I will come back to that document later. Mr. Gibson, after querying the price because of what he said about his drive or pathway, sent the form in, giving his name, and applying for a loan on the terms which had been indicated already, and the matter then proceeded through the normal channels. The price was finally agreed in the letter of March 18, 1971, from Mr. Gibson, who had by this time received a note from the council to say that the valuation they had put on the house took account of the fact that certain repairs were required. So, having been assured of that, he wrote the letter which, to my mind, is the acceptance of the offer. He said: " In view of your remarks I would be obliged if you will carry on with the purchase as per my application already in your possession." Thereafter the whole matter was placed in the council's pipeline, and it proceeded slowly. The only difference, as I see it, between this case and Storer's case [1974] 1 W.L.R. 1403 is that Mr. Gibson's file was a good way further back along the pipeline than Mr. Storer's. There is absolutely nothing to indicate that, if Mr. Gibson's file had reached the point in the pipeline that Mr. Storer's had on the date that Mr. Storer's did, he would not have received exactly the same documents as Mr. Storer received and that the contract would not have proceeded. It seems to me clear that the parties were ad idem on the proposition that the council would sell and Mr. Gibson would buy this house at the price of #2,180. It is equally clear in fact that both sides assumed that he would raise this money by means of a mortgage supplied by the council on the terms of a flat rate mort- gage. There is nothing whatever to indicate that there was any doubt in the minds of the council as to whether he was a suitable person to be given a mortgage. In fact, quite obviously they knew perfectly well that he was a suitable person because he was an employee of theirs, they knew all about him, and it was inconceivable that they would have refrained from granting him a mortgage on the terms they had indicated. For those reasons, I respectfully agree with Lord Denning M.R. that the right conclusion to draw from those facts is that these parties were ad idem on the question of sale. The other way of looking at it is to analyse the documents more precisely. If one does that, then one must look primarily at the document of February 10, 1971, that is, the council's letter. That letter, looked at strictly, deals with two propositions, connected but separate. The first is the question of the sale of the house and the price. The second is the question of mortgage--the amount of the mortgage and the amount of the monthly repayments. Those are dealt with in separate paragraphs. Dealing with the question of sale, the first paragraph is the crucial one. That reads: " I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold)." Had that paragraph read: " The corporation are prepared to sell the house to you at the purchase price . . . ," it would be difficult, it seems to me, to contend that that was not a firm offer which was capable of acceptance by Mr. Gibson; and, if accepted by Mr. Gibson, would con- stitute a contract. The question therefore is, does the use of the phrase " may be " instead of " are " in that paragraph make all the difference between a contract and no contract? That depends, it seems to me, on whether or not there was any outstanding contingency against which the council were refraining from committing themselves. As far as I can see, there was, so far as the sale of the property was concerned, no out- standing contingency at that time at all. That being so, the use of the phrase " may be " cannot make any difference, and I would be prepared to construe that paragraph as meaning: " The corporation are prepared to sell," construing it in the light of the background, the circumstances and the relationship which had been established between the parties. That conclusion, I think, is supported by reference to the second part of the letter. When one comes to look at that part of the letter dealing with mortgage arrangements, it reads: " The details you requested about a corporation mortgage are as follows: Maximum mortgage the corporation may grant: #2,177 repayable over 20 years. . . ." There again that could be of course a statement that the council cannot advance more--that they are not allowed to advance more--than #2,177, sum; and, when one looks at the penultimate paragraph of the letter, one finds it ending in what seems to me to be a highly significant sentence: " This letter should not be regarded as a firm offer of a mortgage." There is an old Latin principle which covers that situation very clearly. In a letter like that it seems to me that a clear distinction must be drawn between the use of the word " may " in relation to the sale and "may" in relation to the granting of a mortgage, in the light of that later sentence. Of course, there was a reason for that because the corporation, although they must have known about Mr. Gibson's general situation, had not got all the details. If Mr. Gibson had been an ordinary council tenant and not an employee, they would have needed some information about his means- before deciding to grant the mortgage. That further information they received in his form which he filled in and sent. So Mr. Francis, I think, is right in arguing that there was no binding contract on the part of the council to grant a mortgage, but I think he is wrong in his submission that there was no binding contract of sale. Whether Mr. Gibson will be in a position to proceed with the purchase if he does not get a council mortgage is another matter, but it is a matter for him to decide. What we have to decide is whether there was a contract to sell the property; and, for the reasons which I have given, in my judgment there was, and I think the judge was right, and I too would dismiss the appeal. GEOFFREY LANE L.J. Lord Cairns L.C. in Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666, 672, said : " My Lords, there are no cases upon which difference of opinion may more readily be entertained, or which are always more embarrassing to dispose of, than cases where the court has to decide whether or not, having regard to letters and documents which have not assumed the complete and formal shape of executed and solemn agreements, a contract has really been constituted between the parties." Unhappily I find myself in embarrassing disagreement with the judgments which have been delivered in this case by Lord Denning M.R. and Ormrod L.J. Nobody has anything but sympathy for the plaintiff, Mr. Gibson, and the 349-odd other tenants who have found themselves caught in the cross- fire between the Tory Party faction and the Labour Party faction on the Manchester City Council. No doubt all those ladies and gentlemen have for many years been expecting, and expecting confidently, that in due course they would be able to buy their council houses, of which they are tenants, at advantageous terms from the council. No doubt, on any view, Mr. Gibson at least got very close indeed to succeeding in that ambition. But what has to be decided as an unadorned question, not influenced by sympathy or politics, is whether it can truly be said that there was an offer by the corporation to sell and an unconditional accept- ance by Mr. Gibson to buy, enabling a formal contract to be drawn without further reference to the parties and containing all the material terms which would eventually have to find their way into that contract. Mr. Carman, on behalf of the plaintiff, suggests that it is a mistake to think that all contracts have to be analysed into offer on the one hand and acceptance on the other. The true question, he suggests, is this: have the parties come to an agreement on everything which is material between them? In my judgment, on either of those two views, the council are entitled to succeed. It is said by the plaintiff that agreement is to be found in the corres- pondence which passed between the parties over the months and, in particular, the letters and so on which went to and fro in February and March 1971. Indeed, there is no need to go back further in the history of these events than November 1970 when the housing manager sent a letter to the plaintiff, amongst others, headed Sale of Council Houses " and containing this paragraph: " You will note that under the new scheme you are required to forward an administration fee of #3 together with your request to purchase, but I must emphasise that this fee is treated as a pay- ment towards the cost of the dwelling when the purchase is com- pleted. The fee is not returnable if you decide not to proceed with the purchase." Then the next paragraph but one: " I am, therefore, enclosing a copy of the brochure which has been prepared giving full details of the new scheme and I should be obliged if you would complete the form which comprises the last page and return it to me together with the #3 fee." We have been shown a copy of the brochure, and it is sufficient for the purpose of this case to say that in that brochure there is no mention of any special terms which might possibly find their way into the eventual contract between the parties. The form was july completed and sent back by Mr. Gibson, received by the council on December 2, 1970, saying to the housing manager: " Dear Sir, Please inform me of the price of buying my council house. I am interested in obtaining a mortgage from the corpora- tion to buy the house. Please send me details about the monthly repayments. . . ." Then comes the document already referred to by Lord Denning M.R. and Ormrod L.J. which is said by the plaintiff to be the offer by the council, namely, the first of the potentially contractual documents in this case. It is dated February 10, 1971, and is written not by the town clerk, as one would expect had this truly been a formal offer by the council, but by the city treasurer, Mr. Page; and again, not surprisingly because it comes from the city treasurer, it is aimed primarily, if not entirely, at the financial aspects of this transaction, and it reads: " Purchase of council house. Your reference no. . . . I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold). The details which you requested about a corporation mortgage are as follows " then he sets out the amount that the corporation " may " grant, the annual fire insurance premium, and the monthly repayment charge on the mortgage if Mr. Gibson should require it. As Ormrod L.J. has pointed out, at the end of the penultimate paragraph it says: " This letter should not be regarded as a firm offer of a mortgage." Then it reads: " If you would like to make formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible." It is said that that letter constitutes a firm offer to sell. It is largely a matter of impression, but, although to Lord Denning M.R. and Ormrod L.J. it appears perfectly plain that that was a firm offer, to me it appears equally plain that it was not. First of all, the words used " may be " in the first paragraph and " may grant a mortgage " a little lower down and finally the expression " If you would like to make a formal application to buy your council house " are strange words to use if this was indeed a formal offer on behalf of the council. It is, in my judg- ment, no more than one would expect of a letter comin; from the city treasurer. It is a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course. Secondly, the letter makes no mention at all of the special conditions which were undoubtedly in due course going to be included in the formal contract and the conveyance. If one looks at the bundle, which contains a report by the town clerk dated August 3. 1970, one sees that it sets out the terms which the council at that stage at any rate intended should be included in the contracts of sale to the tenants who were wishing to purchase their houses. Mr. Carman suggests that there were only matters of form or procedure outstanding and that all the material matters were agreed between the parties. I find myself unable to agree with that contention when I look at this letter. It sets out the fact that it intends to detail a summary of the conditions of sale, and then it appears to set out the terms subject to which the tenancies have been created and indicates there, without going into it in unnecessary detail, which of those terms it is intended to include in the contract of sale. Just to take one or two examples, there is intended to lie included a restrictive covenant that the house shall be used as a private dwelling house only, that there shall be no advertising, that the purchaser shall not obstruct accesses, and so on. It seems to me that none of those matters could possibly be described as matters merely of procedure. They are matters closely reflecting the rights which the proposed purchaser will eventually enjoy over his property. It was suggested by Mr. Carman that it would be very unlikely that any purchaser applying for planning permission to use the premises other than as a private dwelling house would receive such permission. That, it seems to me, is not a consideration which can possibly affect the decision in this case. It seems to me for all those reasons that it is quite impossible to treat this letter of February 10 as being a firm offer made by the council, and it is interesting to observe the further words which Lord Cairns L.C. uses once again in the Brogden case, 2 App.Cas. 666, 672, in the remainder of the paragraph, the beginning of which I have read: " But, on the other hand, there is no principle of law better estab- lished than this, that even although parties may intend to have their agreement expressed in the most solemn and complete form that conveyancers and solicitors are able to prepare, still there may be a consensus between the parties far short of a complete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description." Up to that point the passage supports the plaintiff's contention, but note these final words: " I mean imperfect and incomplete as regards form." If that view of the letter of February 10 is correct then that is an end of the matter, but it is worth while perhaps considering what happened thereafter. The response to the letter from Mr. Gibson was to send back the formal document, which again be it noted is headed not " Accept- ance " but " Application to buy a council house and application for a mortgage." It is a document which was supplied of course by the council for Mr. Gibson to fill in. " SECTION A: APPLICATION TO BUY TO BUY A COUNCIL HOUSE "--there again, not an agreement to accept the council's offer. And therein various particulars are set out, namely, the wife and her work and her income. Then: " SECTION C: CERTIFICATE TO BE COMPLETED BY ALL APPLICANTS. I have read the explanatory leaflet on how to buy my council house " --that is the brochure to which I have referred--" and your letter stating the costs involved, and now wish to purchase my council house. The above answers are correct and I agree that they shall be the basis of the arrangements regarding the purchase and, if appropriate, the loan between myself and the Manchester Corporation." But in the covering letter which accompanied that completed form Mr. Gibson is making a counter-suggestion. He says in his letter of March 5, 1971: " I would therefore like your assurance that direct works will not exclude these premises when re-surfacing or re-laying starts, or alter- natively would you deduct an amount of money from the purchase price and I will undertake the repairs myself. Whichever decision you arrive at I would like to make an initial cash payment of #500 --so I would be obliged if you will let me have the figures to allow for the deposit mentioned. I have left the purchase price blank on the application form until I hear from you." What he is suggesting there in short is that the price of these premises to him should not be that which the council have put forward but that an allowance should be made for his repairing the drive or alternatively there should be an obligation upon the council to make recompense in kind by repairing his drive themselves by direct labour. That seemed to me quite plainly to be a counter-offer. The council's reply on March 12, 1971, was: " Dear Sir, I refer to your letter concerning certain repairs to the path. Account is taken of the general condition of the property at the time of the survey and valuation and the price is fixed accord- ingly, allowing for such defects as there may be. I regret I cannot authorise repairs of this nature at this stage." Then on March 18 there was another letter back from Mr. Gibson in answer to that: " Ref. your letter of March 12 . . . In view of your remarks I would be obliged if you will carry on with the purchase as per my application already in your possession." It is suggested that that letter of March 18 from Mr. Gibson was appro- priate to revive, so to speak, the original offer, if there was one, by the council, and that one can accordingly disregard the counter-offer and rejection which took place in the interim. The matter is dealt with conveniently in Cheshire and Fifoot's Law of Contract, 9th ed. (1976) at p. 33, in these terms: " Whatever the difficulties, and however elastic their rules, the judges must, either upon oral evidence or by the construction of documents, find some act from which they can infer the offeree's intention to accept, or they must refuse to admit the existence of an agreement. This intention, moreover, must be conclusive. It must not treat the negotiations between the parties as still open to the process of bargaining. The offeree must unreservedly assent to the exact terms proposed by the offeror. If, while purporting to accept the offer as a whole, he introduces a new term which the offeror has not had the chance of examining, he is in fact merely making a counter-offer. The effect of this in the eyes of the law is to destroy the original offer. Thus in Hyde v. Wrench (1840) 3 Beav. 334, ' the ' defendant on June 6 offered to sell an estate to the plaintiff for #1,000. On june 8, in reply, the plaintiff made an offer of #950, which was refused by the defendant on June 27. Finally, on June 29, the plaintiff wrote that he was now prepared to pay #1,000.' It was held that no contract existed. By his letter of June 8 the plaintiff had rejected the original offer and he was no longer able to revive it by changing his mind and tendering a subsequent acceptance." It seems to me that that passage applies precisely to the circumstances in this case and, accordingly, even if the letter did amount to an offer, Mr. Gibson has failed to take advantage of it for the reasons which I have endeavoured to indicate. The decision of this court in Storer v. Manchester City Council [1974] 1 W.L.R. 1403, which was relied upon by the judge seems to me to provide if anything good support for the corporation's case rather than the plaintiff's case. If I may just read a passage from Lord Denning M.R.'s judgment, at p. 1406: " On February 11, 1971, Mr. Storer filled in an application form to buy a council house. He said: ' I now wish to purchase my council house.' In it he asked for a loan on mortgage. On March 9, 1971, the city treasurer wrote to him: ' The corporation will lend #2,279 repayable over 25 years with interest at 81/2 per cent. . . . The total monthly instalment payable will be . . . #14.98.' On the same day, March 9, 1971, the town clerk himself wrote a letter which is of crucial importance in the case." Note that super-added in that case to the treasurer's letter was this one from the town clerk, the counterpart of which does not exist in the case we are considering here today. That letter ran as follows, at p. 1407: " Dear Sir: Sale of Council House. I understand you wish to purchase your council house and enclose the agreement for sale. If you will sign the agreement and return it to me I will send you the agreement signed on behalf of the corporation in exchange. From the enclosed list of solicitors, who are prepared to act for you and advise you on the purchase, please let me know the name of the firm that you select, as soon as possible." Lord Denning M.R. continued, at p. 1407: " Enclosed with that letter there was a form headed: ' City of Man- chester. Agreement for Sale of a Council House.' The corporation had Wed in various details, such as the name of the purchaser, the address of the property, the price, the mortgage, amount, and the monthly repayments. There was this item left blank: ' 7. Date when your tenancy ceases and mortgage repayments will oommence ' followed by these clauses : ' 8. Freehold to be conveyed or transferred by the corporation. 9. There will be no abstract or investigation of title. . . . 10. Deeds of oonveyance of transfer and mortgage to be in the corporation's standard forms including conditions against use except as a private dwelling house and against advertising and a restriction not to sell or lease the property for five years. 11. Warning. As from the date mentioned in 7 above the proproperty is at your risk- If you are taking a mortgage from the corporation it will be insured for you but the cost recharged to you. If you are nor taking a mort- gage insure it at once. Your responsibility for repairs and for payment of rates also start from that day. My solicitors are. . . . Mr. Storer filled in that form. He filled in the names of solicitors, Hargreaves & Co. He signed the form himself and returned it on March 20, 1971. So he had done everything which he had to do to bind himself to the purchase of the property. The only thing left blank was the date when the tenancy ceased " None of the documents which in that case were held to be the con- tractual documents even exist in the present case. It is of course bad luck that the Storer line of cases should fall on one side of the line and the Gibson type of case on the other, but bad luck is proverbially fertile ground for bad law. however much sympathy one may feel for him, has totally failed to establish on any view the necessary ingredients of a contract, and for those reasons I respectfully differ from Lord Denning M.R. and Ormrod L.J. and I would allow the appeal. Appeal dismissed with costs. Leave to appeal on conditions that the orders for costs in Court of Appeal and in county courts to stand and corporation not ask for costs in House of Lords. Solicitors: Sharpe, Pritchard & Co. for Leslie Borman, Manchester; Hargreaves & Co., Manchester. A.H.B. [COURT OF APPEAL] DAULIA LTD. v. FOUR MILLBANK NOMINEES LTD. AND ANOTHER Oct. 4; Vendor and Purchaser--Contract--Offer to sell land--Fulfilment of conditions of oral offer--Revocation of offer--Whether uni- lateral contract for disposition of land--Necessity for memor- andum in 1writing--Whether part performance of contract-- Law of Property Act 1925 (15 & 16 Geo. 5, c. 20), s. 40 The plaintiffs wished to buy certain properties which the first defendants were in a position to sell as mortgagees. The plaintiffs claimed that there was an oral agreement that the first defendants would exchange contracts for the sale of the properties if the plaintiffs attended at the first defendants' offices with a draft contract in the terms already agreed and a banker's draft for the amount of the deposit. The plaintiffs duly attended at the first defendants' offices but the first defendants refused to exchange contracts. The plaintiffs claimed damages for breach of the oral agreement. Brightman J. struck out the statement of claim as against the first defendant, under R.S.C., Ord. 18, r. 19, as disclosing no cause of action in that there was no note or memorandum of the agreement sufficient to satisfy section 40 (1) of the Law of Property Act 1925.1 On appeal by the plaintiffs: -- Held, dismiasing the appeal, (1) that, the plaintiffs having performed or satisfied the conditions on which the defendants had agreed to enter into a contract for the sale of land, there was a valid unilateral contract and the defendants, in failing to enter into a contract for sale, were in breach of that unilateral contract; that, although the unlateral contruct was not for the sale of land or an interest in land, it was a contract conceming the disposition of an interest in land to which section 40 of the Law of Property Act 1925 applied and, therefore, since there was no memorandum in writing, there had to be an act of part performance before the contract could be enforced (post, pp. 625.A-C, 626H--627.A, 629B 632F 636E). Warlow v. Harrison (1858) 1 El. & El. 295 and Johnson v. Boyes [1899] 2 Ch. 73 distinguished. (2) That the plaintiffs' acts in performing the conditions of the first defendants' offer considered without reference to the terms of the oral contract did not suggest that they were done in performance of some contract but suggested that they were done in contemplation of making a contract; that, since those acts did not point to there being some contract, there was no act of part performance to exclude the provisions of section 40 (1) of the Act and the judge had rightly held that the [Reported by ROBERT WILLIAMS, ESQ., Barrister-at-Law] 1 Law of Property Act 1925, s. 40: " (1) No action may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged ... (2) This section ... does not affect the law relating to part performance, . . ." Vol 2 27 pleadings disclosed no cause of action against th first defendants (post, pp. 629D--F, 636A, B, E). Steadman v. Steadman [1976] A.C. 536, H.L.(E.) applied. Per Goff L.J. On the true view of a unilateral contract not to prevent the condition becoming satisfied, which obliga- tion must arise as soon as the offeree starts to perform, after which it is too late for the offeror to revoke his offer (post, p. 625C--E). Per Buckley and Orr L.JJ. Law v. Jones was not a deci- sion on the effect of the words " subject to contract." It did not decide that a letter written " subject to contract " could consti- tute a note or memorandum of an oral agreement sufficient to satisfy the Statute of Frauds. What it did decide was that if the parties subsequently enter into a new and distinct oral form part of a sufficient note or memorandum of the later oral agreement notwithstanding that it was " subject to contract " in relation to the earlier bargain. It decided the quite different point that a written note or memomndum to satisfy the statute need not acknowledge the existence of the contract, although it must record all its essential terms. In that respect Law V. Jones and Tiverton Estates Ltd. V. Wearwell Ltd. are undoubtedly in conflict (post, pp. 634H--635A, F--H, 636E). Law V. Jones [1974] Ch. 112, C.A. and Tiverton Estates Ltd. v. Wearwell Ltd. [1975] Ch. 146 considered. Decision of Brightman J. affirmed. United Dominions Trust (Commercial) Ltd. v. Eagle Aircraft Services Ltd. [1968] 1 W.L.R. 74; [1968] 1 All E.R. 104, C.A. Whitchurch v. Bevis (1789) 2 Bro.C.C. 558. APPEAL from Brightman J. The plaintiffs, Daulia Ltd., negotiated with the first defendants, Four 'Millbank Nominees Ltd. for the purchase of certain properties in London. The plaintiffs alleged that oral agreement was reached that if they fulfilled certain conditions the first defendants would enter into a written contract of sale. The plaintiffs fulfilled the conditions but the first written contract of sale. The plaintiffs fulfilled the conditions but the first defendants refused to enter into a written contract of sale. There was no note or memorandum in writing of the oral agreement. The plaintiffs claimed damages for breach of that agreement. On March 31, 1977, on a motion under R.S.C., Ord. 18, r. 19 Brightman J. struck out the state- ment of claim as against the first defendants as disclosing no reasonable cause of action in that there was no note or memorandum of the oral agreement sufficient to satisfy section 40 (1) of the Law of Property Act 1925. The plaintiffs appealed on the grounds that section 40 (1) of the Law of Property Act 1925 did not apply and that the oral agreement was not one that required to be evidenced in writing since it was not a contract for the sale or disposition of an interest in land and that the judge was wrong in law in holding that plaintiffs' claim was so clearly unarguable that the statement of claim ought to be struck out as disclosing no reasonable cause of action. Gerald Godfrey Q.C. and Norman Primost for the plaintiffs. Leonard Hoffman Q.C. and Michael Driscoll for the first defendants. Cur. adv. vult. November 24. The following judgments were read. Buckley L.J., having asked Goff L.J. to deliver the first judgment. GOFF L.J. This is an appeal from an order dated March 31, 1977, of Brightman J. made on a motion under R.S.C., Ord. 18, r. 19 whereby he directed that as against the first defendants the statement of claim should be struck out and the action dismissed with costs. The appellant plaintiffs were keen to buy certain commercial and residential properties from the first defendants who were in a position to sell those properties as mortgagees. The plaintiffs never in fact succeeded in obtaining an exchange of contracts or any other written agreement for sale and purchase, but they claim they did obtain a unilateral contract by the first defendants that they would enter into a written contract of sale on certain agreed terms and the plaintiffs claim The facts on which they base that claim are extensively set forth in the re-amended statement of claim but I need only refer to them quite briefly. I take them from the following paragmphs of the re-amended statement of claim: " 7. On Tuesday, December 21, 1976, the terms of the proposed sale between the plaintiffs and the first defendants were finally agreed between one Shebson acting on behalf of the plaintiffs and the said Langley"--who was a partner in the second defendants and acting on behalf of the first defendants--" whereby the plantiffs were to purchase the said properties from the first defendants for a price of #825,000 payable by a deposit of #41,250 which said deposit was to be payable by a banker's draft and the balance of #783,750 was to he payable on completion. The said terms were partly oral and partly in writing. In so far as they were in writing they were contained in the draft contracts which the plaintiffs and the first defendants already had. In so far as they were oral they had been agreed on the telephone between the said Shebson and the said Langley, and the said oral terms were evidenced by riders to the said contract sent by the said Shebson to the said Langley on Tuesday, December 21; 1976. " 8. On the afternoon of Tuesday, December 21, 1976, one Osgoodby acting on behalf of the first defendants promised the said Shebson acting on behalf of the plaintiffs that the first defendants would enter into a contract for the sale of the said properties with the plaintiffs if the plaintiffs procured a bankers draft for the said deposit, attended at the first defendants offices before 10 a.m. on Wednesday, December 22, 1976, at 4 Millbank and tendered to the first defendants the plaintiffs' part of the contract in the terms already agreed and the said bankers draft. In reliance on the said promise the plaintiffs procured the banker's draft for the said deposit, executed and signed their Part of the said contract for sale in the terms already agreed. " 9. The plaintiffs duly attended at the first defendants' said offices before 10 a.m. on Wednesday December 22, 1976, with their said deposit and their said part of the contract for sale ready for tender to the first defendants. But the first defendants refused to exchange their part of the said contract for sale with the plaintiffs." Brightman J. held that those facts disclose no cause of action, and the plaintiffs now appeal to this court. Under this procedure the facts so pleaded must be taken as admitted, and they give rise to three questions of law. (a) Do they establish a valid unilateral contract? If they do, then there is no question but that they disclose a breach. (b) If the answer In (a) is Yes, then is that contract unenforceable for want of a written note or memorandum to satisfy section 40 of the Law of Property Act 1925 unless there be sufficient acts of part performance to take the case out of the statute? (c) If section 40 applies are there such acts? It is well settled that it is only in plain and obvious cases that the court should exercise its powers under the summary process provided by R.S.C., Ord. 18, r. 19 and it was suggested that these questions should not be resolved by us but should in any event go to trial. I am satisfied, however, that so far as the facts are concerned the plaintiffs' position cannot be improved by evidence beyond that in which they stand on the facts pleaded which for the purposes of this motion and appeal are taken to be admitted. Further the points or law have been very fully argued before us, and I have no doubt that we ought to determine them now. I therefore turn to the first question. Was there a concludcd unilateral ontract by the first defendants to ennte into a contraactfor ~saleon thhe agreed terms? The concept of a unilateral or " if contract " is somewhat anomalous, because it is clear that, at all events until the offeree starts to perform the condition, there is no contract at all, but merely an offer which the offeror is free to revoke. Doubts have been expressed whether the offeror becomes bound so soon as the offeree starts to perform or satisfy the condition, or only when he has fully done so. In my judgment, however, we are not concerned in this case with any 'such problem, because in my view the plaintiffs had fully performed or satisfied the condition when they presented themselves at the time and place appointed with a banker's draft for the deposit, and their part of the written contract for sale duly engrossed and signed and there tendered the same, which I understand to mean proferred it for exchange. Actual exchange, which never took place, would not in my view have been part of the satisfaction of the condition but something additional which was inherently necessary to be done by the plaintiffs to enable, not to bind, the first defendants to perform the unilateral contract. Accordingly in my judgment, the answer to the first question must be in the affirmative. Even if my reasoning so far be wrong the conclusion in my view is still the same for the following reasons. Whilst I think the true view of a unilateral contract must in general be that the offeror is entitled to require full performance of the condition which he has imposed and short of that he is not bound, that must be subject to one important qualification, which stems from the fact that there must be an implied obligation on the part of the offeror not to prevent the condition becom- ing satisfied, which obligation it seems to me must arise 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. This brings me to the second question. There are certain English cases touching this matter, but none precisely in point. The plaintiffs rely strongly on Warlow v. Harrison (1858) 1 El. & l. 95 nd 1Johnston v. Boyes [1899] 2 Ch. 73. In the former an auctioneer knocked down as sold for 61 guineass which was bid by the owner, a pony which according to the particulars was to be sold without reserve, and the auctioneer, not the vendor, was sued for damages by the plaintiff who was the highest independent bidder at 60 guineas. In the Court of Queen's Bench, see p. 308, Lord Campbell held that there was no contract because the vendor had revoked the auctioneer's authority to accept the plaintiff's bid, and therefore no question of the impact of section 17 of the Statute of Frauds arose. The Exchequer Chamber agreed with this conclusion on the plead- ings as they stood, but allowed an amendment, and held the defendant liable; per Martin B. as upon a contract that the sale should be without reserve, and per Willes J. and Bramwell B. upon a breach of warranty of authority to sell without reserve, and Martin B. said at pp. 316317: " Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue the auctioneer as upon a contract that the sale shall be without reserve. We think the auctioneer who puts the property up for sale upon such a condition pledges himself that the sale shall be without reserve; or, in other words, contracts that it shall be so; and that this contract is made with the highest bona fide bidder; and, in case of breach of it, that he has a right of action against the auctioneer. The case is not at all affected by section 17 of the Statute of Frauds, which relates only to direct sales, and not to contracts relating to or connected with them." This case affords support for the plaintiffs' contention as far as it goes, but it is distinguishable, since there the action was against the auctioneer, not the vendor, and it was not upon a contract by the auctioneer that he himself would sell to the highest bidder but that his principal would do so. Warlow v. Harrison, 1 El. & El. 295 was approved by Cozens-Hardy J. in Johnston v. Boyes [1899] 2 Ch. 73, 77, where he related it to the vendor himself, saying : " A vendor who offers property for sale by auction on the terms of printed conditions can be made liable to a member of the public who accepts the offer if those conditions be violated: see Warlow v. Harrison 1 El. & El. 295 and the recent case of Carlill v. Carbolic Smoke Bal Co. [1893] 1 Q.B. 256. Nor do I think that the Statute of Frauds would afford any defence to such an action. The plaintiff is not suing on a contract to purchase land: she is suing simply because her agent, in breach of the first and second conditions of sale, was not allowed to sign a contract which would have resulted in her becoming the purchaser of the land. I think this conclusion results from the decision of the Exchequer Chamber in Warlow v. Harrison. This however, was merely obiter because not only was the action once again not against the vendor but against the auctioneer, but also the court held that there could be no liability anyway, quite apart from the effect of the statute, because the plaintiff's agent had not tendered cash, but only a cheque, which the auctioneer was not bound to accept. The case is in any event unsatisfactory because the complaint made was that andum on her behalf, but that would not have been of any use to her. What was required was a note or memorandum signed by or on behalf of the vendor. On the other hand Rainbow v. Howkins [1904] 2 K.B. 322, so far as it goes tells against the plaintiffs but again it is distinguishable, because the action was brought on the ground that the auctioneer was personally liable as if he were vendor under a contract of sale not upon a collateral contract, and alternatively for breach of warranty of authority, but it was held that he could not be sued on the first ground because of the statute, and could not be sued for breach of warranty of authority, because there was none since, apart from the statute, he had effectively bound the vendor. Mr. Hoffman also relied on Wood v. Midgley (1854) 2 Sm. & Giff. 115, and on appeal, 5 De G.M. & G. 41. That, however, was not a case of an agreement to enter into a written agreement but of a concluded oral agreement for sale with a concurrent or collateral agreement to reduce it to writing, so that again is distinguishable. In these circumstances in my judgment it is necessary to consider how the matter stands in principle. As I see it the question is whether the unilateral contract is--and I quote these words from section 40--a " contract for the sale or other disposition of land or any interest in land." It is clear to me that ex hypothesi it is not a contract for the sale of land or any interest in land because it is a separate and independent contract to enter into such a contract In my judgment, however, it is equally clearly a contract for some other disposition of an interest in land. It is not necessary in my view that the interest in land to be disposed of should actually exist at the time of the contract. I cannot doubt that a contract for valuable consideration to grant an easement over Black- acre would be a contract for the disposition of an interest in land vithin the meaning of the section. Now, in the present case we have a contract to enter into a proper written contract for the sale of land. Such a contract if entered into would be specifically enforceable and would therefore give the plaintiffs a right to the land in equity and so would create and give them an equit- able interest in the land. It follows in my judgment that the unilateral contract was a contract to dispose of an interest in land, because it was a contract to do something which would have that effect in law. The plaintiffs say " But we are not claiming specific performance; only damages." That, however, in my view is an irrelevant consideration for two reasons. The first, which is I think conclusive, is that we are not concerned vith whether the " unilateral contract " could be specifically enforced so as actually to create an interest in land, but whether it is a contract to do that which, if done, would create such an interest. The words of the section look only to the contract. The second is that the plaintiffs cannot escape the impact of the section by limiting the nature of the relief they seek, and moreover, the damages for breach of the unilateral contract must, as I see it, be exactly the same as damages for breach of the contract of sale would have been if contracts had been exchanged and then broken by the plaintiffs. If, however, contrary to my view it be necessary that the unilateral contract should be one capable of specific performance, in my judgment it is so notwithstanding the decision of Stirling J. on motion in Johnston v. Boyes, 42 S.J. 610, which with all respect to that judge is in my view incorrect. For this purpose one must regard the matter apart from section 40, for if one postulates that the section applies one begs the whole question. So regarded, I cannot see how a vendor can escape an order for specific performance by agreeing (with sufficient particularity to be effective in law) to agree to sell rather than by a direct agreement to sell. The dictum of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, 515 " a contract de praesenti to enter into what, in law, is an enforceable contract, is simply that enforceable contract, and no more and no less," with which I respectfully agree, does not directly apply, because prior to exchange of contracts which never took place the a contract between A and B, but a unilateral contract by A to enter into a particular contract with B, but in my view the principle must be the same. I am fortified in this conclusion by the American case of Union Car Advertising Co. Inc. v. Boston Elevated Railway Co. (1928) 26 Fed. Rep. Mr. Godfrey pointed out that the court said, at p. 759: "... it was virtually conceded by the plaintiff at the argument that under the law of Massachusetts an oral contract to execute a written contract for the sale or transfer of an interest in land is within the statute of frauds and invalid." But the case before the court was not such a case but one of a contract not to be performed within the year. Therefore, he said, this American decision did not help because the position with regard to a contract for the sale or other disposition of an interest in land was not before the court, and anyway the court was dealing only with the law of Massechusetts. So far as the second point is concerned the case is none the less per- suasive authority, and as to the first, the citations in the judgment from law of that state, and show that law to be founded upon reasoning which commands ifself to me and entirely accords with my own. Thus in Sarkisian v. Teele (1909) 88 N.E. 333, where the subject matter was an oral contract to execute an unsigned written contract to sell stock in trade and to let the business premises, the court said, at p. 334: "... if the bill is considered as seeking to enforce an oral promise by the defendant to enter into the formal writing, as containing all the essential elements of the contract, it cannot be maintained," and again " By the statute of frauds such an agreement was required to be in writing, and an oral promise to execute a contract embodying these terms also comes within the statute. Further in McLachlin v. Village of Whitehall (1906) 99 N.Y.S. 721, as cited in 26 Fed. Rep. (2nd series) p. 758 : "... the trustees of the defendant village entered into an oral con- tract wherein it was agreed that if the plaintiff would increase his plant, so that he could furnish incandescent lights for private houses in the village, the trustees would renew . . ." the written contract he then had for lighting its streets, which would other- wise expire in 1897. In that case the court said, at pp. 722-723: " The question is therefore presented whether damages can be recovered for the breach of an oral agreement to enter into a con- tract, which, under the statute of frauds, is required to be in writing. It is true that the oral agreement to enter into the written contract might be fully performed within a year or within a day. The action is not in form one to recover damages for a breach of contract for lighting the streets and public places for a term of five years, but for damages consequent upon a breach of the verbal agreement to award such a contract to the plaintiff. The damages, however, claimed as consequent upon such breach, are none other than the same damages as would have been recoverable for breach of the contract for lighting if it had been awarded to the plaintiff. . . . It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not also void, where the damages claimed for the breach of the oral agreement are not independent of it, but necessarily are the same as those which would arise from the breach of the written contract, the door would be open for the practical nullification of the statute of frauds in a large class of cases." The law is similarly stated in 72 American Jurisprudence (2nd ed.), Statute of Frauds para. 4: " The general rule is that an oral agreement to reduce to writing a ' contract which is within the scope of the operation of the statute of frauds, or to sign an agreement which the statute of frauds requires to be in writing, is invalid and unenforceable." In my judgment, therefore, the unilateral contract in this case is prima facie unenforceable, and I turn to the third question. The plaintiffs rely on all and every of the acts done by them to satisfy the conditions of the " unilateral contract," as being also sufficient acts of part performance. The first defendants say that that cannot be so because nothing can be part performance if done before there is any binding contract. Mr. Hoffman puts his case as high as saying that by definition there can never be part performance of a unilateral contract. I doubt whether that is right as a general principle, since in most cases the performance of the condition by the offeree is also the discharge f all his obligations and is certainly done pursuant to the inchoattecon- tract. I think in many cases the offeree's acts may amount to part per- formance, though I doubt whether in this case they caused sufficient prejudice to the plaintiffs to raise an equity on which the first defendants could be charged. In my view, however, it is unnecessary to decide these questions since in my judgment the case fails because none of the alleged acts of part performance of themselves suggests that there was any contract between the parties. Indeed they point to the exact opposite and suggest that the parties were about to make or contemplated making a contract. It is only if one first looks to see what the oral contract is, and finds that it is a unilateral contract, such as pleaded in this case, that the acts can begin to be regarded as part performance, but that is an inquiry which one is not permitted to make: see per Lord Reid in Steadman v. Steadman [1976] A.C. 536, 541--542, where he said : " I think that there has been some confusion between this supposed rule and another perfectly good rule. You must not first look at the oral contract and then see whether the alleged acts of part per- formace are consistent with it. You must first look at the alleged acts of part performance to see whether they prove that there must have been a contract and it is only if they do so prove that you can bring in the oral contract. . . . In my view, unless the law is to be divorced from reason and principle, the rule must be that you take the whole circumstances, leaving aside evidence about the oral con- tract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not." Lord Salmon appears to have taken a contrary view: he said, at p. 571 : " In the present case, the payment of #100 by the husband to his wife who had divorced him--looked at without regard to its surrounding circumstances--would not be any evidence of any contract, let alone of a contract concerning land." The other members of the court did not state the position so specifically one way or the other, but both Viscount Dilhorne at p. 553 and Lord Simon at p. 561 accepted the statement in Fry, Specific Per- formance of Contract (1921) 6th ed., p. 278, section 582 : " The true principle, however, of the operation of acts of part per- formance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged," contract. The plaintiffs argue that whilst one may not look to see what oral contract is alleged, one may look at the promise made as part of the surrounding circumstances and then the alleged acts of part performance are explained and shown to be referable to the existence of a contract; but that, with all respect, I reject as too subtle, and in reality looking to and examining the alleged acts of part performance in the light of the alleged contract. For these reasons in my judgment the plaintiffs fail on the third question also, and I would dismiss this appeal. I intended to say that I would do so with considerable regret as the first defendants' conduct unexplained appeared to me to be unmeritorious. However, this case having been heard simply on an application to strike out the statement of claim as disclosing no cause of action, the motives or reasons which influenced the defendants have not been investigated, and we were informed by counsel that at the very last moment the mortgagors found a purchaser at a higher price and so they felt themselves bound to reject the plaintiffs despite the assurances they had given them. It seems, there- fore, that in this particular case there may be a good explanation and I leave it there. BUCKLEY L.J. I agree. The plaintiffs and the first defendants were in negotiation for the purchase by the former from the latter of a con- siderable number of properties in London described as the Gill Portfolio. It is common ground, however, that at no time was there a contract between them in this respect. It was the intention of the parties that the formation of a contract of sale should await the exchange of formal written agreements. The plaintiffs sue on an alleged contract, partly oral and partly by conduct, arising out of the promise alleged in paragraph 8 of the re-amended statemen t of claim and the plaintiffs' conduct alleged in paragraphs 9 and 10 thereof. It is claimed that he first defendants thus became bound to enter into formal written agreemen t of sale in terms which had already been agreed (though not contractually) between the parties when the contract sued upon was made. The is 10 consequently are (1) whether the facts pleaded in paragmphs 8, 9 and 10 of the re-amended statement of claim are such as would give rise to a contract; (2) whether a plea under section 40 of the Law of Property Act 1925 could afford a good defence to an action on such contract; and (3) if so, whether in the present case there was any sufficient part perfomance to take the case out of the section. Brightman J. seems to have accepted that the answer to the first question should be affirmative. In this court it has been suggested that the plaintiffs' conduct alleged in paragraphs 9 and 10 did not fully satisfy the conditions upon which the defendants' alleged promise was condi- tional, because it is not in terms alleged that the plaintiffs in fact tendered the plaintiffs' part of the written agreement. I would not regard this as an adequate ground for striking out the statement of claim; for if, as seems probable, the first defendants' declaration on December 22, 1976, of an intention not to exchange agreements stultified the plaintiffs' inten- tion then to tender their part for exchange, the first defendants could not, in my judgment, rely on any failure of the plaintiffs to make actual tender as a defence to a claim of breach of contract. The defendants' offer to exchange contracts must have been subject to an implied obligation that the defendants would not render the performance by the plantiffs of the acts necessary for acceptance impossible, and I agree with Goff L.J. that the defendants could not withdraw their offer once the plaintiffs had embarked upon those acts. In my opinion, the re-amended statement of claim is capable of supporting a conclusion that a contract was made on December 22, 1976, under which the first defendants became bound to enter into a written agreement of sale of the properties to the plaintiffs upon the terms which, as alleged in paragraph 7 of the re-amended statement of claim, had been finally agreed on the Previous day. The judge, in an interesting analysis of the position in the present case, reached the conclusion that, on the basis that a contract to exchange agreements existed, that contract was itself a contract for the sale of land, and that no distinction could be drawn between the con- tract to exchange agreements and the contract which would result from such exchange. If the judge was right, it must follow that he was also right in concluding that the contract to exchange agreements must fall within the operation of section 40 and be unenforceable for lack of writing unless there was sufficient part performance to take the case out of the section. As I said, however, at the beginning of this judgment, it was, and I think still is, common ground between the parties that there never has been any contract of sale in the present case. If this is the case, any contract there may have been was merely a contract to do something-- viz. exchange of agreements--the doing of which would bring a contract of sale into existence. As I read the judge's judgment, he held that the contract to exchange agreements should be treated as, and indeed was in truth, a contract for the sale of land. The plaintiffs contend that this is not good law and that the contract to exchange agreements is a contract to do a particular act which is distinct from the contract of sale which would result from the doing of that act. If it be accepted that the intention of the parties was at all relevant times that there should be no contract of sale until formal agreements had been exchanged, there can have been no contract of sale on December 22, 1976, for no agreements were then exchanged. In these circumstances, either no contract was made on that day or it was a contract which was not a contract of sale. If no contract was made, this can, I think, on the pleaded facts only have been because the promise alleged in paragraph 8 of the re-amended statement of claim was not in truth a promise at all by reason of the subject-to-contract character of the dealings between the parties in relation to the sale negotiations. The judge expressed the view that the exhibited correspondence showed clearly that the negotiations for the sale were intended to be subject to contract, and this has not been questioned in this court. The judge went on to say that is was theoretically possible that on December 21, 1976-- that is, on the occasion to which paragraph 8 of the re-amended state- ment of claim refers--Mr. Osgoodby on behalf of the first defendants made an offer in the terms pleaded in paragraph 8 which was not subject to contract. If the case were to turn on the question of fact whether the so called promise was a part of subject-to-contract negotiations or was an offer capable of acceptance having contractual effect, I think that question ought to go to trial. If the promise was subject to contract, no contract would have arisen from the plaintiffs' acts pleaded in paragraphs 9 and 10 of the re-amended statement of claim; if, on the other hand, it was not subject to contract, is any contract which may have arisen by reason words, would section 40 apply to it? As I have already said, if the judge was right in his view of the effect of the contract, section 40 must apply: but let me assume that for whatever reason, that view is incorrect and the contract was no more than a contract to exchange agreements. In my view such a contract would be one which the court could order to be specifically performed; For, although not a contract of sale of land, it would undoubtedly be a contract relating to a sale of land. At the risk of drawing too fine a distinction, one might say that, though not a contract of sale, it would be a contract for sale. Such a contract, it seems to me, would be specifically enforceable, for the common law remedy of damages would be inadequate. The injury suffered by the plaintiffs in consequence of the failure to implement the contract to exchange agreements and the damages recoverable in respect of it would, I think, be precisely the same as the injury resulting from, and the damages recoverable in consequence of, a breach of the contract which would arise from the exchange of agreements. The perormance of the contract for an exchange of agree- ments would bring a contract of sale into existence. The latter contract would confer an equitable interest in the land on the purchaser. So I agree with Goff L.J. that the contract to exchange agreements is a con- tract for the creation of, and consequently for the disposition of, an interest in land within section 40 of the Law of Property Act 1925. Moreover, if specifically enforceable, the contract to exchange agree- ments must have itself given rise to an equitable interest in land. We were referred to a number of American cases which will be found collected and discussed in Union Car Advertising Co. Inc. v. Boston Elevated Railway Co., 26 Fed. Rep. (2nd Series) 755, a decision of the Circuit Court of Appeals, 1 st Circuit, dated June 13, 1928. In one of Circuit Court of Appeals, lst Circuit, dated June 13, 1928. In one of these, Boyd v. Greene (1895) 62 Mass. 566, 568; 39 N.E. 277, 278, it was said that an oral contract to execute a valid written agreement to convey land is as much within the Statute of Frauds as an oral contract to execute and deliver a conveyance of land. In another, Sarkisian v. Teele, 201 Mass. 596; 88 N.E. 333, it was held that an oral promise to execute a contract to sell stock in trade and to lease a store to the plaintiff came within the statute. Yet another, McLachlin v. Village of Whitehall, 99 N.Y.S. 721; 1 14 App.Div. 315, was concerned with an oral promise made on behalf of the defendants to renew an expiring contract for lighting the streets of. the .village for a further period of five Years. The appellate court decided in favour of the defendants saying, at p. 723: It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not aslo void, where the damages claimed for the breach of the oral agreement arc not independent of it, but necessarily are the same as those which would arise from the breach of the written contract, the door would be open for the practical nullification of the statute of frauds in a large class of cases." The first and third of these three cases appear to have been cases relating to agreements to enter into a written contract where no contract already existed. Sarkisian v. Teele, on the other hand, seems to have been a case of an agreement to render an existing unenforceable agreement enforce- able by reducing it to writing signed by the parties. It seems to me, however, that there can be no valid distinction for the relevant purpose between cases of these two classes. In each case the oral agreement, if performed, will result in there being an enforceable contmct where formerly there was none. In 72 American Jurist (2nd Series) 568, the matter is stated in these terms: " The general rule is that an oral agreement to reduce to writing a cntract which is within the scope of the operation of the Statute of Frauds, or to sign an agreement which the Statute of Frauds requires to be in writing, is invalid and unenforceable. Neither pro- mise is enforceable unless the statute is satisfied. In other words a parol agreement invalid under the statute is not aided by a further parol agreement to reduce the principal agreement to writing. To allow the enforcement of such an agreement would be tantamount to taking the main contract out of the statute, and as has been said, it is absurd to say that an oral promise in relation to certain subject matter is invalid, but that a promise that the party will thereafter bind himself with respect to the subject matter is valid. Such a con- struction would be a palpable evasion of the statute and let in all of the evils against which it is directed." This appears to deal with the matter on the basis of the general policy of the Statute of Frauds. I prefer, however, to base my decision in the present case upon the view that the unwritten contract comes within the terms of section 40 of the Law of Property Act 1925 as a contract for a diposition of an interest in land. We were referred, among other English authorities, to Wood v. Midgley (1854) 5 De G.M. & G. 41, where a purchaser, having promised to sign a written agreement on the following day, then refused to sign. A written receipt for a deposit paid by the purchaser was held to be an insufficient memorandum for the purposes of the Statute of Frauds. The plaintiff's bill contained no allegation to thc effect that the purchaser's conduct was fraudulent. The defendants' demurrer to the plaintiff's bill was allowed. That case does not, in my judgment, assist us much in the present one. The plaintiff's action was for specific performance of the contract of sale, not for relief in respect of the oral promise to sign. In Johnston v. Boyes [1899] 2 Ch. 73, the defendants offered freehold land for sale under conditions providing that the highest bidder should be the purchaser. The plaintiff's husband, Johnston, bid on her behalf and the property was knocked down to him as the highest bidder. He thereupon tendered his own cheque in payment of the deposit. One of the defendants recognised him as a man who was impecunious and entirely defendent financially upon his wife. Upon the vendor's instructions the auctioneer refused to accept the cheque or to permit Johnston to sign any agreement. The property was at once put up for resale and resold. The plaintiff sued for damages for breach of an alleged contract that the highest bidder at the auction should be the purchaser of the property. Cozens-Hardy J. said, at p. 77: " A vendor who offers property for sale by auction on the terms of printed conditions can be made liable to a member of the public who accepts the offer if those conditions be violated: see Warlow v. Harrison and the recent case of Carlill v. Carbolic Smoke Ball Co. Nor do I think that the Statute of Frauds would afford any defence to such an action. The plaintiff is not suing on a contract to pur- chase land : she is suing simply because her agent, in breach of the first and second conditions of sale, was not allowed to sign a contract which would have resulted in her becoming the purchaser of the land." The reference to Johnston not being allowed to sign a contract was, as Goff L.J. has pointed out, inappropriate to anything which the judge had to decide. In my view his language must be read as referring elliptically to the refusal by the defendants through their agent, the auctioneer, to enter into a written contract of sale with Johnston as the agent of the plaintiff. It is true that the case was eventually decided upon the footing that the defendants could not be compelled to accept Johnston's cheque in payment of the deposit, but for my part I doubt whether it is correct to say that the passage which I have cited from the judge's judgment was obiter. Having decided in the passage which I have cited that there was an enforceable contract, he went on to say: " It is, therefore, necessary to consider whether the facts proved have established a breach of the contract alleged by the plaintiff." He went on to hold for cash until the next day. They were accordingly under no obligation to sign the contract and were not in breach of the contract sued upon. Consequently I think that the passage which I have cited is authority which tends to support the plaintiffs' contention in the present case; but it does not appear to have been suggested to Cozens-Hardy J. in that case that the contract with which he was concerned might have come within the Statute of Frauds as a contract for the transfer of an equitable interest in land. He referred only to a contract to purchase land. Although he held that the statute was not applicable to the contract there in question, he did not do so upon the ground on which I would hold that the contract sued on in the present case does fall within section 40. In the course of the argument we were referred to a passage in the judgment of Lord Denning M.R. in Tiverton Estates Ltd. v. Wearwell Ltd. [1975] Ch. 146, 159, commenting on the earlier decision of this court in Law v. Jones [1974] Ch. 112. Although this is not an occasion for an extended discussion of the decisions in those two cases, Law v. Jones appears to have occasioned so much misunderstanding that perhaps I may be permitted to make certain explanatory observations about it. I would emphasise, however, that these remarks have no bearing upon the decision of the present case. Contrary to what some statements about Law v. Jones appear to suggest, it was not a decision on the effect of the words " subject to contract "; nor, apart possibly from what I said in that case at p. 126 which, as I expressly stated, did not arise for decision, can I discover any statement in the judgments in Law v. Jones on the topic of " subject to contract " which was novel. It is important to realise that there were two distinct sets of negotiations and two bargains in that case. The first was for a sale at #6,500, which never came to any- thing because the vendor resiled from it before it was put into writing. The second was for a sale at #7,000 and was the subject of the letter of March 17, 1972, the bargain having been made on March 13, 1972. The question for decision was whether that letter, read in conjunction with documents linked to it by reference, afforded a sufficient note or memorandum of the oral contract of March 13 to satisfy section 40 of the Law of Property Act 1925. It would be most presumptuous of me to suppose, in the light of the judgments in Tiverton Estates Ltd. v. Wear- well Ltd., that I may not have been mistaken in the view upon this question which I expressed in Law v. Jones, but I have re-read my judgment in that case most carefully in the light of those observations and I can find no reason for modifying my opinion in any respect. The judgments in Tiverton Estates Ltd. v. Wearwell Ltd. rely strongly upon Buxton v. Rust (1872) L.R. 7 Exch. 279 and Thirkell v. Cambi [1919] 2 K.B. 590. These were both cases in which a written document relied on to satisfy section 17 of the Statute of Frauds denied liability but admitted the existence of a contract. Documents of this character give rise, in my opinion, as I explained in Law v. Jones [1974] Ch. 112, to special con- siderations and do not establish that in every case a note or memorandum to satisfy the Statute must acknowledge the existence of a contract. I remain of the opinion that the " offer cases" can only be fitted into the pattern of authority if the statute does not require the written note or memorandum to acknowledge expressly or by implication the existence of a contract. I am unable to understand how, outside the private world of the White Queen, a document written at a time when ex hypothesi no contract exists can acknowledge the existence of a contract made at a later date. With deference to the view expressed by Russell L.J. in Law v. Jones, at p. 119, the fact that a written offer is a continuing offer until withdrawn or accepted does not meet this point. I may perhaps add that I see no reason to dissent from what Lord Denning M.R. said in the Tiverton Estates case [1975] Ch. 146, 1601-H, but I do not regard that proposition as fitting the facts in Law v. Jones. Law v. Jones [1974] Ch. 112 did not decide that a letter written " sub- ject to contract " or forming part of a correspondence conducted subject to a " subject to contract " stipulation can constitute a note or memorandum of an oral agreement to which it relates sufficient to satisfy the Statute of Frauds, at any rate so long as the " subject to contract " stipulation remains operative. What it did decide was that, if the parties subsequently enter into a new and distinct oral agreement, the facts may be such that the earlier letter may form part of a sufficient note or memorandum of the later oral agreement notwithstanding that it was " subject to contract " in relation to the earlier bargain. It also, of course, decided the quite different point that a written note or memor- andum to satisfy the statute need not acknowledge the existence of the contract, although it must record all its essential terms. In that respect Law v. Jones and Tiverton Estates Ltd. v. Wearwell Ltd. [1975] Ch. 146 are undoubtedly in conflict. To revert to the present case, for reasons which I have given I am of the opinion that, whether the judge was right or mistaken in his view of the character and effect of the unwritten contract which is sued upon, it falls within the operation of the Law of Property Act 1925, section 40. It is consequently necessary to consider the question of part performance. The acts relied on as constituting part performance are those alleged in paragraph 9 of the re-amended statement of claim. Having regard to the surrounding circumstances other than the unwritten contract, were these acts such as to suggest that it is more likely than not that they were done in pursuance of some contract? (Steadman v. Steadman [1976] .C. 536.) In my judgment thevywere not. I agree with Goff L.J. in thinking that, if one ignores the unwritten contract, the natural con- clusion to draw from the acts must be that they were done not in pursuance of a contract but in contemplation of making a contract. For these reasons I agree that this appeal must fail. Were it not for this fact, of which counsel has informed us, that the explanation of the defendants' conduct was that they were selling as mortgagees and that the mortgagor on the eve of the exchange of contracts had found a purchaser at a higher price than the price which the plaintiffs were willing to pay, I should have regarded this as another case of a kind which has become all too common recently, when property values have been very volatile, in which a vendor has taken advantage of section 40 in circum- stances in which justice and probity should have induced the vendors to honour their bargain, but I accept that there were extenuating circumstances. ORR L.J. I agree that this appeal should be dismissed for the reasons given by Buckley L.J. and Goff L.J. and I would only add that I entirely agree with the observation made by Buckley L.J. with reference to Lw v. Jones [1974] Ch. 112. Appeal dismissed. No order as to costs. Leave to appeal refused. Solicitors: Kaufman, Kramer & Shebson; Clifford-Turner. [HOUSE OF LORDS] * GIBSON . . . . . . . . . . RESPONDENT AND MANCHESTER CITY COUNCIL . . . . - APPELLANTS 1979 Jan 24; Lord Diplock, Lord Edmund-Davies, March 8 Lord Fraser of Tullybelton, Lord Russell of Killowen and Lord Keith of Kinkel Contract--Formation--Consensus ad idem--Council's negotiations formal contract--Council's change of policy after election Whether parties had reached agreement--Whether formal offer and acceptance necessary The respondent was the tenant and occupier of a council house owned by the appellant corporation by whom he had been employed for 16 years. Since 1968 he had been actively interested in buying his house. In 1970 the corporation re- solved to offer council houses for sale on favourable terms to sitting tenants and in November 1970 they sent the tenant a form and a brochure giving details of how he could buy his house. The tenant completed the form and returned it to the corporation with a #3 administration fee and a request that he be told the price of buying the house. On February 10, 1971, the city treasurer of the corporation wrote to the tenant saying " the corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (free- hold) "; details of a corporation mortgage were given but the letter was not to " be regarded as a firm offer of a mortgage"; and the tenant was told that if he wanted " to make formal application " to buy his council house he should complete and return the enclosed application form. The tenant completed the form, leaving the purchase price blank, and returned it in a covering letter of March 5, 1971, asking for consideration to be given to defects in the path to the house. On March 12, 1971, the corporation wrote to the tenant to say that the price had been fixed according to the condition of the property. On March 18, 1971, the tenant wrote asking the corporation to " carry on with the purchase as per my application." The corporation took the house off the list of tenant occupied houses for whose maintenance they were responsible and the tenant did work to the house. Following a change in political control of the council in May 1971 the corporation resolved not to sell council houses to tenants except where legally binding contracts had been concluded and on August 4, 1971, notification was given by the town clerk that the sale of the house would not be proceeding. Judge Bailey held that the contract for sale of the house by the corporation to the tenant was complete and ordered specific performance. The Court of Appeal (by a majority) affirmed that decision. On appeal by the corporation : -- Held, allowing the appeal, that upon the true construction of the documents relied upon as constituting the contract, there never was an offer by the corporation acceptance of which by the tenant was capable in law of constituting a legally enforceable contract for the sale of the house. It was but a step in the negotiations for a contraot which, owing to the change in the political complexion of the council, never reached fruition (post, pp. 297C--D, 298A--F, 302B--C, 304E--F, C). Storer v. Manchester City Council [1974] 1 W.L.R. 1403, C.A. distinguished. Per Lord Diplock, Lord Fraser of Tullybelton and Lord Keith of Kinkel. There may be certain types of contract, though they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the pnrties in which the successive communications other than the first are in reply to one another, is not one of these (post, pp. 297D--E, 304C, G). Decision of the Court of Appeal [1978] 1 W.L.R. 520; [1978] 2 All E.R. 583 reversed. The following cases are referred to in their Lordships' opinions : Hyde v. Wrench (1840) 3 Beav. 334. Stevenson, Jaques & Co. v. McLean (1880) 5 Q.B.D. 346. Storer v. Manchester City Council [1974] 1 W.L.R. 1403 ; [1974] 3 All E.R. 824, C.A. The following additional cases were cited in argument: Bigg v. Boyd Gibbins Ltd. [1971] 1 W.L.R. 913; [1971] 2 All E.R. 183, Brogden v. Metropolitan Railway Co. (1887) 2 App. Cas. 666, H.L.(E.). Clifton v. Palumbo [1944] 2 All E.R. 497, C.A. New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd. [1975] A.C. 154; [1974] 2 W.L.R. 865; [1974] 1 All E.R. 1015, P.C. APPEAL from the Court of Appeal. This was an appeal by the appellants, Manchester City Council, from an order of the Court of Appeal (Lord Denning M.R. and Ormrod L.J., Geoffrey Lane L.J. dissenting) dated January 17, 1978, dismissing an appeal by the appellants from the order of Judge Bailey dated December 15, 1976, sitting in Manchester county court whereby he ordered specific performance of what the judge held was a legally enforceable contract for the sale by the appellants to the respondent, Robert Gibson, of the freehold interest in a council house at 174 Charlestown Road, Blackley, at a price of #2,180. The facts are set out in the opinions of Lord Diplock and Lord Edmund-Davies. H. E. Francis Q.C. and A. W. Simpson for the appellants. G. A. Carman Q.C. and B. I. Caulfield for the respondents. Their Lordships took time for consideration. March 8, 1979. LORD DIPLOCK. My Lords, this is an action for specific performance of what is claimed to be a contract for the sale of land. The only question in the appeal is of a kind with which the courts are very familiar. It is whether in the correspondence between the parties there can be found a legally enforceable contract for the sale by the Manchester Corporation to Mr. Gibson of the dwelling house of which he was the occupying tenant at the relevant time in 1971. That question is one that in my view, can be answered by applying to the particular documents relied upon by Mr. Gibson as constituting the contract, well- settled, indeed elementary, principles of English law. This being so, it is not the sort of case in which leave would have been likely to be granted to appeal to your Lordships' House, but for the fact that it is a test case. The two documents principally relied upon by Mr. Gibson were in standard forms used by the corporation in dealing with applications from tenants of council houses to purchase the freehold of their homes under a scheme that had been adopted by the council during a period when it was under Conservative Party control. Political control passed to the Labour Party as a result of the local government elections held in May 1971. The scheme was then abandoned. It was decided that no more council houses should be sold to any tenant with whom a legally binding contract of sale had not already been concluded. At the date of this decision there was a considerable number of tenants, running into hundreds, whose applications to purchase the houses which they occupied had reached substantially the same stage as that of Mr. Gibson. The two documents in the same standard form as those on which be principally relies had passed between each one of them and the corporation. So their rights too are likely to depend upon the result of this appeal. My Lords, the contract of which specific performance is sought to be enforced is a contract for the sale of land. It is thus subject to the requirements as to writing laid down in section 40 of the Law of Property Act 1925; but nothing turns on this since the only contract that is alleged is one made by letters and accompanying documents passing between the parties. The outcome of this appeal depends upon their true construction. In the Manchester County Court where the action started, the case was pleaded in the conventional way. The particulars of claim alleged an offer in writing by the corporation to sell the freehold interest in the house to Mr. Gibson at a price of #2,180 and an acceptance in writing of that offer by Mr. Gibson. The judge (Judge Bailey) followed the same conventional approach to the question that fell to be decided. He looked to see whether there was an offer of sale and an acceptance. He held that, upon their true construction, the documents relied upon as such in the particulars of claim did amount to an offer and an acceptance respectively and so con- stituted a legally enforceable contract. He ordered specific performance of an open contract for the sale to Mr. Gibson of the freehold interest in the house at the price of #2,180. The corporation's appeal against this judgment was dismissed by a majority of the Court of Appeal (Lord Denning M.R. and Ormrod L.J.); Geoffrey Lane L.J. dissented. Lord Denning M.R. rejected what I have described as the conventional approach of looking to see whether upon the true construction of the documents relied upon there can be discerned an offer and acceptance. One ought, he said, [1978] 1 W.L.R. 520, 523H, to " look at the correspondence as a whole and at the conduct of the parties and see therefrom whether the parties have come to an agreement on everything that was material." This approach, which in referring to the conduct of the parties where there is no allegation of part performance appears to me to overlook the provisions of section 40 of the Law of Property Act 1925, led him however to the conclusion that there should be imported into the agreement to be specifically performed additional conditions, against use except as a private dwelling house and against advertising and a restriction not to sell or lease the property for five years. These are conditions which would not be implied by law in an open contract for the sale of land. The reason for so varying the judge's order was that clauses in these terms were included in the standard form of " Agreement for Sale of a Council House " which, as appears from the earlier case of Storer v. Manchester City Council [1974] 1 W.L.R. 1403, was entered into by the corporation and council tenants whose applications to purchase the freehold of their council house reached the stage at which contracts were exchanged. There was, however, no refer- ence to this standard form of agreement in any of the documents said to constitute the contract relied on in the instant case, nor was there any evidence that Mr. Gibson had knowledge of its terms at or before the time that the alleged contract was concluded. Ormrod L.J., who agreed with Lord Denning M.R., adopted a similar approach but he did also deal briefly with the construction of the docu- ment relied upon by Mr. Gibson as an unconditional offer of sale by the corporation. On this he came to the same conclusion as the judge. Geoffrey Lane L.J. in a dissenting judgment, which for my part I find convincing, adopted the conventional approach. He found that upon the true construction of the documents relied upon as constituting the contract, there never was an offer by the corporation acceptance of which by Mr. Gibson was capable in law of constituting a legally enforceable contract. It was but a step in the negotiations for a contract which, owing to the change in the political complexion of the council, never reached fruition. My Lords, there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the parties in which the sucoessive communications other than the first are in reply to one another, is not one of these. I can see no reason in the instant case for departing from the conventional approach of looking at the handful of documents relied upon as constituting the contract sued upon and seeing whether upon their true construction there is to be found in them a contractual offer by the corporation to sell the house to Mr. Gibson and an acceptance of that offer by Mr. Gibson. I venture to think that it was by departing from this conventional approach that the majority of the Court of Appeal was led into error. The genesis of the relevant negotiations in the instant case is a form filled in by Mr. Gibson on November 28, 1970, inquiring what would be the price of buying his council house at 174 Charlestown Road, Blackley, and expressing his interest in obtaining a mortgage from the corporation. The form was a detachable part of a brochure which had been circulated by the corporation to tenants who had previously expressed an interest in buying their houses. It contained details of a new scheme for selling council houses that had been recently adopted by the council. The scheme provided for a sale at market value less a discount dependent on the length of time the purchaser had been a council tenant. This in the case of Mr. Gibson would have amounted to 20 per cent. The scheme also provided for the provision by the corporation of advances upon mortgage which might amount to as much as the whole of the purchase price. As a result of that inquiry Mr. Gibson's house was inspected by the corporation's valuer and on February 10, 1971, the letter which is relied upon by Mr. Gibson as the offer by the corporation to sell the house to him was sent from the City Treasurers Department. It was in the following terms : " Dear Sir, Purchase of council house Your Reference Number 82463 03 " I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold). . . . " Maximum mortgage the corporation may grant: #2,177 repayable over 20 years. " Annual fire insurance premium : " Monthly repayment charge, calculated by : (i) flat rate repayment method "If you wish to pay off some of the purchase price at the start and therefore require a mortgage for less than the amount quoted above, the monthly instalment will change; in these circumstances, I will supply new figures on request. The above repayment figures apply so long as the interest rate charged on home loans is 81/2 per cent. The interest rate will be subject to variation by the corporation after giving not less than three months' written notice, and if it changes, there will be an adjustment to the monthly instalment payable. This letter should not be regarded as firm offer of a mortgage. " If you would like to make formal application to buy your council house, please complete the enclosed application form and return it to 1me as ssoo as possible. Yours faithfully, (Sgd.) H. R. PAGE CITY TREASURER Mr. Robert Gibson " My Lords, the words I have indicised seem to me, as they seemed to Geoffrey Lane L.J., to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr. Gibson's written acceptance of it. The words " may be prepared to sell" are fatal to this; so is the invitation, not be it noted, to accept the offer, but " to make formal application to buy" upon the enclosed application form. It is, to quote Geoffrey Lane L.J., a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course. Both Ormrod L.J. and the judge in the county court reaching the con- clusion that this letter was a firm offer to sell the freehold interest in the house for #2,180, attached importance to the fact that the second para- graph, dealing with the financial details of the mortgage of which Mr. Gibson had asked for particulars, stated expressly, " This letter should not be regarded as a firm offer of a mortgage." The necessary implication from this, it is suggested, is that the first paragraph of the letter is to be regarded as a firm offer to sell despite the fact that this is plainly inconist- ent with the express language of that paragraph. My Lords, with great respect, this surely must be fallacious. If the final sentence had been omitted the wording of the second paragraph, unlike that of the first, with its use of the indicative mood in such expressions as "the interest rate will change," might have been understood by council tenants to whom it was addressed as indicating a firm offer of a mortgage of the amount and on the terms for repayment stated if the council were prepared to sell the house at the stated price. But whether or not this be the expression of the presence of the last sentence in paragraph 2, it cannot possibly affect the plain meaning of the words used in paragraph 1. Mr. Gibson did fill in the application form enclosed with this letter. It was in three sections; section A headed " Application to buy a council house". Section B " Application for a loan to buy a council house" and section C " Certificate to be completed by all applicants." He left blank the space for the purchase price in section A and sent the form to the corporation on March 5, 1971, with a covering letter in which he requested the corporation either to undertake at their own expense to carry out repairs to the tarmac path forming part of the premises or to make a deduction from the purchase price to cover the cost of repairs. The letter also intimated that Mr. Gibson would like to make a down payment of #500 towards the purchase price instead of borrowing the whole amount on mortgage. In reply to the request made in this letter the corporation, by letter of March 12, 1971, said that the condition of the property had been taken into consideration in fixing the purchase price and that repairs to the tarmac by the corporation could not be authorised at this stage. This letter was acknowledged by Mr. Gibson by his letter to the corporation of March 18, 1971, in which he asked the corporation to " carry on with the purchase as per my application already in your possession." My Lords, the application form and letter of March 18, 1971, were relied on by Mr. Gibson as an unconditional acceptance of the corpora- tion's offer to sell the house; but this cannot be so unless there was a contractual offer by the corporation available for acceptance, and, for the reason already given I am of opinion that there was none. It is unneces- sary to consider whether the application form and Mr. Gibson's letters of March 3 and 18, 1971, are capable of amounting to a contractual offer by him to purchase the freehold interest in the house at a price of #2,180 on the terms of an open contract, for there is no suggestion that, even if it were, it was ever accepted by the corporation. Nor would it ever have been even if there had been no change in the political control of the council, as the policy of the corporation before the change required the incorporation in all agreements for sale of council houses to tenants of the conditions referred to by Lord Denning M.R. in his judgment and other conditions inconsistent with an open contract. I therefore feel compelled to allow the appeal. One can sympathise with Mr. Gibson's disappointment on finding that his expectations that he would be able to buy his council house at 20 per cent. below its market value in the autumn of 1970 cannot be realised. Whether one thinks this makes it a hard case perhaps depends upon the political views that one holds about council housing policy. But hard cases offer a strong tempta- tion to let them have their proverbial consequences. It is a temptation that the judicial mind must be vigilant to resist. LORD EDMUND-DAVIES. My Lords, this is a hard case--and we all know where hard cases can take a judge. It is also a test case, some 350 others being in a like situation to the respondent. Mr. Gibson had been employed by the Manchester City Corporation for 16 years and, since March 1959, tenant of their dwelling house, 1974 Charlestown Road, Blackley. As long ago as July 1968 he had intimated to the corporation his desire to buy his home, and to that end he had completed and sent them in the following December the form of application to purchase with which they supplied him. Events moved slowly, and in June 1970 Mr. Gibson inquired when he might have a decision on his application and whether he might meanwhile be permitted to make certain improvements, including the repair of paths. It -was in September 1970 that the corporation resolved to sell the freeholds of their dwellings and not (as hitherto) merely lease- hold interests. In October 1970, their housing manager wrote to Mr. Gibson, apologising for the delay and regretting that " . . . it is not possible to indicate how long it will be before I will be able to give you the oppor- tunity of purchasing your house," adding that in due course the property would be valued and the applicant informed of the result. In the following month, the corporation circulated those tenants who, like Mr. Gibson, had already expressed their desire to purchase their homes, and enclosed a brochure entitled " Full details of how you can buy your council house." This began : " The city council are prepared to sell freehold . . . any council house . . . to the tenant of that house, providing he has been in occupation of it for at least one year," at market value less a discount to be calculated according to the length of his occupation. Particulars were also given about mortgage facilities. Mr. Gibson filled in and submitted to the corporation a form attached to the brochure and beginning, " Dear Sir, please inform me of the price of buying my council house." The reply thereto, dated February 10, 1971, and signed by the city treasurer, is important as it was the tenant's case that this constituted an offer by the corporation to sell. I set out its material parts : " Purchase of Council House " I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of #2,725 less 20 per cent. = #2,180 (freehold). " The details which you requested about a corporation mortgage are as follows : -- maximum mortgage the corporation may grant. #2,177 repayable over 20 years . . . " This letter should not be regarded as a firm offer of a mortgage. " If you would like to make formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible." The form itself, which Mr. Gibson completed on March 3, 1971, was headed : " Application to buy a council house and application for a mortgage." He left the purchase price blank, but filled in the particulars required in relation to his application for a loan. And he signed the certificate at the end of the form, which was worded in this way: " I have read the explanatory leaflet (i.e. the brochure] on how to buy my council house and your letter stating the costs involved, and now wish to purchase my council house. The above answers are correct and I agree that they shall be the basis of the arrangements regarding the purchase and, if appropriate, the loan between myself and the Manchester Corporation." Mr. Gibson sent off that form under cover of a letter dated March 5, 1971, the opening paragraph of which read: " With reference to enclosed application for purchase of above property. Before the transaction is finalised I would appreciate your comments on the following." [There followed a complaint that, although the corporation's 'Direct Works' Department had under- taken to repair Mr. Gibson's tarmac paths, nothing had been done]. " I would therefore like your assurance that Direct Works will not exclude these premises when re-surfacing or re-laying starts, or altematively would you deduct an amount of money from the purchase price and I will undertake the repairs myself. Whichever decision you arrive at I would like to make an initial cash payment of #500--so I would be obliged if you will let me have the figures to allow for the deposit mentioned. I have left the purchase price blank on the application form until I hear from you." On March 12, the housing manager retorted that, as the general con- dition of the property had been taken into account in arriving at the price of #2,180, he could not authorise repairing the paths. On March 18 Mr. Gibson replied by a letter which was said to constitute his acceptance of the corporation's alleged offer to sell and which read in " Reference your letter of March 12 . . . In view of your remarks I would be obliged if you will carry on with the purchase as per my application already in your possession." The corporation did not reply to that letter. In May 1971 the political control of the corporation changed hands and the scheme to sell off council houses was suspended. In July 1971 it was formally discontinued. My Lords, it was on the basis of the foregoing documents and correspondence that Mr. Gibson instituted proceedings in the county court in September 1974 for specific performance of what he, in effect, submitted was an open contract whereby the corporation had agreed to sell to him the freehold of his dwelling for #2,180. It was pleaded that the corporation had so offered by their letter of February 10, 1971, and the accompanying application form, the acceptance (as I understand) being conveyed by Mr. Gibson's completing and returning that form and later " uncondition- ally accepted the said offer by letter to the defendants dated March 18, 1971." Reliance was also sought to be laid upon an internal memorandum passing between two of the corporation's departments which was said to constitute an admission by the corporation that they had--presumably by that date--sold the freehold to Mr. Gibson. It is convenient to mention also at this stage that both in the county court and in the Court of Appeal the plaintiff relied further upon the fact that during 1971 the town clerk, in the course of a letter he sent a city councillor who had espoused Mr. Gibson's case, had written regarding the treasurer's letter of February 10, 1971 : " Mr. Gibson accepted this offer, but before the papers could be passed to me for preparation of the forinal contract the local elections intervened. Since then no more contracts have been prepared, pend- ing a formal decision being taken by the present council regarding the policy to be adopted in relation to the sale of council houses . . ." It is, however, right to observe that, later in his same letter, the town clerk wrote of the unwisdom of Mr. Gibson's having carried out certain alterations ". . . before there was a binding contract in existence," although these words may--or may not--have been intended to refer to the absence of any " formal contract," a fact to which the writer also adverted. The pleaded defence was simple : The corporation had made no offer; alternatively, if they had, Mr. Gibson had not accepted it; the internal memorandum constituted no admission; and there was non-com- pliance with section 40 of the Law of Property Act 1925. None of these pleas found favour with the judge in the county court, who ordered specific performance. The appeal was dismissed in extemporary judgments delivered by Lord Denning M.R. and Ormrod L.J., with Geoffrey Lane L.J. dissenting. The majority upheld the pleaded case of offer and acceptance, whereas Geoffrey Lane L.J. held that it failed in limine as it was impossible to regard the corporation's letter of February 10, 1971, as an offer to sell. I agree with him, and for the reasons he gave. These are to be found at [1978] 1 W.L.R. 529D to 530E and there would be no advantage in my repeating them. There was at best no more than an invitation by the corporation to tenants to apply to be allowed to purchase freeholds. I am not, however, with Geoffrey Lane L.J. in treating Mr. Gibson's letter of March 5, 1971, (regarding non-repair of his tarmac paths) as a counter-offer which had the effect of destroying an offer to sell--if the corporation had made one. On the contrary, I read it as merely ex- ploratory of the possibility of a reduction in price in the eventuality indicated. In other words, this case is like Stevenson, Jaques & Co. v. McLean (1880) 5 Q.B.D. 346 and unlike Hyde v. Wrench (1840) 3 Beav. 334. But that point is of no practical importance in this appeal, for, even had there been an offer, I hold that Mr. Francis Q.C. was right in submitting that there followed no acceptance, but nothing more than an application to buy at an unstated price, coupled with an application for a loan. The offer and acceptance approach obviously presenting certain difficulties, the majority held in the Court of Appeal that it was not the only one, and it is undoubted that, as Cheshire and Fifoot observed (Law of Contract, 9th ed. (1976), p. 26) " . . . there are cases where the courts will certainly hold that there is a contract even though it is difficult or impossible to analyse the transaction in terms of offer and acceptance: see e.g. Clarke v. Earl Dunraven [1897] A.C. 59 . . ." Lord Denning M.R. said [1978] 1 W.L.R. 520, 523-524, that in such cases : " You should look at the correspondence as a whole and at the conduct of the parties and see therefrom whether the parties have correspondence and their conduct you can see an agreement on all then there is a binding contract in law even though all the formalities have not been gone through: see Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666." On that alternative basis, Lord Denning M.R. concluded that the parties had in truth contractually bound themselves. His first ground for so concluding was the nature of the correspondence between the parties, and I have already indicated why, for my part, I hold that of itself this dis- closed the making of no contract. His second ground was that, in the belief that a contract to sell would emerge, the Plaintiff did much work in repairing and improving his house and premises. But no evidence was called as to when such work had been done, and it appears from the correspondence that, although as far back as June 1970 Mr. Gibson had inquired whether he might proceed to improve the property, ". . . to the mutual benefit of the city and myself until such time as my case comes up for consideration," the corporation's reply in the following October gave no encouragement to the tenant to execute any improve- ments, and concluded, " If at any time you decide to withdraw your application I should be obliged if you would let me know." It is therefore application I should be obliged if you would let me know. It is therefore impossible to conclude that improvements were executed on the basis that the corporation had already committed themselves to sell. Nor, with respect to Lord Denning M.R., can it be material that, entirely unknown to Mr. Gibson, the corporation at one stage took 174 Charlestown Road off the list of houses being maintained by them and put it on the list of " pending sales," for that action had been taken in February 1971 in relation to all cases where the Direct Works Department had been notified that sales were " proceeding." And it has to be observed that this alteration in the list was effected a month earlier than the time when, according to the plaintiff's pleaded case, he accepted the corporation's " offer " to sell. And, finally, the town clerk's letter to Councillor Goldstone already referred to, cannot in my judgment have relevance to the matter of consensus ad idem. I have already sought to show that, read as a whole its wording is equivocal; and, even were it clear, the proper question is not whether the town clerk considered that a contract had been con- cluded but whether this was so in fact and in law. My Lords, there are further difficulties in Mr. Gibson's way. It is common ground that, had the corporation not altered its policy, the parties would in the ordinary way have entered into a standard " Agreement for Sale of a Council House," such as that concluded in Storer v. Manchester City Council [1974] 1 W.L.R. 1403. That agreement contained a provision that : " Deeds of conveyance or transfer and mortgage to be in the corporation's standard forms including conditions against use except as a private dwelling house and against advertising and a restriction not to sell or lease the property for five years. But in the instant case no such agreement was ever prepared or referred to, and it is not suggested that Mr. Gibson ever had knowledge of any special conditions, and still less that he assented to them. And as these special conditions are not such as may be implied in an open contract for the sale of land, their introduction would create--from his point of view--the difficulty of non-compliance with section 40 of the Law of Property Act 1925 and therefore unenforceability. I am accordingly in respectful disagreement with Lord Denning M.R., who concluded ([1978] 1 W.L.R. 520, 525D) that: alternatively, when granting specific performance, the court in its discretion should include such a clause. The order should be for specific performance of an agreement for the sale of a council house containing the clauses in the form in general use in Manchester. It is a contract for sale on the terms of the usual agreement for selling a council house." In the result, the altemative approach adopted in the Court of Appeal did not in my judgment avail the plaintiff. My Lords, although this appeal could, as I have indicated, have been disposed of with considerable brevity, I have dealt with it at some length. This I have thought it right to do for three reasons. First, out of respect for the Court of Appeal, from whose majority judgment I am differing. Secondly, because this is indeed a hard case for Mr. Gibson, who had long wanted to buy his house and had every reason to think he would shortly be doing so on distinctly advantageous terms until the corporation's bomb- shell announcement. And, thirdly, because there are many tenants in a like situation and it is right that they shotild be fully informed why this appeal is being allowed. Sympathetic though one must be to Mr. Gibson, for the reasons I have indicated I am forced to the conclusion that this House should uphold the dissenting judgment of Geoffrey Lane L.J. and allow the appeal. LORD FRASER OF TULLYBELTON. My Lords, I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Diplock and Lord Russell of Killowen. I agree with both of them and, for the reasons stated by them, I would allow this appeal. LORD RUSSEL OF KILLOWEN. My Lords, the allegation of the respondent of a concluded contract for sale to him of his council house was quite simply based. He alleged an offer by the appellant to sell contained in the letter dated February 10, 1971, written by the city treasurer to him: he alleged acceptance by him of that offer to him by a combination of the application form and his letter dated March 18, 1971. Thus he said was a contract for sale constituted, of which he claimed specific performance: a plain case of a contract constituted by offer to sell capable of acceptance as such. I do not see the relevance to the case of general references to consensus in the judgments below. There was no oral evidence. My Lords, I cannot bring myself to accept that a letter which says that the possible vendor " May be prepared to sell the house to you " can be regarded as an offer to sell capable of acceptance so as to constitute a contract. The language simply does not permit such a construction. Nor can the statement that the letter should not be regarded as a firm offer of a mortgage operate to turn into a firm offer to sell that which quite plainly it was not. On that short ground I would allow the appeal and set aside the orders of the Court of Appeal and the judge, save as to costs having regard to the terms upon which leave to appeal was given by the Court of Appeal. For the same reasons there should be no order for costs in this House. LORD KEITH OF KlNKEL. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend Lord Diplock. I agree entirely with his reasoning and conclusions, and accordingly I too would allow the appeal. Appeal allowed. Solicitors: Sharpe, Pritchard & Co. for Leslie Boardman, Manchester; C.M. Alfille & Co. for Hargreaves & Co., Manchester. J. A. G. [COURT OF APPEAL] * BUTLER MACHINE TOOL CO. LTD. v. EX-CELL-O CORPORATION (ENGLAND) LTD. [1972 B. No. 234] 1977 April 25 Lord Denning M.R., Lawton and Bridge L.JJ. Contract--Formation--Offer and acceptance--Terms and condi- tions--Orders to be accepted on sellers, terms--Acknowledg- ment of order on buyers' terms--Whether price variation clause in contract--Uniform Laws on International Sales Act 1967 (c. 45), Sch. 2, art. 7 1 On May 23, 1969, the plaintiff sellers offered to deliver a machine tool for the price of #75.535. Delivery was to be in 10 months and it was a condition that orders werase accepted only on the terms set out in the quotation which were to prevail over any terms in the buyers' order. The sellers' terms included a price variation clause whereby it was a condition of accept- ance that goods would be charged at prices Wing at date of delivery. The defendant buyers replied on May 27, 1969, giving an order with differences from the sellers' quotation and with their own terms and conditions which had no price variation clause. The order had a tear-off acknowledgment for sig- nature and return which accepted the order " on the terms and conditions thereon." On June 5, 1969, the sellers, after acknowledging receipt of the order on June 4, returned the acknowledgment form duly completed with a covering letter stating that delivery was to be " in accordance with our revised quotation of May 23 for delivery in . . . March/April 1970." The machine was ready about September 1970, but the buyers could not accept delivery until November 1970. The sellers invoked the price increase clause and claimed #2,892 for the increase due to the rise in costs between May 27, 1969, and April 1, 1970, when the machine should have been delivered. Thesiger J. gave judgment for the sellers for #2,892 and interest. On the buyers' appeal: -- Held, allowing the appeal, that the buyers' order of May 27, 1969, was not an acceptance of the offer in the sellers' quotation of May 23, but a counter-offer which the sellers had accepted by their letter of June 5, 1969, when the contract was completed without any price llmitation clause. Hyde v. Wrench (1840) 3 Beav. 334 and Trollope & Colls Ltd. v. Atomic Power Constructions Ltd. [1963] 1 W.L.R. 333; [1962] 3 All E.R. 1035 applied. Per Lord Denning M.R. The documents passing between the parties have to be construed as a whole and as a matter of construction the letter of June 5, 1969, is the decisive document (post, p. 405E). Judgment of Thesiger J. reversed. The following cases are referred to in the judgments: British Road Services Ltd. v. Arthur W. Crutchley & Co. Ltd. [1968] 1 Lloyd's Rep. 271; [1968] 1 All E.R. 811, C.A. 1 Uniform Laws on International Sales Act 1967, Sched. 2. art. 7: see post, p. 406B--C Vorl1 21 Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666 H.L.(E.). Hyde v. Wrench (1840) 3 Beav. 334. New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. [1975] A.C. 154; [1974] 2 W.L.R. 865; [1974] 1 All E.R. 1015, P.C. Trollope & Colls Ltd. v. Atomic Power Constructions Ltd. [1963] 1 W.L.R. 333; [1962] 3 All E.R. 1035. The following additional cases were cited in argument: Davies (A.) & Co. (Shopfitters) Ltd. v. William Old Ltd. (1969) 67 L.G.R. Gardiner v. Moore [1969] 1 Q.B. 55; [1966] 3 W.L.R. 786; [1966] 1 All E.R. 365. APPEAL from Thesiger J. The defendant buyers, Ex-Cell-O Corporation (England) Ltd., appealed against the judgment of Thesiger J. on February 12, 1976, in an action started in the Halifax District Registry, ordering that the defendants pay to ' the plaintiffs #2,892 damages, #1,410 interest and costs. The substantial ground of the appeal was that the judge was wrong in law in finding that the conditions of sale in the plaintiff sellers quotation and in particular the price variation clause formed part of the contract between the parties. The facts are stated in the judgrnents. John Griffiths Q.C. and Rex Tedd for the buyers. Lionel Scott for the sellers. LORD DENNING M.R. This case is a " battle of forms." The plaintiffs, the Butler Machine Tool Co. Ltd., suppliers of a machine, on May 23, 1969, quoted a price for a machine tool of #75,535. Delivery was to be given in 10 months. On the back of the quotation there were terms and conditions. One of them was a price variation clause. It provided for an increase in the price if there was an increase in the costs and so forth. The machine tool was not delivered until November 1970. By that time costs had increased so much that the sellers claimed an additional sum of #2,892 as due to them under the price variation clause. The defendant buyers, Ex-Cell-O Corporation (England) Ltd., rejected the excess charge. They relied on their own terms and conditions. They said : " We did not accept the sellers' quotation as it was. We gave an order for the self-same machine at the self-same price, but on the back of our order we had our own terms and conditions. Our terms and conditions did not contain any price variation clause." The judge held that the price variation clause in the sellers' form con- tinued through the whole dealing and so the sellers were entitled to rely upon it. He was clearly influenced by a passage in Anson's Law of Contract, 24th ed. (1975), pp. 37 and 38, of which the editor is Professor Guest: and also by Treitel, The Law of Contract, 4th ed. (1975), p. 15. The judge said that the sellers did all that was necessary and reasonable to bring the price variation clause to the notice of the buyers. He thought that the buyers would not " browse over the conditions " of the sellers : and then, by printed words in their (the buyers') document trap the sellers into a fixed price contract. I am afraid that I cannot agree with the suggestion that the buyers " trapped " the sellers in any way. Neither party called any oral evidence before the judge. The case was decided on the documents alone. I propose therefore to go through them. On May 23, 1969, the sellers offered to deliver one " Butler " double colunm plane-miller for the total price of #75,535. Delivery 10 months (subject to confirmation at time of ordering) other terms and conditios are on the reverse of this quotation. On the back there were 16 conditions in small print starting with this general condition : " All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the buyer's order." Clause 3 was the price variation clause. It said: " Prices are based on present day costs of manufacture and design and having regard to the delivery quoted and uncertainty as to the cost of labour, materials etc. during the period of manufacture, we regret that we have no alternative but to make it a condition of acceptance of order that goods will be charged at prices ruling upon date of delivery." The buyers replied on May 27, 1969, giving an order in these words: " Please supply on terms and conditions as below and overleaf." Below there was a list of the goods ordered, but there were differences from the quotation of the sellers in these respects : (i) there was an additional item for the cost of installation, #3,100 and (ii) there was a different delivery date : instead of 10 months, it was 10-11 months. Overleaf there were different terms as to the cost of carriage: in that it was to be paid to the delivery address of the buyers: whereas the sellers' terms were ex warehouse. There were different terms as to the right to cancel for late delivery. The buyers in their conditions reserved the right to cancel if delivery was not made by the agreed date: whereas the sellers in their conditions said that cancellation of order due to late delivery would not be accepted. On the foot of the buyers' order there was a tear-off slip headed : " Acknowledgment: Please sign and return to Ex-Cell-O. We accept your order on the terms and conditions stated thereon--and undertake to deliver by--Date--signed." In that slip the delivery date and signature were left blank ready to be Wed in by the sellers. On June 5, 1969, the sellers wrote this letter to the buyers: " We have pleasure in acknowledging receipt of your official order dated May 27 covering the supply of one Butler Double Colunm Plane-Miller. This being delivered in accordance with our revised quotation of May 23 for delivery in 10/11 months, i.e., March/April 1970. We retum herewith duly completed your acknowledgment of order form." They enclosed the acknowledgment form duly Wed in with the delivery date March/April 1970 and signed by the Butler Machine Tool Co. No doubt a contract was then concluded. But on what terms? The sellers rely on their general conditions and on their last letter which said "in accordance with our revised quotation of May 23" (which had on the back the Price variation clause). The buyers rely on the acknowledgment signed by the sellers which accepted the buyer's order " on the terms and conditions stated thereon " (which did not include a price variation clause). If those documents are analysed in our traditional method, the result would seem to me to be this: the quotation of May 23, 1969, was an offer by the sellers to the buyers containing the terms and conditions on the back. The order of May 27, 1969, purported to be an acceptance of that offer in that it was for the same machine at the same price, but it contained such additions as to cost of installation, date of delivery and so forth that it was in law a rejection of the offer and constituted a counter-offer. That is clear from Hyde v. Wrench (1840) 3 Beav. 334. As Megaw J. said in Trollope & Colls Ltd. v. Atomic Power Construction Ltd. [1963] 1 W.L.R. 333, 337: ". . . the counter-offer kills the original offer." The letter of the sellers of June 5, 1969, was an acceptance of that counter-offer, as is shown by the acknowledgment which the sellers signed and retumed to the buyers. The reference to the quotation of May 23 referred only to the price and identity of the machine. To go on with the facts of the case. The important thing is that the sellers did not keep the contractual date of delivery which was March/April 1970. The machine was ready about September 1970 but by that time the buyers' production schedule had to be re-arranged as they could not accept delivery until November 1970. Meanwhile the sellers had invoked the price increase clause. They sought to charge the buyers an increase due to the rise in costs between May 27, 1969 (when the order was given), and April 1, 1970 (when the machine ought to have been delivered). It came to 5,892. The buyers rejected the claim. The judge held that the sellers were entitled to the sum of #2,892 under the price variation clause. He did not apply the traditional method of analysis by way of offer and counter-offer. He said that in the quotation of May 23, 1969, " one finds the price viariation clause appearing under a most emphatic heading stating that it is a term or con- dition that is to prevail." So he held that it did prevail. I have much sympathy with the judge's approach to this case. In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out of date. This was observed by Lord Wilberforce in New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. [1975] A.C. 154, 167. The better way is to look at all the documents passing between the parties--and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points--even though there may be differences between the forms and conditions printed on the back of them. As Lord Caims said in Brogden v. Metropolitan Railway Co. (1877) 2 App.Cas. 666, 672 : ". . . there may be a consensus between the parties far short of a com- plete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description; . . ." Applying this guide, it will be found that in most cases when there is a "battle of forms," there is a contract as soon as the last of the forms is sent and received without objection being taken to it. That is well observed in Benjamin's Sale of Goods, 9th ed. (1974), p. 84. The difficulty is to decide which form, or which part of which form, is a term or condition of the contract In some cases the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. Such was British Road Services Ltd. v. Arthur V. Crutchley & Co. Ltd. [1968] 1 Lloyd's Rep. 271, 281-282, per Lord Pearson; and the illustra- tion given by Professor Guest in Anson's Law of Contract, 24th ed., pp. 37' 38 when he says that " the terms of the contract consist of the terms of the offer subject to the modifications contained in the acceptance. In some cases the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back: and the buyer orders the goods purporting to accept the offer--on an order form with his own different terms and conditions on the back--then if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the differ- ence unless he draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired on both sides. There is a concluded contract but the forms vary. The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable--so that they are mutually contradictory-- then the conflicting terms may have to be scrapped and replaced by a reasonable implication. In the present case the judge thought that the sellers in their original quotation got their blow in first: especially by the provision that " these terms and conditions shall prevail over any terms and conditions in the buyer's order." It was so emphatic that the price variation clause continued through all the subsequent dealings and that the buyers must be taken to have agreed to it. I can understand that point of view. But I think that the documents have to be considered as a whole. And, as a matter of construc- tion, I think the acknowledgment of June 5, 1969, is the decisive document It makes it clear that the contract was on the buyers' terms and not on the sellers' terms : and the buyers' terms did not include a price variation clause. I would therefore allow the appeal and enter judgment for the defend- ants. LAWTON L.J. The modem commercial practice of making quotations and placing orders with conditions attached, usually in small print, is indeed likely, as in this case to produce a battle of forms. The problem is how should that battle be conducted? The view taken by Thesiger J. was that the atite should extend over a wide area and the court should do its best to look into the nunds of the parties and make certain assumptions. In my judgment, the battle has to be conducted in accordance with set rules. It is a battle more on classical 18th century lines when convention decided who had the right to open fire first rather than in accordance with the modern concept of attrition. The rules relating to a battle of this kind have been known for the past 130-odd years. They were set out by Lord Langdale M.R. in Hyde v. Wrench, 3 Beav. 334, 337, to which Lord Denning M.R. has already referred; and, if anyone should have thought they were obsolescent, Megaw J. in Trollope & Colls Ltd. v. Atomic Power Construction Ltd. [1963] 1 W.L.R. 333, 337 called attention to the fact that those rules are still in force. When those rules are applied to this case, in my judgment, the answer He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. Such was British Road Services Ltd. v. Arthur V. Crutchley & Co. Ltd. [1968] 1 Lloyd's Rep. 271, 281-282, per Lord Pearson; and the illustra- is obvious. The sellers started by making an offer. That was in their quotation. The small print was headed by the following words : " General. All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the buyer's order." That offer was not accepted. The buyers were only prepared to have one of these very expensive machines on their own terms. Their terms had very material differences in them from the terms put forward by the sellers. They could not be reconciled in any way. In the language of article 7 of the Uniform Law on the Formation of Contracts for the International Sale of Goods (see Uniform Laws on International Sales Act 1967, Schedule 2) they did " materially alter the terms " set out in the offer made by the plaintiffs. As I understand Hyde v. Wrench, 3 Beav. 334, and the cases which have followed, the consequence of placing the order in that way, if I may adopt Megaw J.'s words [1963] 1 W.L.R. 333, 337, was " to kill the original offer." It follows that the court has to look at what happened after the buyers made their counter-offer. By letter dated June 4, 1969, the plaintiffs acknowledged receipt of the counter-offer, and they went on in this way : " Details of this order have been passed to our Halifax works for attention and a formal acknowledgment of order will follow in due course." That is clearly a reference to the printed tear-off slip which was at the bottom of the buyers' counter-offer. By letter dated June 5, 1969, the sales office manager at the plaintiffs' Halifax factory completed that tear-off slip and sent it back to the buyers. It is true, as Mr. Scott has reminded us, that the retum of that printed slip was accompanied by a letter which had this sentence in it: "This is being entered in accordance with our revised quotation of May 23 for delivery in 10/11 months." I agree with Lord Denning M.R. that in business sense, that refers to the quotation as to the price and the identity of the machine, and it does not bring into the contract the small print con- ditions on the back of the quotation. Those small print conditions had disappeared from the story. That was when the contract was made. At that date it was a fixed price contract without a price escalation clause. As I pointed out in the course of argument to Mr. Scott, if the letter of June 5 which accompanied the form acknowledging the terms which the buyers had specified had amounted to a counter-offer, then in my judgment the parties never were ad idem. It cannot be said that the buyers accepted the counter-offer by reason of the fact that ultimately they took physical delivery of the machine. By the time they took physical delivery of the machine, they had made it clear by correspondence that they were not accepting that there was any price escalation clause in any contract which they had made with the plaintiffs. I agree with Lord Denning M.R. that this appeal should bc allowed. BRIDGE L.J. Schedule 2 to the Uniform Laws on International Sales Act 1967 is headed " The Uniform Law on the Formation of Contracts for the International Sale of Goods." To the limited extent that that Schedule is already in force in the law of this country, it would not in any event be applicable to the contract which is the subject of this appeal because that was not a contract of international sale of goods as defined in that statute. We have heard, nevertheless, an interesting discussion on the question of the extent to which the terms of article 7 of that Schedule are mirrored in the common law of England today. No difficulty arises about paragraph 1 of the article, which provides : " An acceptance containing additions, limitations or other modifications shall be a rejection of the offer and shall constitute a counter-offer." But paragraph 2 of the article is in these terms : " However, a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance unless the offeror promptly objects to the discrepancy; if he does not so object, the terms of the contract shall be the terms of the offer with the modifica- tions contained in the acceptance." For my part, I consider it both unnecessary and undesirable to express any opinion on the question whether there is any difference between the principle expressed in that paragraph 2 and the principle which would prevail in the common law of England today without reference to that paragraph, but it was presumably a principle analogous to that expressed in paragraph 2 of article 7 which the editor of Anson's Law of Contract, 24th ed., Professor Guest, had in mind in the passage from that work which was quoted in the judgment of Lord Denning M.R. On any view, that passage goes a good deal further than the principle expressed in article 7 of the Act of 1967, and I entirely agree with Lord Denning M.R. that it goes too far. But when one turns from those interesting and abstruse areas of the law to the plain facts of this case, this case is nothing like the kind of case with which either the makers of the convention which embodied article 7 of Schedule 2 or the editor of Anson, 24th ed., had in mind in the passages referred to, because this is a case which on its facts is plainly governed by what I may call the classical doctrine that a counter-offer amounts to a rejection of an offer and puts an end to the effect of the offer. The first offer between the parties here was the plaintiff sellers' quotation dated May 23, 1969. The conditions of sale in the small print on the back of that document, as well as embodying the price variation clause, to which reference has been made in the judgments already delivered, embodied a number of other important conditions. There was a condition providing that orders should in no circumstances be cancelled without the written consent of the sellers and should only be cancelled on terms which indeiunified the sellers against loss. There was a condition that the sellers should not be liable for any loss or damage from delay however caused. There was a condition purporting to limit the sellers' liability for damage ue to defective workmaQnhip or materi~alsin the goods sold. And there was a condition providing that the buyers should be responsible for the cost of delivery. When one turns from that document to the buyers' order of May 27, 1969, it is perfectly clear not only that that order was a counter-offer but that it did not purport in any way to be an acceptance of the terms of the sellers' offer dated May 23. In addition, when one compares the terms and condi- tions of the buyers' offer, it is clear that they are in fact contrary in a nmber of vitaall important respects to thceconditbonsof s~alein thce sellers' offer. Amongst the buyers' proposed conditions are conditions that he prioc of the goods shall include the cost of delivery to the buyers' premses; that the buyers shall be entitled to cancel for any delay in delivery; and a condition giving the buyers a right to reject if on inspection the goods are found to be faulty in any respect. The position then was, when the sellers received the buyers' offer of May 27, that that was an offer open to them to accept or reject They replied in two letters dated June 4 and 5 respectively. The letter of June 4 was an informal acknowledgment of the order, and the letter of June 5 enclosed the formal acknowledgment, as Lord Denning M.R. and Lawton L.J. have said, embodied in the printed tear-off slip taken from the order itself and including the perfectly clear and unambiguous senteace " We accept your order on the terms and conditions stated thereon." On the face of it, at that moment of time, there was a complete contract in existence, and the parties were ad idem as to the terms of the contract embodied in the buyers' order. Mr. Scott has struggled manfully to say that the contract concluded on those terms and conditions was in some way overruled or varied by the references in the two letters dated June 4 and 5 to the quotation of May 23, 1969. The first refers to the machinery being as quoted on May 23. The second letter says that the order has been entered in accordance with the quotation of May 23. I agree with Lord Denning M.R. and Lawton W. that that language has no other effect than to identify the machinery and to refer to the prices quoted on May 23. But on any view, at its highest, the language is equivocal and wholly ineffective to override the plain and unequivocal terms of the printed acknowledgment of order which was enclosed with the letter of June 5. Even if that were not so and if Mr. Scott could show that the sellers' acknowledgment of the order was itself a further counter-offer, I suspect that he would be in considerable difficulties in showing that any later circumstance amounted to an acceptance of that counter-offer in the terms of the original quotation of May 23 by the buyers. But I do not consider that question further because I am content to rest upon the view that there is nothing in the letter of June 5 which overrides the plain effect of the acceptance of the order on the terms and conditions stated thereon. I too would allow the appeal and enter judgment for the defendants. Appeal allowed with costs in Court of Appeal and below. Leave to appeal refused. Solicitors: Tringhams for Harvey, Ingram, Leicester; Wood, Nash & Winter for Wilkinson, Woodward & Ludlam, Halifax. A. H. B. [HOUSE OF LORDS] BRINKIBON LTD. . . . . . . . . APPELLANTS AND STAHAG STAHL UND STAHLWARENHANDELS- GESELLSCHAFT m.b.H. . . . . . . RESPONDENTS 1981 Nov. 18, 19; Lord Wilberforce, Lord Russell of Killowen, 1982 Jan. 21 Lord Fraser of Tullybelton, Lord Bridge of Harwich and Lord Brandon of Oakwood Contract--Formation--Offer and acceptance--Telex communica- tion from London to Vienna--Alleged breach of contract-- Where contract made--Service of writ out of jurisdiction-- R. S. C., Ord. 11, r. 1 (1) (f) (g) B, an English company, sought leave under R.S.C., Ord. 11, r. 1 (1) to issue a writ against S., an Austrian company, and serve notice of it on them in Austria. The proposed action was for breach of a contract which was made (if at all) either by a telex communication from B. in London to S. in Vienna, accepting a counter-offer made by S., or else by acceptance : of the counter-offer by conduct in instructions given by B. to their bankers in the United Kingdom to open a letter of credit in Switzerland in favour of S. Further, it was alleged that there had been repudiation and breach of contract by S. within the jurisdiction. Mocatta J. held that the contract had been " made within the jurisdiction " within R.S.C., Ord. 11, r. 1 (1) (f) and gave leave thereunder but refused leave under pamgraph (g) on the ground that the breach and repudiation occurred in Austria. The Court of Appeal, holding that the contract was made in Austria, reversed his decision to grant leave. On appeal by B.:-- Held, dismissing the appeal, that the acceptance by telex from London to Vienna caused the contract to be made in Vienna since, according to the general rule, instantaneous communication between principals involved that the contract (if any) was made when and where the acceptance was received (post, pp. 266F--H, 267C--D, 268O-H, 269A--D, 273E-G). Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327, C.A. applied. Per curiam. In telex communications the senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The measage may not reach, or be intended to reach, the designated recipient immediately; it may be sent out of office hours or at night on the assumption that it will be read at a later time. Error or default at the recipient's end may prevent receipt at the time contemplated and believed in by the sender. The message may be sent and/or received through machines opemted by third persons. No universal rule can cover all such cases, which must be resolved by reference to the intentions of the parties, sound business practice and in some cases by a judgment where the risks should lie (post, pp. 267E--G, 269A--D, 275A). Held, further, that the steps taken by B. to set up a letter of credit did not amount to acceptance of the counter-offer within the jurisdiction (post, pp. 268B, 272G--H); and that the alleged breach relied on occurred outside the jurisdiction (post, pp. 268c, 274G--H). Decision of the Court of Appeal [1980] 2 Lloyd's Rep. 556 affirmed. The following cases are referred to in their Lordships' opinions: Adam v. Lindsell (1818) 1 B. & Ald. 681. Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A. Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327; [1955] 3 W.L.R. 48; [1955] 2 All E.R. 493, C.A. Henthorn v. Fraser [1892] 2 Ch. 27, C.A. Household Fire and Carriage A ccident Insurance Co. Ltd. v. Grant (1879) 4 Ex.D. 216, C.A. Imperial Land Co. Ltd. of Marseilles, In re (Harris' Case) (1872) L.R. 7 Ch.App. 587. The following additional cases were cited in argument: Bennett v. Cosgriff (1878) 38 L.T. 177. Brimnes, The [1973] 1 W.L.R. 386; [1973] 1 All E.R. 769; [1975] Q.B. 929; [1974] 3 W.L.R. 613; [1974] 3 All E.R. 88, C.A. Cowan v. O'Connor (1888) 20 Q.B.D. 640, D.C. Dunlop v. Higgins (1848) 1 H.L.Cas. 381, H.L.(Sc.). Evans v. Nicholson (No. 2) (1875) 32 L.T. 778. Inland Revenue Commissioners v. Muller & Co.'s Margarine Ltd. [1901] A.C. 217, H.L.(E.). Joseph v. Krull Wholesale Drug Co. (1956) 147 F-Supp. 250. Martin v. Stout [1925] A.C. 359, P.C. Newcomb v. De Roos (1859) 1 El. & El. 271. Tel Peda Investigation Bureau (Pty.) Ltd. v. van Zyl [1965] (1) S.A. 702. United States v. Bushwick Mills Inc. (1947) 165 F. 2d 198. APPEAL from the Court of Appeal. This was an appeal by the appellants, Brinkibon Ltd., by leave of the House of Lords from an order of the Court of Appeal (Stephenson and Templeman L.JJ.) dated June 12, 1980, reversing a decision of Mocatta. J. dated March 11, 1980, discharging an order of Robert Goff J. dated November 30. 1979, whereby leave had been granted to the appel- lants, to serve notice of a writ on the respondents, Stahag Stahl und Stahlwarenhandelsgesellschaft m.b.H., in Austria under the provisions of R.S.C.. Ord. 11, r. 1 (1) (f) and (g) on the grounds that a contract between the parties had been made in England and further that a breach of the contract had occurred in England. The facts are stated in the opinions of Lord Wilberforce and Lord Brandon of Oakbrook. Anthony Thompson Q.C. and Alastair MacGregor for the appellants. Nicholas Phillips Q.C. and Martin White for the respondents. Their Lordships took time for consideration. January 21, 1982. LORD WILBERFORCE. My Lords, the appellants desire to sue in this country the respondents, an Austrian company, for breach of an alleged contract for the supply of steel. In order to do so, they must obtain leave to serve notice of their writ upon the respon- dents under one or other of the provisions of R.S.C., Ord. 11, r. 1 (1). Those relied upon are paragraphs (f) and (g). To satisfy (f), the appel- lants must show that the contmct was " made within the jurisdiction ": to come within (g) they must establish that the action is in respect of a breach committed within the jurisdiction. The Court of Appeal has decided against the appellants under both paragraphs. 'The question whether a contract was made within the jurisdiction will often admit of a simple answer: if both parties are in England at the time of making it, or if it is contained in a single document signed by both parties in England, there is no difficulty. But in the case of con- tracts involving negotiations, where one party is abroad, the answer may be difficult to find. Sophisticated analysis may be required to decide when the last counter-offer was made into a contract by acceptance, or at what point a clear consensus was reached and by virtue of what words spoken or of what conduct. In the case of successive telephone conver- sations it may indeed be most artificial to ask where the contmct was made: if one asked the parties, they might say they did not know--or care. The place of making a contract is usually irrelevant as regards validity, or interpretation, or enforcement. Unfortunately it remains in Order 11 as a test for purposes of jurisdiction, and courts have to do their best with it. In the present case it seems that if there was a contract (a question which can only be decided at the trial), it was preceded by and possibly formed by a number of telephone conversations and telexes between London and Vienna, and there are a number of possible combinations upon which reliance can be placed. At this stage we must take the alternatives which provide reasonable evidence of a contract in order to see if the test is satisfied. There are two: (i) A telex dated May 3, 1979, from the respondents in Vienna, said to amount to a counter-offer, followed by a telex from the appellants in London to the respondents in Vienna dated May 4, 1979, said to amount to an acceptance. (ii) The above telex dated May 3, 1979, from the respondents followed by action, by way of opening a letter of credit, said to have amounted to an acceptance by conduct. The first of these alternatives neatly raises the question whether an acceptance by telex sent from London but received in Vienna causes a contract to be made in London, or in Vienna. If the acceptance had been sent by post. or by telegram, then, on existing authorities, it would have been complete when put into the hands of the post office--in London. If on the other hand it had been telephoned, it would have been complete when heard by the offeror--in Vienna. So in which category is a telex communication to be placed? Existing authority of the Court of Appeal decides in favour of the latter category, i.e. a telex is to be assimilated to other methods of instantaneous communication : see Entores Ltd. v. Miles Far Eat Corporation [1955] 2 Q.B. 327. The appellants ask that this case, which has stood for 30 years, should now be reviewed. Now such review as is necessary must be made against the back- ground of the law as to the making of contracts. The general rule, it is hardly necessary to state, is that a contract is formed when acceptance f an offer is coommnicated -y the offeree to the offeror. And if it is necessary to determine where a contract is formed (as to which I have already commented) it appears logical that this should be at the place where acceptance is communicated to the offeror. In the common case of contracts, whether oral or in writing inter praesentes, there is no difficulty; and again logic demands that even where there is not mutual presence at the same place and at the same time, if communication is instantaneous, for example by telephone or radio communication, the same result should follow. Then there is the case--very common--of communication at a dis- tance to meet which the so called " postal rule " has developed. I need not trace its history: it has firmly been in the law at least since Adam v. Lindsell (1818) 1 B. & Ald. 681. The rationale for it, if left somewhat obscure by Lord Ellenborough C.J., has since been well explained. Mellish L.J. in In re Imperial Land Co. of Marseilles (Harris' Case) (1872) L.R. 7 Ch.App. 587, 594 ascribed it to the extraordinary and mis- chievous consequences which would follow if it were held that an offer might be revoked at any time until the letter accepting it had been actually received: and its foundation in convenience was restated by Thesiger L.J. in Household Fire and Carriage Accident Insurance Co. Ltd. v. Grant (1879) 4 Ex.D. 216, 223. In these cases too it seems logical to say that the place, as well as the time, of acceptance should be where (as when) the acceptance is put into the charge of the post office. In this situation, with a general rule covering instantaneous communi- cation inter praesentes, or at a distance, with an exception applying to non-instantaneous communication at a distance, how should communi- cations by telex be categorised? In Entores Ltd. v. Miles Far East orporation [955] 2 Q.B. 327 the Court of Appeal classified them with instantaneous communications. Their ruling, which has passed into the textbooks, including Williston on Contracts, 3rd ed. (1957) appears not to have caused either adverse comment, or any difficulty to business men. I would accept it as a general rule. Where the condition of simultaneity is met, and where it appears to be within the mutual intention of the parties that contractual exchanges should take place in this way, I think it a sound rule, but not necessarily a universal rule. Since 1955 the use of telex communication has been greatly expanded, and there are many variants on it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or upon the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie : see Household Fire and Carriage Accident Insurance Co. Ltd. v. Grant (1879) 4 Ex.D. 216, 227 per Baggallay L.J. and Henthorn v. Fraser [1892] 2 Ch. 27 per Lord Herschell. The present case is, as Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327 itself, the simple case of instantaneous communication between principals, and, in accordance with the general rule, involves that the contract (if any) was made when and where the acceptance was received. This was on May 3, 1979, in Vienna. The alternative argument under this head was that the contract was made by an offer made from Vienna (as above, on May 3, 1979) and an acceptance by conduct in the United Kingdom. The conduct relied upon was the giving of instructions by the appellants to set up a letter of credit, as requested in the respondents' telex of May 3, 1979. The appellants' telex of May 4, 1979, opened with the words " confirm having opened our irrevocable letter of credit No. 0761/79 on account of Mide- strade Est., Chiasso, Switzerland . . ." Midestrade Est. is, it appears, the company behind the appellants--a fact which raises the question whether a letter of credit on their account satisfied the terms of the respondents request. I need not come to a conclusion on this point because I am satisfied that the letter of credit was not opened in the United Kingdom. Instructions were indeed given by the appellants to their bank in the United Kingdom to open it, and that bank gave instructions on May 4, 1979, to their correspondent in Vienna, but these steps were between the appellants and their agents only. They could not amount, in my opinion, to an acceptance of the offer of May 3, 1979. This took place, if at all, when the correspondent bank in Vienna notified the respondents: this they did in Vienna. On neither ground, therefore, can it be said that the contract was made within the jurisdiction and the case under subparagraph (f) must fail. That under subparagraph (g) can be more shortly dealt with. The breach pleaded is that the defendants (respondents) " have not opened a performance bond and have delivered no steel" (points of claim para- graph 7). Each of these acts should have been performed outside the jurisdiction and failure to do them must be similarly located. On both points, therefore, I find myself in agreement with the Court of Appeal, and the appeal must be dismissed. LORD FRASER OF TULLYBELTON. My Lords, I am in full agreement with the reasoning of my noble and learned friends, Lord Wilberforce and Lord Brandon of Oakbrook. I wish only to add a comment on the subject of where a contract is made, when it is made by an offer accepted by telex between parties in different countries. The question is whether acceptance by telex falls within the general rule that it requires to be notified to the offeror in order to be binding, or within the exception of the postal rule whereby it becomes binding when (and where) it is handed over to the post office. The posting rule is based on considerations of practical convenience, arising from the delay that is inevitable in deliver- ing a letter. But it has been extended to apply to telegrams sent through the post office, and in strict logic there is much to be said for applying it also to telex messages sent by one business firm directly to another. There is very little, if any, difference in the mechanics of transmission between a private telex from one business office to another, and a tele- gram sent through the post office--especially one sent from one large city to another. Even the element of delay will not be greatly different in the typical case where the operator of the recipient's telex is a clerk with no authority to conclude contracts, who has to hand it to his prin- cipal. In such a case a telex message is not in fast received instan- taneously by the responsible principal. I assume that the present case is a case of that sort. Nevertheless I have reached the opinion that, on balance, an acceptance sent by telex directly from the acceptor's office to the offeror's office should be treated as if it were an instantaneous communication between principals, like a telephone conversation. One reason is that the decision to that effect in Entores v. Miles Far East Corporation [1955] 2 Q.B. 327 seems to have worked without leading to serious difficulty or complaint from the business community. Secondly, once the message has been received on the offeror's telex machine, it is not unreasonable to treat it as delivered to the principal offeror, because it is his responsibility to arrange for prompt handling of messages within his own office. Thirdly, a party (the acceptor) who tries to send a message by telex can generally tell if his message has not been received on the other party's (the offeror's) machine, whereas the offeror, of course, will not know if an unsuccessful attempt has been made to send an acceptance to him. It is therefore convenient that the acceptor, being in the better position, should have the responsibility of ensuring that his message is received. For these reasons I think it is right that in the ordinary simple case, such as I take this to be, the general rule and not the postal rule should apply. But I agree with both my noble and learned friends that the general rule will not cover all the many variations that may occur with telex messages. LORD RUSSEL OF KILLOWEN. My Lords, I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Wilberforce and Lord Brandon of Oakbrook. I agree with them and accordingly I too would dismiss this appeal. LORD BRIDGE OF HARWICH. My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Wilberforce and Lord Brandon of Oakbrook. I agree with them that, for the reasons they give, this appeal should be dismissed. LORD BRANDON OF OAKBROOK. My Lords, both the appellants (whom I shall call " the buyers ") and the respondents (whom I shall call "the sellers ") are traders in steel. The buyers are an English company. The sellers are an Austrian company, having no place of business in England or Wales. It is common ground between the buyers and the sellers that early in May 1979, following negotiations which began in April 1979, an executory contract was made between them for the sale by the sellers to the buyers of a quantity of mild steel bars. It is further common ground that, in circumstances which I shall explain later, that executory contract (which I shall call " the contract ") was never performed. On November 30, 1979, a considerable time after performance of the contract should, according to its terms, have been completed, the buyers applied ex parte to robert Goff J. in the Commercial COurt for leave to issue a writ against the sellers claiming damages for breach of the contract and to serve notice of such writ on the sellers out of the juris- diction in Austria. The application was supported by an affidavit of Mr. Jackson a partner in the firm of solicitors acting for the buyers, and the learned judge made the order which he was asked to make. Pursuant to that order, the buyers issued a writ against the sellers indorsed on the back with points of claim, and served notice of such writ on the sellers in Austria. On March 11, 1980, Mocatta J. in the Commercial Court dismissed an application by the sellers, who had meanwhile entered a conditional appearance in the action, to set aside the service on them of notice of the writ in Austria. The sellers appeared against the decision of Mocatta J. and by order of June 12, 1980, the Court of Appeal (Stephenson and Templeman L.JJ.) allowed the appeal and set aside both the order of Robert Goff J. of November 30, 1979, and that of Mocatta J. of March 11, 1980. The Court of Appeal refused an application by the buyers to present a petition of appeal to your Lordships' House, but leave for them to do so was later given by the Appeal Committee. There are two grounds on which the buyers relied in the courts below, and continued to rely in your Lordships' House, for their contention that this was a proper case for service out of the jurisdiction in Austria under R.S.C., Ord. 11, r. 1 (1). The first ground was that the case came within paragraph (f) of rule 1 (1) because the action begun by the writ was brought against the sellers to recover damages in respect of a contract which was made in England. The second ground was that the case came within paragraph (g) of rule 1 (1) because the action begun by the writ was brought against the sellers in respect of a breach of contract committed in England. Robert Goff J. appears to have acccepted both grounds. Mocatta J. accepted the first ground but rejected the second. The Court of Appeal rejected both grounds. My Lords, the negotiations between the parties which led up to the making of the contmct were conducted, in the main at any rate, by telex. I say " in the main " because there is some evidence, contained in the affidavit of Mr. Jackson, to which I referred earlier, that there were also some telephone conversations between representatives of the parties relating to the matter. There was, however, no evidence to show what was said in the course of any such telephone conversations and no significance can therefore be attached to them. There were six telexes leading up to making of the contract : four from the buyers to the sellers, sent on April 20, April 23, April 26 and May 4, 1979; and two from the sellers to the buyers sent on April 25, and May 3, 1979. In the course of these telexes the principal terms of the contract were agreed as follows. First, the goods to be sold were to be 20,000 metric tons of mild steel bars of four different sizes. Secondly, the goods were to be delivered c. & f. Alexandria on liner terms. Thirdly, the price was to be U.S.$353 per metric ton. Fourthly, the goods were to be shipped in five sepa- rate instalments, each of 4,000 metric tons, in June, July, August, September and October 1979. Fifthly, payment of the price of each of the five instal- ments, namely, U.S.$1,412,000, was to be made by means of a letter of credit, revolving four times, which was to be operative at a named bank in Vienna. Sixthly, the following documents were to be presented against the letter of credit: a commercial invoice; a full set of clean bills of lading; a certificate of origin legalised by the Egyptian embassy or consulate; a blacklist certificate of the shipping company; a works certificate indicating the mechanical properties of the steel and that the bars were manufactured according to British Standard Specification 4449/1969. Seventhly, the sellers were to provide a performance bond based on a percentage of the total price of U.S.$7,060,000. With regard to this the buyers first proposed that the percentage should be 5 per cent., but the sellers made a counter- proposal of 3 per cent. which, since the buyers made no objection to it, appears to have been impliedly accepted by them. Eighthly, if the freight rates were to increase for the shipments in September and October the the proposal came first from the sellers and, since the buyers made no objection to it, appears again to have been impliedly accepted by them. In their telex of May 3, 1979, the sellers named the Zentralsparkasse der Gemeinde bank in Vienna as the bank at which the buyers' letter of credit was to be operative. Following receipt of that telex the buyers, on ay 4, 1979, gave instructions to th~ei London bank, as a re~sul of w~hic the latter sent to Osterreichischt Landerbank, their correspondent bank in Vienna, a long telex which amounted either to a letter of credit, or at any rate to notice of a letter of credit, opened by a Swiss firm, Midestrade Est, of Chiasso, in favour of the sellers in respect of the prices payable for the five instalments of steel bars the subject matter of the contract. In the last paragraph but one of that telex the buyers' London bank said: " This telex advice should be considered as a negotiable instrument. Please advise the above credit through Zentralsparkasse der Gemeinde, Wien, Vienna. Please also advise the beneficiaries about the arrival of credit on telephone." After giving those instructions to their London bank, the buyers on the same day, May 4, 1979, sent to the sellers a telex in these terms: " Confirm having opened our irrevocable letter of credit No. 0761/79 on account of Midestrade Est., Chiasso, Switzerland, favouring your- selves for U.S. dlrs. 1,142,000 covering shipment of 4,000 m. tons rebars stop the credit is to revolve four times covering total shipment of 20,000 m. tons stop this credit has been advised through Osterreichische Landerbank (Wien)." Midestrade Est. of Chiasso in Switzerland were in fact principals on whose behalf the buyers, throughout their negotiations with the sellers, were acting as agents. The mention, however, of that Swiss firm's name in the telexed letter of credit sent by the buyers' London bank to their corres- pondent bank in Vienna, and in the telex from the buyers to the sellers set out above, constituted the first intimation to the sellers that a third party was involved in the contract on the buyers' side the letter of credit was unworkable and that it had been opened in the name not of the buyers but of a Swiss firm of whom the sellers knew nothing. On May 21, 1979, the sellers sent a further telex to the buyers in which they said, in effect, that they were withdrawing from the contmct on the ground that they had not had opened in their favour a proper letter of credit under it. Further telexes were exchanged in which the buyers sought to persuade the sellers to change their minds and go on with the contract, but these efforts all failed. The result accordingly was that the contract was never performed. My Lords, I shall consider first the buyers' contention that the case comes within paragraph (f) of R.S.C., Ord. 11, r. 1 (1), because the action begun by the writ was brought against the sellers to recover damages in respect of a contract which was made in England. In order to examine that contention it is necessary to consider the question when and where the negotiations between the buyer and the seller resulted in what both parties agree they did result in, namely, a concluded contract of sale. In Mr. Jackson's affidavit of November 21, 1979, in support of the buyers' ex parte application to Robert Goff J. he stated in paragraph 4 that the contract came into being as the result of an offer by the buyers, contained in a telex sent by them to the sellers on April 26, 1979, being accepted by a telex sent by the sellers to the buyers on May 3, 1979. The manner in which the contract was made was pleaded in the same way in paragraph 4 of the buyers' points of claim indorsed on the back of the writ Examination of the two telexes concerned does not support the buyers, original case on how the contract was concluded. The buyers' telex of April 26, 1979, is capable of being interpreted as an offer, but the sellers' telex of May 3, 1979, cannot be interpreted as an acceptance of such offer, because it introduced terms which differed materially from those contained in the latter. In particular, the buyers in their telex of April 26, 1979, proposed a performance bond of 5 per cent. on the total purchase price, whereas the sellers in their telex of May 3, 1979, specified a performance bond of 3 per cent. The sellers further introduced an entirely new term, under which the buyers were to pay to the sellers any increase in freight charges in respect of the September and October shipments. In these circumstances the sellers' telex of May 3 must, in accordance with well-established principles of the law of contract, be interpreted not as an acceptance of the buyers' offer but as a counter-offer. In your Lordships' House, Mr. Thompson Q.C. for the buyers accepted, as I understood him, that the way in which the contract was said to have been made, first, in paragraph 4 of Mr. Jackson's affidavit and, secondly, in paragraph 4 of the buyers' points of claim, could not be supported. He recognised that the sellers' telex of May 3, had to be interpreted as a counter-offer, and he put forward two alternative cases as to the manner in which that counter-offer was accepted by the buyers, either of which would, he said, produce the same result, namely, that acceptance took place, and the contract was therefore made, in England. Mr. Thompson's first contention was that the sellers' counter-offer contained in their telex of May 3, 1979, was accepted by the buyers by their conduct on May 4, 1979, in instructing their London bank to open the required letter of credit operative in Vienna. His second and alternative contention was that the counter-offer was accepted by the buyers sending to the sellers their telex of May 4, 1979, which I quoted in full above. In support of the first contention Mr. Thompson argued that the conduct of the buyers in giving the instructions concerned to their London bank took place in England, and that, since that conduct had the effect of concluding the contract the contract was one made in England for the purposes of paragraph (f) of R.S.C., Ord. 11, r. 1 (1). In support of his second and alternative contention, Mr. Thompson argued that, since the buyers' telex of May 4, which resulted in the con- cluding of the contract, was sent by a representative of the buyers in London, once again the contract was one made in England for the purposes of paragraph (f) above. My Lords, I do not consider that Mr. Thompson's first contention, that the contract was concluded by the conduct of the buyers on May 4, 1979, in giving instructions to their London bank can possibly be right. It may be that when as a result of those instructions, a letter of credit was opened operative at a bank in Vienna, and the sellers were then notified of that fact by that bank, such notification had the effect of bringing into being a concluded contract on the terms of the sellers' telex of May 3, 1979. But the proposition that the mere giving by the buyers to their London bank of the instructions concerned, without any notification to the sellers of the fact that such instructions had been given, or of their nature and effect, could result in bringing into being a concluded contract appears to me to be quite untenable. On the other hand, if the contract was concluded as a result of a letter of credit operative at a bank in Vienna being opened, and the bank conceded then notifying the sellers of such opening, the contract so concluded would be one made in Austria and not in England. Mr. Thompson's second and alternative case, that the contract was concluded by the buyers transmitting to the sellers their telex of May 4, 1979, seems to me to be the correct analysis of the transaction. On this analysis, however, the buyers are up against the difficulty that it was decided by the Court of Appeal in Entores Ltd. Milers Far East Corpora- tion [1955] 2 Q.B. 327 that, when an offer is accepted by telex, the contract thereby made is to be regarded as having been so made at the place where such telex was received (in this case Vienna) and not in the place from which such telex was sent (in this case London). Mr. Thompson invited your Lordships to hold the Entores case was wrongly decided and should therefore be overruled. In this connection he said that it was well-established law that, when acceptance of an offer was notified to an offeror by post or telegram, the concluding of the contract took place when and where the letter of acceptance was posted or the telegram of acceptance was despatched. He then argued that the same rule should apply to cases where the acceptance of an offer was com- municated by telex, with the consequence that the contract so made should be regarded as having been made at the place from which the telex was sent and not the place where it was received. My Lords, I am not persuaded that the Entores case [1955] 2 Q.B. 327, was wrongly decided and should therefore be overruled. On the contrary I think that it was rightly decided and should be approved. The general principle of law applicable to the formation of a contract by offer and acceptance is that the acceptance of the offer by the offeree must be notified to the offeror before a contract can be regarded as concluded, Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, 262, per Lindley L.J. The cases on acceptance by letter and telegram constitute an exception to the general principle of the law of contract stated above. The reason for the exception is commercial expediencey: see, for example, Imperial Land Co. of Marseilles, In re (Harris' Case) (1872) L.R 7 Ch.App. 587, 692 per Mellish L.J. That reason of commercial expediency applies to cases where there is bound to be a substantial interval between the time when the acceptance is sent and the time when it is received. In such cases the exception to the general rule is more convenient, and makes on the whole or greatEr fairness, than the general rule itself would do. In my opinion, however, that reason of commercial expediency does not have any app~- cation when the means of communication employed between the offeror and the offeree is instantaneous in nature, as is the case when either the telephone or telex is used. In such cases the general principle relating to the formation of contracts remains applicable, with the result that the contract is made where and when the telex of acceptance is received by the offeror. It follows from what I have said that, in my opinion, Mr. Thompson's contention that the present case falls within paragraph (f) of R.S.C., Ord. 11, r. 1 (1), fails and must be rejected. I tumrnto examine Mr. Thompson's otbhr contention that the present case falls within paragraph (g) of R.S.C., Ord. 11, r. 1 (1). In order to do this it is necessary to consider first what is the breach of the contract in respect of which the buyers' action against the sellers was brought, and then to see whether such breach, assuming that it was committed, took place within or outside the jurisdiction. This part of the case appears to have been conducted by both sides at every stage in the courts below as if the breach of the contract in respect of which the buyers' action was brought consisted of an anticipatory breach in the form of a repudiation of the contract contained in the sellers telexes of May 9 and 21, 1979. As a result the question considered in the courts below was whether such repudiation took place in the country from which Vol. 2 the telexes concemed were sent, namely, Austria, or in the country in which they were received, namely, England. Both Mocatta J. and the Court of Appeal took the view that the repudiation, and therefore the relevant breach of the contract, took place in Austria, the country from which the telexes concerned were sent. In my view both sides, in conducting this part of the case on the basis described above, were acting under a complete misapprehension as to what was the breach of the contract in respect of which the buyers' action was brought. That this is so becomes immediately apparent from the terms of paragraphs 6, 7 and 8 of the points of claim indorsed on the back of the writ. Assuming, in favour of the buyers, that the sellers, by sending their telexes of May 9 and 21, repudiated the contract, a situation then arose in which the buyers were entitled to elect between two courses. They could either accept the repudiation and treat the contract as at an end; or they could decline to accept the repudiation and treat the contract as still subsisting. It is clear that, in that situation, the buyers elected to follow the second course and not the first. I say that that is clear for four reasons. First, there is nowhere to be found in the documents put in evidence any telex or letter from the buyers to the sellers indicating that the former accepted the repudiation of the contract by the latter. Secondly, though reference is made in paragraph 6 of the buyers' points of claim to the sellers' two telexes of May 9 and 21, 1979, it is nowhere pleaded either that the sending of those telexes constituted a repudiation of the contract by the sellers, or that the buyers elected to accept such repudiation and treat the contract as at an end. Thirdly, the breach of the contract in fact pleaded in para- graph 7 of the points of claiin is simply a failure by the sellers to perform the contract by opening a performance bond and delivering the steel. Fourthly, the damage alleged to have been suffered by the buyers in paragraph 8 of the points of claim is damage calculated by reference to the difference between the market and the contract prices of the steel at the time when the five instalments should, on the footing that the contract remained in force, have been delivered to the buyers. Having regard to these matters the question to be considered in relation to paragraph (8) of R.S.C., Ord. 11, r. 1 (1) is not in what country did any alleged anticipatory repudiation of the contract by the sellers take place. The question is rather whether the sellers, on the assumption that they failed to perform any part of their obligations under the contract, thereby committed any breach of the contract in England. There is no difficulty in giving a negative answer to that question, for it has never been suggested that any part of the contract to be performed by the sellers was to be performed anywhere except outside the jurisdiction. It follows from what I have said that, in my opinion, Mr. Thompson's contention that the present case falls within paragraph (g) of R.S.C., Ord. 11, r. 1 (1) also fails and must be rejected. My Lords, for the reasons which I have given, I would affirm the decision of the Court of Appeal, though on different grounds in relation to paragraph (g), and dismiss the appeal. Since preparing this speech I have had the advantage of reading in draft that of my noble and learned friend, Lord Wilberforce. In it he points out that, while the present case, like the Entores case [1955] 2 Q.B. 327, is concerned only with instantaneous communication by telex between the principals on either side, there may in other cases be a number of variations on that simple theme. He further expresses the view that there can be no general rule capable of covering all such variations, and that, when they occur, the problems posed by them must be resolved by reference to the intention of the parties, sound business practice and in some cases a judgment where the risk shall lie. I agree entirely with these observations. Appeal dismissed. Solicitors: Heald & Nickinson; Linklaters & paines. F. C. [HOUSE OF LORDS] SUDBROOK TRADING ESTATE LTD. . . . APPELLANTS AND EGGLETON AND OTHERS . . . . . . RESPONDENTS [1980 S. No. 113] 1982 March 23, 24, 25, 29; Lord Diplock, Lord Fraser of July 8 Tullybelton, Lord Russell of Killowen, Lord Scarman and Lord Bridge of Harwich Landlord and Tenant--Option to purchase --Price at valuation-- Lessees' option to purchase reversion in fee simple at price agreed by parties, valuers--Lessors refusing to appoint valuer --Whether power in court to order appointment of valuer or specific performance--Whether enforceable contract to pur- chase at fair price By four separate leases made in 1949, 1955, 1966 and 1968 four adjacent industrial premises were demised for various terms of years all expiring on December 24, 1997. By clause 9 of the lease dated November 18, 1955, the lessees were granted an option, on giving to the lessors notice in writing of their desire " to purchase the reversion in fee simple in the premises hereby demised . . . at such price not being less than #12,000 as may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessee and in default of such agreement by an umpire appointed by the . . . valuers." The other leases contained option clauses in identical terms, save as to the minimum price. The lessees exercised their options to purchase the reversions but the lessors refused to appoint a valuer. The lessees sought declarations, inter alia, that upon the true construction of the leases the option clauses conferred upon them valid options to purchase the reversions in fee simple at a valuation and that those options had been validly exercised and for an order for specific performance. Lawson J. declared that the options were valid and had been properly exercised. On the lessors appeal, the Court of Appeal held that, since the agreement was one where the parties had agreed the machinery for ascertaining the option price, the parties had come to an agreement to agree and that, since it was a well established principle that a court could neither compel a party to appoint a valuer nor order specific performance of an incomplete agreement, the court could not intervene to impose terms upon the lessors to make a contract to which they had not agreed and the options were unenforceable. On appeal by the lessees: -- Held, allowing the appeal (Lord Russell of Killowen dissenting), that on its true construction, the agreement was for sale at a fair and reasonable price and once the options had been exercised in accordance with the necessary preconditions, since the price was capable of being ascertained and was there- fore certain, a complete contract for the sale and purchase of the freehold reversion was constituted; that as the price was to be ascertained by the application of objective standards constituting a subsidiary and non-essential part of the contract, the court would, if the machinery broke down for any reason, price (post 321G--322B 324D--E 325H--326D, E, 329H-- 330C, D--F); and that accordingly, since the options had been validly exercised the contracts constituted by their exercise should be specifically performed, and an inquiry as to the fair valuation of the reversion and title of the lessors to the free- hold should be held and conveyances made to the lessees. if necessary, by the court (post, pp. 322F, H--323B, 328E--F. 330D--F). Agar v. Macklew (1825) 2 Sim. & St. 41B and Vickers v. Vickers (1867) L.T. 4 Eq. 529 overruled. Milnes v. Gery (1807) 14 Ves. Jun. 400 considered. Decision of the Court of Appeal [1981] 3 W.L.R. 361; [1981] 3 All E.R. 105 reversed. The following cases are referred to in their Lordships' opinions : Agar v. Macklew (1825) 2 Sim. & St. 418. Beer v. Bowden (Note) [1981] 1 W.L.R. 522; [1981] 1 All E.R. 1070, C.A. Dinham v. Bradford (1869) L.R. 5 Ch.App. 519. Gregory v. Mighell (1811) 18 Ves. Jun. 328. Hall v. Warren (1804) 9 Ves. Jun. 605. May and Butcher Ltd. v. The King [1934] 2 K.B. 17, (Note) H.L.(E.). Milnes v. Gery (1807) 14 Ves. Jun. 400. Practice Statement (Judicial Precedent) [1966] 1 W.L.R. 1234; [1966] 3 All E.R. 77, H.L.(E.). Richardson v. Smith (1870) L.R. 5 Ch.App. 648. Selkirk (Earl of) v. Nasmith (1778) Mor. 627. Smith v. Peters (1875) L.R. 20 Eq. 511. Talbot v. Talbot [1968] Ch. 1; [1967] 3 W.L.R. 438; [1967] 2 All E.R. 920, C.A. Vickers v. Vickers (1867) L.R. 4 Eq. 529. The following additional cases were cited in argument: Baker v. Metropolitan Railway Co. (1862) 31 Beav. 504. Bates (Thomas) and Son Ltd. v. Wyndham's (Lingerie) Ltd. [1981] 1 W.L.R. 505; [1981] 1 All E.R. 1077, C.A. Blundell v. Brettargh (1810) 17 Ves. Jun. 232. Brown v. Gould [1972] Ch. 53; [1971] 3 W.L.R. 334; [1971] 2 All E.R. 1505. Chillingworth v. Esche [1924] 1 Ch. 97, C.A. Collins v. Collins (1858) 26 Beav. 306. Courtney & Fairbairn Ltd. v. Tolaini Brothers (Hotels) Ltd. [1975] 1 W.L.R. 297; [1975] 1 All E.R. 716, C.A. Darbey v. Whitaker (1857) 4 Drew. 134. George v. Roach (1942) 67 C.L.R. 253. Gourlay v. Duke of Somerset (1815) 19 Ves. Jun. 429. Hart v. Hart (1881) 18 Ch.D. 670. Hunt v. Wilson [1978] 2 N.Z.L.R. 261. Morgan v. Milman (1853) 3 De G.M. & G. 24. Perrin v. Morgan [1943] A.C. 399; [1943] 1 All E.R. 187, H.L.(Sc.). Rees v. Johnson (1884) 3 N.Z.L.R. 1, S.C. Smith & Service and Nelson & Son, In re (1890) 25 Q.B.D. 545, C.A. South Wales Railway Co. v. Wythes (1854) 5 De G.M. & G. 880. Tito v. Waddell (No. 2) [1977] Ch. 106; [1977] 2 W.L.R. 496; [1977] 3 All E.R. 129. White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413; [1962] 2 W.L.R. 17; [1961] 3 All E.R. 1178, H.L.(Sc.). Wilks v. Davis (1817) 3 Mer. 507. APPEAL from the Court of Appeal. This was an appeal by leave of the House of Lords from an order of the Court of Appeal (Cumming-Bruce, Templeman and Oliver L.JJ.) dated March 17, 1981, and raised the question for decision whether the options granted to the appellant lessees, Sudbrook Trading Estate Ltd., in four leases to purchase the respective freehold reversions owned by the respon- dent lessors, William Vernon Eggleton, Thomas H. D. Keck and Alan G. Keddie, as trustees, upon certain conditions were valid and enforceable. Lawton J. held that they were but the Court of Appeal reversed his decision. The facts are set out in the opinion of Lord Diplock. P. J. Millett Q.C. and Martin Roth for the appellant lessees. E. G. Nugee Q.C. and Roger kaye for the respondent lessors. Their Lordships took time for consideration. July 8. LORD DIPLOCK. My Lords, the appellants are lessees of four adjacent industrial premises in Gloucester under four separate leases entered into in 1949, 1955, 1966 and 1968 respectively for various terms of years all of which expire on the same date, viz., December 24, 1997. Each lease contained a clause in identical terms, save as to the minimum purchase price, which purported to confer upon the lessees an option to purchase the freehold reversion to the premises from the lessors of whom the respondents, who are trustees, are the successors in title. These option clauses were in the following terms which are taken from the 1955 lease and the words upon which the instant appeal will turn are italicised: " And it is hereby agreed and declared . . . 9. That if the lessees shall desire to purchase the reversion in fee simple in the premises hereby demised and having paid all rent then due and duly performed and observed the covenants and conditions on their part herein contained shall at any time not later than six months before the expiration of the said term but after the expiration of the first 21 years thereof and during the life of the survivor of the lessors children Susan Margaret Keck Valerie Josephine Keck Rosemary Veronica Keck and Jeremy Hamilton Halls Keck give to the lessor notice in writing to that effect the lessees shall be the purchasers of such reversion as from the date of such notice at such price not being less than #12,000 & may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessees or in default of such agreement by an umpire appointed by the said valuers subject to the conditions following namely: -- (a) The purchase money shall be paid and the purchase completed on such one of the quarterly days appointed for payment of rent as shall happen next after the expiration of six calendar months from the date of such notice (b) The lessees shall pay all rent up to the day appointed for completion of the purchase including the rent due on that day (c) The title shall commence with a trust deed made August 9. 1898, between Matthews and Co. Ltd. of one part and Albert Estcourt William Henry Isaac Pryer and John Albert Matthews of the other part (d) The sale shall in other respects be subject to the Law Society's Conditions of Sale (according to the edition current at the date of such notice) so far as the same are applicable to a private sale. What, one may ask, could be clearer, fairer or more sensible that that? After expiry of the first 21 years of the term the lessees gave to the lessors notice in writing of their desire to purchase the reversion in fee simple to the 1955, 1966 and 1967 leases and nominated their own valuer. They requested the lessors to nominate their valuer; but this the lessors refused to do. Hence these proceedings. By their statement of claim, dated February 29, 1980, the lessees claimed against the lessors the following relief : " 1. Declarations that upon the true construction of : -- (i) the 1949 lease; (ii) the 1955 lease; (iii) the 1966 lease; (iv) the 1968 lease the said clauses therein respectively contained confer on the plaintiff valid options to purchase the reversions in fee simple in the premises thereby respectively demised. " 2. Declarations that upon such construction as aforesaid and in the events which have happened the options contained in : -- (i) the " 3. Declaration that the contracts constituted by the exercise of the options contained in : -- (i) the 1955 lease; (ii) the 1966 lease; (iii) the 1968 lease ought to be specifically performed and carried into execution in accordance with the conditions contained in the respective clauses of such leases. " 4. That directions may be given as to the nomination of a valuer or valuers by or on behalf of the defendants. 5. All such further directions and inquiries as may be requisite. 6. Damages in addition to specific performance. 7. Further or other relief. 8. Costs." Lawson J. before whom the action was heard in Bristol in November 1980, where he sat as an additional judge of the Chancery Division, made the first two declarations sought but declined at that stage to grant any of the other relief claiined. His attitude may be summarised as being " wait and see," and he gave liberty to apply. What did happen, though not without some waiting, was that the lessors sought and obtained leave to appeal out of time to the Court of Appeal against this judgment. The Court of Appeal in a unanimous judgment delivered by Templeman L.J. allowed the appeal, holding, with expressed regret, that they were bound by an unbroken series of authorities, starting as long ago as Silnes v. Gery (1807) 14 Ves.Jun. 400, to allow the appeal. For my part, I think they were so bound. Templeman L.J.'s judgment refers to and incorporates an adequate and lucid statement of the facts and rationes decidendi of all the relevant authorities. My noble and learned friend, Lord Fraser of Tullybelton, in his speech, with which I would express my entire agreement, also cites the most important of them. I do not propose to refer to them individually myself since I accept that the principles that they establish are accurately summarised by Templeman L.J. [1981] 3 W.L.R. 361 in the following passage of his judgment (the " essential term " referred to being, in the instant case, the purchase price of the reversion in fee simple to the lease), at p. 373: "first, in ascertaining the essential terms of a contract, the court will not substitute machinery of its own for machinery provided by the parties, however defective that machinery may prove to be. Secondly, where machinery is agreed for the ascertainment of an essential term, then until the agreed machinery has operated successfully, the court will not decree specific performance, since there is not yet any contract to perform. Thirdly, where the operation of the machinery is stultified by the refusal of one of the parties to appoint a valuer or an arbitrator, the court will not, by way of partial specific performance, compel him to make an appointment. All three of these principles stem from one central proposition, that where the agreement on the face of it is incomplete until something else has been done, whether by further agreement between the parties or by the decision of an arbitrator or valuer, the court is powerless, because there is no complete agreement to enforce." The authorities binding on the Court of Appeal in which these principles are established do not include any decisions of this House. Even before the change of practice of this House, announced in 1966, Practice State- ment (Judicial Precedent) [1966] 1 W.L.R. 1234, they would not have been binding upon your Lordships. It is open to the House to consider whether in the 1980's it remains consistent with a just and rational system of law to continue to apply those principles to an option to purchase land granted in terms similar to those used in the option clauses that are the subject matter of this appeal, so as to enable the grantor, by the simple expedient of refusing to appoint a valuer, to deprive the grantee of any legal right to obtain title to the land. If a majority of your Lordships are convinced, as I am, that to do so would be to administer not justice but injustice then, despite the antiquity and consistency of the previous auth- orities, it will be the duty of this House to overrule them. The option clause in each lease was obviously intended by both parties to the lease to have legal effect; that is to say, to create legally enforceable rights and obligations. What other reason could there be for going to the trouble of inserting those elaborate and carefully drafted provisions in the lease? The option clause cannot be classified as a mere " agreement to make an agreement." There are not any terms left to be agreed between the parties. In modern terminology, it is to be classified as a unilateral or " if " contract. Although it creates from the outset a right on the part of the lessees, which they will be entitled, but not bound, to exercise against the lessors at a future date, it does not give rise to any legal obligations on the part of either party unless and until the lessees give notice in writing to the lessors, within the stipulated period, of their desire to purchase the freehold reversion to the lease. The giving of such notice, however, converts the " if " contract into a synallagmatic or bilateral contract, which creates mutual legal rights and obligations on the part of both lessors and lessees. The first obligation upon each of them, once the contract has become synallagmatic, is to appoint their respective valuers to fix what is the fair and reasonable price for the reversion. That this is a primary obligation under the contract follows from the use of the words " to be nominated," but it would, in my view, also be a necessary implication to give business efficacy to the option clause. The requirement that the price to be so fixed is one that will be fair and reasonable as between lessors and lessees, appears to me to be a necessary implication from the description " Valuers " applied to the persons by whom the price is to be fixed by agreement between them, if possible, and from the description " Umpire" applied to the person by whom the price is to be fixed if the valuers cannot agree The term "Valuer" (with a capital " V " at any rate), is used nowadays to denote a member of a recognised profession comprised of persons possessed of skill and experience in assessing the market price of property, particularly real property. The obligation of both lessors and lessees upon appointing their respec- tive valuers is to instruct them to carry out the functions for which the option clause requires that they should be appointed, viz., to try to reach agreement with one another upon a price for the reversion that is fair and reasonable as between the lessors and lessees, and, failing such agreement, to agree upon and appoint a suitably qualified impartial person to fix such price. The option clause, to which the lessors and lessees alone are parties, cannot of itself impose upon the valuers any legal duty to endeavour to reach agreement with one another as to a fair and reasonable price for the reversion, or if they fail to do so, to agree upon what person is to be appointed by them jointly as umpire to fix the price. But that this, which is stressed in several of the cases cited by Templeman L.J., presents an obstacle to compelling performance of the contract contained in the option clause is a proposition that on examination, proves, in my opinion, to be illusory. If a valuer appointed by the lessors or lessees does not carry out the instructions given him by his appointor, but in default of agreement with his fellow valuer upon the price, fails to agree with him upon the person to be appointed as umpire, the valuer will be in breach of his own contract with his appointor; his appointment can be revoked and a fresh valuer, who will comply with his instructions, appointed in his stead. In the (improbable) event contemplated, in my view it would by necessary implication be a contractual duty owed by the lessors and lessees to one another under the option clause to adopt this course. So if both lessors and lessees carry out their primary contractual obligations to one another under the option clause, the result will be a conveyance by the lessors to the lessees of the reversion in fee simple to the demised premises upon the completion date fixed for completion by paragraph (b) of the clause at a price agreed upon between valuers appointed by each party or failing such agreement determined by an umpire appointed jointly by the valuers. Until such conveyance and payment the contract remains executory; but so does any other contract for the sale of land. What Templeman L.J. refers to in his summary of the effect of the authorities as the one central proposition from which the three principles that he states all stem, viz. until the price has been fixed by the method provided for in the contract "there is no complete agree- ment to enforce," involved a fundamental fallacy. A contract is complete as a contract as soon as the parties have reached agreement as to what each of its essential terms is or can with certainty be ascertained: for it is an elementary principle of the English law of contract id certum est quod certum reddi potest. True it is that the agreement for the sale of land remains executory until transfer of title to the land and payment of the purchase price; but if this is the sense in which the agreement is said not to urchase price; but if this is the sense in which the agreement is said not to be complete it is only executory contracts that do require enforcement by the courts; and such enforcement may either take the form of requiring a party to perform his primary obligation to the other party under it (specific performance) or, if he has failed to perform a primary obligation, of requiring him to perform the secondary obligation, that arises only upon such failure, to pay monetary compensation (damages) to the other party for the resulting loss that he has sustained. My Lords, the real issue in this case is not whether the option clause when brought into operation by written notice given by the lessees to the lessors converted an " if " contract into a synallagmatic contract for the sale of the reversion in fee simple in the premises that are the subject of the lease, of which the lessors were in breach at the date of the commence- ment of the proceedings before Lawson J. by their refusal to appoint a valuer and are now in further breach by their failure to convey the fee simple to the lessees on the date fixed for completion by that clause. For reasons that I have already given I have no doubt that it did; but real issue is whether the court has jurisdiction to enforce the lessors' primary obligation under the contract to convey the fee simple by decreeing specific performance of that primary obligation, or whether its jurisdiction is limited to enforcing the secondary obligation arising on failure to fulfil that primary obligation, by awarding the lessees damages to an amount acquire the fee simple at a fair and reasonable price, i.e. for what the fee simple was worth. Since if they do not acquire the fee simple they will not have to pay that price, the dainages for loss of such a bargain would be negligible and, as in most cases of breach of contract for the sale of land at a market price by refusal to convey it, would constitute a wholly inadequate and unjust remedy for the breach. That is why the normal remedy is by a decree for specific performance by the vendor of his primary obligation to convey, upon the purchaser's performing or being willing to perform his own primary obligations under the contract. Why should the presence in the option clause of a convenient and sensible machinery for ascertaining what is a fair and reasonable price, which the lessors, in breach of their contractual duty, prevent from operating, deprive the lessees of the only remedy which would result in justice being done to them? It may be that where upon the true construc- tion of the contract the price to be paid is not to be a fair and reashnable one assessed by applying objective standards used by valuers in the exercise of their professional task but a price fixed by a named individual pplying such subjective standards as he personally th~inksfit, and that individual, without being instigated by either party to the contract of sale, refuses to fix the price or is unable through death or disability to do so, the contract of sale is thereupon determined by frustration. But such is not the present case. In the first place the contract upon its true construction is in my view a contract for sale at a fair and reasonable price assessed by applying objective standards. In the second place the only thing that has prevented the machinery provided by the option clause for ascertaining the fair and reasonable price from operating is the lessors' own breach of contract in refusing to appoint their valuer. So if the synallagmatic contract created by the exercise of the option were allowed to be treated by the lessors as frustrated the fmstration would be self-induced, a circum- stance which English law does not allow a party to a contract to rely on to his own advantage. So I see no reason why, because they have broken one contractual obligation the lessors should not be ordered by the court to perform another contractual obligation on their part namely to convey the fee simple in the premises to the lessees against payment of a fair and reasonable price assessed by applying the objective standards to which I have referred. As regards the assessment of the fair and reasonable price to be paid by the lessees upon specific performance of the contract to convey, the lessors have clearly waived their contractual right to have that price assessed by the machinery for which the option clause provides. The lessees in their turn are content also to waive their corresponding right to use that machinery. This will leave it to the court itself to determine upon the expert evidence of valuers what is the fair and reasonable price. In these circumstances I do not find it necessary to decide whether in the absence of such waiver by the lessees the court would have jurisdiction to compel the lessors to appoint a valuer; but it must not be taken that I am accepting that it would not. I do not accept as fit for survival in a civilised system of law any of the three principals extracted from the authorities that are summarised in the passage that I have quoted from the judgment of Templeman L.J. My Lords, I would have hesitated long before overruling such a long and consistent line of authorities if I thought that people had arranged correctly stated what is the existing law; but when honest parties to a con- tract for the sale of land or an option to enter into such a contract have in the past inserted provisions for the ascertainment of the purchase price similar to the italicised words included in the option clause in the instant case they must have intended to create legal rights to have those provisions acted on by both parties and not flouted by either party at his own sweet will; otherwise there is no point in inserting them at all. So, to overrule the old authorities will be to give effect to the intentions of those who have made use of such provisions in contracts that have been entered into before the decision of this House in the instant app~eal For these reasons and those given by Lord Fraser of Tullybelton I would allow the appeal and make the following order ' Declare that upon the true construction of each of the four leases in the statement of claim mentioned the clauses therein respectively contained confer on the plaintiff valid options to purchase the reversions in fee simple in the premises thereby respectively demised. And declare that upon the true construction thereof and in the events which have happened the options respectively contained in the three of such leases defined in the statement of claim as the 1955 lease the 1966 lease and the 1968 lease have been validly and effectively exercised. " Order that the contracts constituted by the exercise of the options respectively contained in the said three leases be specifically performed and carried into execution in accordance with the conditions contained in the respective clauses of such leases ' And order that the following inquiries shall be made, that is to say: 1. An inquiry what is the fair valuation of each of the reversions in fee simple in the premises respectively demised by the said three leases, the amount of such valuation in each case to be certified. 2. An inquriy whether a good title can be made to each of such reversions. And in case it shall appear that a good title can be made to each of the said reversions order that the plaintiff be at liberty to prepare proper conveyances (to be settled by the court in case the parties differ) to itself of such reversions in consideration of the following sums respectively, that is to say: (a) in the case of the 1955 lease the fair valuation of the reversion in the premises thereby demised certified as aforesaid or the sum of #12,000, whichever be the greater; (b) in the case of the 1966 lease the fair valuation of the reversion in the premises thereby demised certified as aforesaid; (c) in the case of the 1968 lease the fair valuation of the reversion in the premises thereby demised certified as aforesaid or the sum of #21,500, which ever be the greater. " And order that the first and second defendants do execute the said conveyances in respect of the reversions in the premises comprised in the 1955 lease and the 1966 lease and that the first and third defendants do execute the said conveyance in respect of the reversion in the premises comprised in the 1968 lease. " An order that the plaintiffs' costs in the courts below be taxed by the taxing master and their costs in this House be taxed by the clerk of the Parliaments and that the said costs when taxed be deducted from the amount of the said purchase moneys when computed as aforesaid provided that such costs to be deducted as aforesaid shall be limited to the plaintiff's costs in this House and the Court of Appeal and one half of their costs of the action down to and including the judgment of Lawson J. " And upon the plaintiff paying to the defendants at a time and place to be fixed by the court the balance of the amount of such purchase moneys after such deduction as aforesaid order that the defendants do deliver to the plaintiff the three said conveyances together with all deeds and writings in their possession dealing solely with the said premises and giving an acknowledgment of the right of the plaintiff to production and delivery of copies of and undertaking for the safe custody of deeds relating also to other property as provided by section 64 of the Law of Property Act 1925. " And the parties are to be at liberty to apply to the High Court." LORD FRASER OF TULLYBELTON. My Lords, the appellants are the tenants in four leases, by each of which they were granted an option to purchase the freehold reversion of the leased premises at a valuation. The appellants have exercised the options, but the respondents, who are the landlords, contend that the options are unenforceable. The questions now to be determined, therefore, are whether the options are valid and enforce- able, and, if so, how they should be enforced. The leases relate to adjacent industrial premises in Gloucester. They were granted at different dates, but for terms which all expire on December 24, 1997, at yearly rents which are subject to periodical review. The leases are all in substantially the same form. For reasons that are not now material the option contained in the earliest lease, that dated March 23, 1949, had not been exercised when the writs in these proceeding were issued, but it has been subsequently exercised and there is now no relevant distinction between that option and the other there. The clause in the 1949 lease, clause 11, has been taken as typical of them all. It entitled the appellants to purchase the reversion in fee simple, upon certain conditions hich were all satisfied, " at such price not being less than #5,~000as may bceagreed upon by two valuers one to be nominated by the lessor and the other by the lessee or in default of such agreement by an umpire appointed by the said valuers. . . ." The respondents contend that the options are void for uncertainty on the ground that they contain no formula by which the price can be fixed in the ev.ent of no agreement being reached and that they are no more than agreements to agree. The respondents have therefore declined to appoint their valuer. The machinery provided in the leases has accordingly become inoperable. In these proceedings the appellants seek a declaration that the options are valid, that they have been validly and effectively exercised, and that the contracts constituted by the exercise ought to be specifically performed. As regards the mode of performance, the main argument for the appellants is that the court should order such inquiries as are necessary to ascertain the value of each of the properties. Lawson J. decided the question of principle in favour of the appellants, but his decision was reversed by the Court of Appeal which held that the options were unenforceable. Templeman L.J., who delivered the judgment of the Court of Appeal, made a full review of the English authorities and the conclusion which he drew from them was, in my opinion inevitably, adverse to the appellants' contentions. The fundamental proposition upon which he relied was, in his own words [1981] 3 W.L.R. 361, 373, " that where the agreement on the face of it is incomplete until something else has been done, whether by further agreement between the parties or by the decision of an arbitrator or valuer, the court is powerless, because there is no complete agreement to enforce: . . ." I agree that that is the effect of the earlier decisions but, with the greatest respect, I am of opinion that it is wrong. It appears to me that, on the exercise of the option, the necessary preconditions having been satisfied, as they were in this case, a complete contract of sale and purchase of the freehold reversion was constituted. The price, which was of course an essential term of the contract, was for reasons which I shall explain, capable of being ascertained and was therefore certain. Certum est quod certum reddi potest: see May and Butcher Ltd. v. The King (Note) [1934] 2 K.B. 17, 21, per Viscount Dunedin. The courts have applied clauses such as those in the present case in a strictly literal way and have treated them as making the completion of a contract of sale conditional upon agreement between the valuers either on the value of the property, or failing that, on the choice of an umpire. They have further laid down the principle that where parties have agreed on a particular method of ascertaining the price, and that method has for any reason proved ineffective, the court will neither grant an order for specific performance to compel parties to operate the agreed machinery, nor substitute its own machinery to ascertain the price, because either of these clauses would be to impose upon parties an agreement that they had not made. That was decided by Sir William Grant M.R. in Milnes v. Grey (1807) 14 Ves. Jun. 400 and his decision has been accepted ever since. The basis of his decision is sufficiently explained by the following sentences from his opinion, at p. 406 : " The only agreement, into which the defendant entered, was to purchase at a price, to be ascertained in a specified mode. No price having ever been fixed in that mode, the parties have not agreed upon any price. Where then is the complete and concluded con- tract, which this court is called upon to execute? " At p. 409: " In this case the plaintiff seeks to compel the defendant to take this estate at such price as a master of this court shall find it to be worth; admitting, that the defendant never made that agreement; and my opinion is that the agreement he had made is not substan- tially, or in any fair sense, the same with that; and it could only be by an arbitrary discretion that the court could substitute the one in the place of the other." That view had not always been followed in previous cases in England: see Hall v. Warren (1804) 9 Ves. Jun. 605 where the seller had become insane and could not name his valuer but Sir William Grant M.R. held, at p. 612 that a mode of ascertaining the value " equivalent, and as effectual and fair " as that which had been agreed on might be found. In Roman law there had been doubt about the position when a sale was made at a price to be fixed by a third party, until Justinian laid down that the contract became complete only when the third party had fixed the price (Institutes 3.23.1), but that rule was not followed by the Scottish court in Earl of Selkirk v. Nasmith (1778) Mor. 627. So far as England is concemed, the decision in Milnes v. Gery, 14 Ves. Jun. 400, seems to have been treated as settling the law on this point, and in Agar v. Macklew (1825) 2 Sim. & St. 418 Sir John Leach V.-C. said, at p. 423 : " I consider it to be quite settled that this court will not entertain a bill for the specific performance of an agreement to refer to arbi- tration; nor will, in such case, substitute the master for the arbitrators, which would be to bind the parties contrary to their agreement." Although the Vice-Chancellor referred to " arbitrators " their function was to act as what would now be called valuers. The rule being settled, it is unnecessary for me to refer to later decisions when it has been applied. While that is the general principle it is equally well established that, where parties have agreed to sell " at a fair valuation " or " at a reason- able price " or according to some similar formula, without specifying any machinery for ascertaining the price, the position is different. As Grant M.R. said in Milnes v. Gery, 14 Ves. Jun. 400, 407: " In that case no particular means of ascertaining the value are pointed out: there is nothing therefore, precluding the court from adopting any means, adapted to that purpose." The court will order such inquiries as may be necessary to ascertain the fair price: see Talbot v. Talbot [1968] Ch. 1. I recognise the logic of the reasoning which has led to the courts refusing to substitute their own machinery for the machinery which has been agreed upon by the parties. But the result to which it leads is so remote from that which parties normally intend and expect, and is so inconvenient in practice, that there must in my opinion be some defect in the reasoning. I think the defect lies in construing the provisions for the mode of ascertaining the value as an essentail part of the agree- ment. That may have been perfectly true early in the 19th century, when the valuer's profession and the rules of valuation were less well established than they are now. But at the present day these provisions are only subsidiary to the main purpose of the agreement which is for sale and purchase of the property at a fair or reasonable value. In the ordinary case parties do not make any substantial distinction between an Vol. 3 agreement to sell at a fair value, without specifying the mode of ascertain- ing the value, and an agreement to sell at a value to be ascertained by valuers appointed in the way provided in these leases. The true distinction is between those cases where the mode of ascertaining the price is an essential term of the contract, and those cases where the mode of ascertain- essential term of the contract, and those cases where the mode of ascertain- ment, though indicated in the contract, is subsidiary and non-essential: see Fry on Specific Performance, 6th ed. (1921), pp. 167, 169, paragraphs 360, 364. The present case falls, in my opinion, into the latter category. Accordingly when the option was exercised there was constituted a com- plete contract for sale, and the clause should be construed as meaning that the price was to be a fair price. On the other hand where an agree- ment is made to sell at a price to be fixed by a valuer who is named, or who, by reason of holding some office such as auditor of a company whose shares are to be valued, will have special knowledge relevant to the question of value, the prescribed mode may well be regarded as essential. Where, as here, the machinery consists of valuers and an umpire, none of whom is named or identified, it is in my opinion unrealistic to regard it as an essential term. If it breaks down there is no reason why the court should not substitute other machinery to carry out the main purpose of ascertaining the price in order that the agreement may be carried out. In the present case the machinery provided for in the clause has broken own because the respondents have idclined to appoint their valuer. ln that sense the breakdown has been caused by their fault, in failing to implement an implied obligation to co-operate in making the machinery work. The case might be distinguishable in that respect from cases where the breakdown has occurred for some cause outside the control of either party, such as the death of an umpire, or his failure to complete the valuation by a stipulated date. But I do not rely on any such distinction. I prefer to rest my decision on the general principle that, where the machinery is not essential, if it breaks down for any reason the court will substitute its own machinery. The question has apparently never been considered by your Lordships' House, but it has been regarded as settled at least since Agar v. Macklew (1825) 2 Sim. & St. 418 in England and also in other countries whose law is based upon English law, including Australia, New Zealand, Canada and some of the states in the United States of America. In these circumstances ould not have felt it right to depart from the rule which has been so lng and so widely accepted were it not that, in addition to my clear opinion that the existing rule is not appropriate in present-day conditions, there are other considerations tending to justify a departure from precedent. These are as follows. 1. The rule established by Milnes v. Gery, 14 Ves. Jun. 400 and Agar v. Macklew, 2 Sim. & St. 418 has not been extended, but has been to some extent whittled away by exceptions. One of these exceptions is where an agreement has been partly performed. It was expressed by Templeman L.J. in the Court of Appeal in the following words which I gratefully adopt [1981] 3 W.L.R. 361, 373: " Where an agreement which would otherwise be unenforceable for want of certainty or finality in an essential stipulation has been partly performed so that the inteervntion of the court is ne~cessar in aid of a grant that has already taken effect, the court will strain to the utmost to supply the want of certainty even to the extent of providing a substitute machinery." An example was Gregory v. Mighell (1811) 18 Ves. Jun. 328, where a tenant had been in possession of premises for 11 years under a lease which provided for a fair rent to be fixed by two valuers or their umpire, but no rent had been fixed in that way. The tenant admitted that some rent must be due and the court ordered that it should be fixed by the master. The recent case of Beer v. Bowden (Note) [1981] 1 W.L.R. 522 is another example of the exception. No doubt these were stronger cases than the present to justify intervention by the court, but the present case is not entirely outside the exception because the option is one term of the lease which has been in force for some years. When the option is exercised in accordance with clause 11, the resulting agreement is not entirely separate from the partly performed contract of lease. 2. A second exception applies where the valuation provisions relate to a subsidiary part of a wider contract, which is itself valid and enforceable. The court will take steps to prevent the wider contract being rendered unenforceable by a failure of the machinery for the subsidiary valuation Thus in Smith v. Peters (1875) L.R. 20 Eq. 511, there was an agreement for sale of the lease of a public house at a fixed price and of the household furniture fixtures and other effects at a fair valuation to be made by a named valuer. The seller obstructed the valuer in the performance of his duty. Sir George Jessel M.R. said, at p. 513 that " there is no evidence that the value of the fixtures and furniture was so large as to be an essential portion of the contract " and he decreed specific performance and made a mandatory order compelling the vendor to permit the valuer to enter the premises for the purpose of valuing the fixtures and furniture. Similarly in Richardson v. Smith (1870) L.R. 5 Ch.App. 648, a contract for the sale of a valuable estate included an agreement that certain furniture and other articles of much less value should be taken by the purchaser at a valuation to be made by valuers mutually agreed upon. The vendor refused to appoint a valuer and refused to complete any part of the contract. The court made an order for specific performance of the contract except for the part relating to the fumiture and other articles which was severed. Lord Hatherley L.C. said, at p. 651: "In this case an attempt is made to push the doctrine of Milnes v. Gery, 14 Ves. Jun. 400, which has already been certainly carried quite far enough, to an extent which would be utterly unwarrantable, and which, if it were permitted, would induce vendors who are desirous of retaining the power of escaping from their contracts to introduce provisions for the valuation of some nunor part of the subject matter of the contract in such a mode that they might at any time escape from the performance of the agreement as to the main subject of the contract simply by setting up an act of their own in wrong of the purchaser, and refusing to appoint a valuer. . . . Then could either the purchaser or the seller play fast and loose as long as he pleased with the agreement, and get off the bargain by not naming a valuer? " These observations are applicable in principle to a case where the mode of valuation specified in the contract is not essential to the main purpose of the contract. Dinham v. Bradford (1869) LR 5 Ch.App. 519 partakes of both the exceptions to which I have referred. In that case a partnership agreement provided that, on dissolution of the partnership, one partner should pur- chase the interest of the other at a valuation to be made by two valuers, one appointed by each partner but no provision was made to appoint an umpire. It was held that the court would carry the partnership agreement into effect by ascertaining the value of the share. Lord Hatherley L.C. said, at p. 523: " If the valuation cannot be made modo et forma, the court will substitute itself for the arbitrators. It is not the very essence and substabce of the contract, so that no contract can be made out except through the medium of the arbitrators. Here the property has been had and enjoyed, and the only question now is, what is right and proper to be done with regard to settling the price? " Similarly here the mode of valuation provided for is not the very essence and substance of the contract. 3. Departure from precedent on the question raised in this appeal is not likely to create a " danger of disturbing restrospectively the basis on which contracts, settlements of property and fiscal arrangements have been entered into " to borrow the language of the Practice Statement (Judicial Precedent) [1966] 1 W.L.R. 1234 explaining the condition on which your Lordships' House would not regard itself as bound by its own previous decisions. I do not believe that honest persons are in the habit of making agreements containing option clauses in terms such as those now under consideration. on the basis and with the intention that the option will be unenforecable. On the contrary. I think they would generally be astonished to be told that the exercise of the option had not brought about a complete contract. The appropriate means for the court to enforce the present agree- ments is in my opinion by ordering an inquiry into the fair value of the reversions. That was the method used in Talbot v. Talbot [1968] Ch. 1. The alternative of ordering the respondents to appoint a valuer would not be suitable because in the event of the order not being obeyed, the only sanction would be imprisonment for contempt of court which would clearly be inappropriate. For these reasons the decisions in Agar v. Macklew, 2 Sim. & St. 418 and Vickers v. Vickers (1867) L.R. 4 Eq. 529 should in my opinion be overruled. I agree with the order proposed by my noble and learned friend Lord Diplock allowing this appeal. LORD RUSSELL OF KILLOWEN. My Lords, it appears to be generally accepted that the law as previously understood since at least the early l9th century is in favour of the respondents and of the decision of the Court of Appeal. It is proposed by the majority of your Lordships to assert that that previous understanding was erroneous. I cannot agree. Basically the assumption is made that the parties intended that the exercise of the option should involve payment of a " fair price " for a " fair value." Of course parties to such a contract could in terms so a ree, and I am not concerned to deny that in such a case a court could enforce the contract by ascertainment of a fair price or fair value, treating specific provisions in the contract for methods (which proved : to be unworkable) of ascertaining that fair price or valuation as being inessential. But that is not this case. Why should it be thought that potential vendor and purchaser intended the price to be " fair? " The former would intend the price to be high, even though " unfairly " so. And the latter vice versa. Vendors and purchasers are normally greedy. If the theory that the contract can be construed as if it were a contract in terms for ultimate sale and purchase at a fair price or value is wrong, specific performance cannot be ordered, on well-established principles. Assuming refusal by the vendor to appoint a valuer to be a breach of contract, damages cannot be other than nominal: and I do not understand it to be suggested that the court can nominate a person as " vendor's valuer," nor order nomination of a valuer by the vendors on pain of contempt of court should the order not be obeyed. In my opinion this case is an example of the long established and quite sound principle that if A agrees to sell Blackacre to B the contract must provide for the price to be paid either in express terms or by the establishment of agreed machinery which is bound to work by which the price can be ascertained. If the machinery is not so bound to work the party taking ultimate advantage of its deficiencies is not to be castigated as having taken some unfair advantage, as though he had from the outset plotted to do so. If the tackle is not in order from the start it cannot be assumed that either party then knew it. I do not propose to examine the relevant authorities stretching through generations of distinguished judges in this field. They have been fully discussed in the judgment of the Court of Appeal (Templeman L.J.) [1981] 3 W.L.R. 361. It will have been noted that the strength of the main stream of authority is accentuated by the exceptions diverted from it: for example, if there is undoubtedly a tenancy the court must fix a proper rent or if a sale of Blackacre involves chattels or stock at a valuation the court will in one form or another ensure that the main object (the sale of Blackacre at a stated price) is not stultified by a side- wind problem of valuation. But the main stream has flowed on: and I know of no adequate reason in 1982 for damming it. Indeed I mistrust profoundly the possible flooding. I felt considerable sympathy for counsel for the respondents when he was told that he had all the law on his side, but was (in effect) facing the prophets. (This is a paraphrase of my own remark in argument, when he was told that he had all equity behind him and I intervened to suggest that he had less in front of him.) In the result I would dismiss this appeal. I can only exclaim with Macduff--" What! All my pretty chickens and their dam, at one fell swoop? " (Macbeth, Act IV, Sc. 3). LORD SCARMAN. My Lords, I would allow the appeal. I agree with the speeches delivered by my noble and learned friends, Lord Diplock and Lord Fraser of Tullybelton, and with the order proposed by them. I add a few obserbations only because we are departing from a rule which has been accepted as good law for more than 150 years. The question for decision is as to the true construction to be placed upon an option granted to a lessee to buy the freehold reversion. The terms of the option have been set out in full by my noble and learned friend, Lord Diplock. Were the parties agreeing to a sale " at a fair valuation," i.e. " at a reasonable price? " Or were they treating their [chosen mode of ascertaining the price as being of the essence of their contract? What was the object of their contract? A fair and reasonable price? Or a price reached only by the means specified? Unembarmssed by authority, I would unhesitatingly conclude that the parties intended that the lessee should pay a fair and reasonable price to be determined as at the date when he exercised the option. The valuation formula was introduced into the contract merely as a con- venient way of ascertaining the price at that future time. Should we be deterred from so constming the provision by the existence of a line be deterred from so construing the provision by the existence of a line of authority stretching back over 150 years in which provisions remitting to a valuer or arbitrator the ascertainment of a price have been construed as making the machinery of ascertainment an essential term of the contract? I think not. Indeed I change the relevance of ancient authority when construing the terms of the formula used in these leases. I agree with the comments of my noble and leamed friends on the injustice which can arise by applying old cases when what has to be construed is a modem contract. In my view, no " judicial valour " (a quality greatly admired by Sir Frederick Pollock) is needed to overrule a line of authority which never reached this House and which, properly considered, is concerned not so much with principle as with construction. We would be doing a public disservice if, in deference to ancient law, we were to invalidate a simple, sensible, and practical formula for ascertaining a fair and reasonable price. In today's conditions a valuation by professional valuers LORD BRIDGE OF HARWICH. My Lords, your Lordships are invited to overrule a line of authority originating with the decision of Sir William Grant M.R. in Milnes v. Gery (1807) 14 Ves Jun. 400 and continuing unbroken ever since. The principal decisions and their effect are compre- hensively and accurately reviewed in the unanimous judgment of the Court of Appeal, who rightly regarded themselves as bound to decide against the appellants. Your Lordships are not so bound, and being convinced, in agree- ment with the majority of your Lordships, that there are compelling reasons longer be regarded as good law, I had intended to write a speech attempting to express those reasons in my own words. I have now had the advantage of reading in draft the speeches of my noble and learned friends Lord Diplock, Lord Fraser of Tullybelton and Lord Scarman, and finding in them the grounds for allowing this appeal so fully, so clearly and so convincingly expressed, I am satisfied that anything I might add would be mere repetition. For the reasons given in those speeches I, too, would allow the appeal and I concur in the order proposed by Lord Diplock. Appeal allowed. Solicitors : Field Fisher & Martineau for Rickerbys, Cheltenham; Stevensons for Taynton & Son, Gloucester. A. R. [CHANCERY DIVISION] HARVELA INVESTMENTS LTD. v. ROYAL TRUST COMPANY OF CANADA (C.I.) LTD. AND OTHERS [1983 H. No. 556] 1983 Oct. 20, 21, 24, 25, 26; Peter Gibson J. Nov. 29 Contract--Formation--Offer and acceptance--Sealed competitive tender--Highest single offer required--Bid comprising fixed sum or sum ascertainable by reference to rival bid--Whether highest "single offer"--Implied term in offer or invitation to treat--Whether referential bid impliedly excluded from seaied tender The first defendant, a Jersey trust company, was the registered holder of shares in the third defendant, H. Ltd., on behalf of the trustees of a settlement made in 1962 by the second defendant's sister. Both the plaintiff, an investment company, which con- trolled 43 per cent. of the votes in H. Ltd., and the second defendant and his family, who controlled 40 per cent. of the votes, were anxious to gain a majority holding and they made various offers to purchase the shares. On 17 August 1981, the trustees invited the plaintiff and the second defendant to submit further offers, on the basis that no offer received would be regarded as binding, but the terms of the offers received as a result were not the same. The tmstees then, by telex, invited them to submit revised offers on identical terms and conditions by sealed tender to be submitted by 3 p.m. on 16 September and to continue their existing offers until then. The tenders were to be submitted on the terms, inter alia, that they were a single offer for all shares held by the first defendant. The invitation telex stated, by term 5, that in the event that closing should not take place within 30 days, other than by reason of any delay on the part of the first defendants, interest should be payable by the purchaser on the full purchase price at a rate higher by 4 per cent. than the Bank of Montreal prime rate from time to time for Canadian dollar loans. Paragraph (C) provided: "We confirm that if any offer made by you is the highest offer received by us we bind ourselves to accept such offer provided that such offer complies with the terms of this telex." Before 3 p.m. on 16 September 1981 the plaintiff telexed a revised offer in the sum of CS2,175,000 and the second defendant's revised offer was expressed to be "C$2,100,000 or C$101,000 in excess of any other offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher." At 4.47 p.m. on the same afternoon the first defendant advised the plaintiff that its tender was unsuccessful but delayed notifyng acceptance to the second defendant until a legal opinion had been obtained as to the validity of the second defendant's referential bid. On 25 September the first defendant's agents indicated its acceptance of the second defendant's offer and gave notice that it proposed to require the purchase of the shares to be completed on 15 October 1981. The plaintiff claimed a declaration that the first defendant was contractually bound to transfer the shares to the plaintiff for C$2,175,000, an order for specific performance of that contract and damages. The second defendant counterclaimed for a declaration that the first defendant was contractually bound to transfer the shares to him and for an order for specific performance and for damages. The first defendant whilst adopting a neutral attitude as between the plaintiff and the second defendant indicated that it would, if the plaintiff obtained an order for specific performance, claim interest on the purchase moneys from 16 October 1981 until payment by way of equitable relief at a specified rate lower than the rate specified in the invitation telex. The interest claimed exceeded C$650,000. The dividends paid since 16 October 1981 were C$1,866 per annum. On the claim and counterclaim:-- Held, (1) that although the second defendant's bid was, on its plain wording, quantifiable at 3 p.m. on 16 September so that it constituted "a single offer" within the terms of the invitation telex, referential bids were inconsistent vith the purpose and nature of sealed bids and were impliedly excluded as a necessary legal incident of the relationships between the vendor and those bidding and between individual bidders; and that, therefore, the plaintiff's bid of C$2,175,000 was the highest bid made in accord- ance with the terms of the invitation telex (post, pp. 892c--E, 893F--H, 895D--E, 898C-D). South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. [1898] 1 Ch. 465, C.A. applied. Liverpool City Council v. Irwin [1977] A.C. 239, H.L.(E.) and S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173 considered. (2) That, on its true construction, the invitation telex was not an invitation to treat but an offer in the form of an unequivocal promise to accept the highest bid which the plaintiff accepted by submitting the highest bid in accordance with the terms of the telex thus giving rise to a unilateral contract; that the mere making of the bid was sufficient to constitute consideration and that, accordingly, a specifically enforceable contract, which was either a contract for the sale of the shares or a contract to enter into such a contract, came into existence between the plaintiff and the first defendant at 3 p.m. on 16 September (post, pp. 899A--E, 900G--H). Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A.; Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, H.L.(E.) and Daulia Ltd. v. Four Millbank Nominees Ltd. [1978] Ch. 231, C.A. applied. (3) That although the purported acceptance on 29 September of the second defendant's bid created a prima facie contract for the sale of the shares the formation of which would not be prevented by a mistake of law, the plaintiff had entered into a prior contract on 16 September with the first defendant and accordingly the plaintiff was entitled to an order for specific performance; and that since the delay in completion of the contract was on the part of the first defendant, it had no contractual right to interest against the plaintiff, but it would be equitable to direct specific performance on terms that the first defendant was entitled to retain all dividends on any of the shares in repect of the period from 16 October 1981 to completion (post, pp. 901D--H, 903E--G, 904E--G). Esdaile v. Stephenson (1822) 1 Sim. & St. 122 applied. The following cases are referred to in the judgment: Bartlett v. Barclays Bank Trust Co. Ltd. (Nos. 1 and 2) [1980] Ch. 515; [1980] 2 W.L.R. 430; [1980] 1 All E.R. 139 Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, C.A. Daulia Ltd. v. Four Millbank Nominees Ltd. [1978] Ch. 231; [1978] 2 W.L.R. 621; [1978] 2 All E.R. 557, C.A. Esdaile v. Stephenson (1822) 1 Sim. & St. 122 Hewitt's Contract, In re [1963] 1 W.L.R. 1298; [1963] 3 All E.R. 419 Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503, H.L.(E.) Liverpool City Council v. Irwin [1976] Q.B. 319; [1975] 3 W.L.R. 663; [1975] 3 All E.R. 658, C.A.; [1977] A.C. 239; (1976) 2 W.L.R. 562; [1976] 2 All E.R. 39, H.L.(E.) S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd. (1982) 449 N.Y.S. 2d 173 Saltzberg and Rubin v. Hollis Securities Ltd. (1964) 48 D.L.R. (2d) 344 South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co. [1898] 1 Ch. 465, C.A. Spencer v. Harding (1870) 5 C.P. 561 The following cases were cited in argument: Mears v. Safecar Security Ltd. [1981] 1 W.L.R. 1214, E.A.T.; [1982] 3 W.L.R. 336; [1982] 2 All E.R. 865, C.A. Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206; [1939] 2 All Storer v. Manchester City Council [1974] 1 W.L.R. 1403; [1974] 3 All E.R. SUMMONS By writ of summons dated 4 February 1983 the plaintiff, Harvela Company of Canada (C.I.) Ltd. and the second defendant, Sir Leonard Outerbridge, a declaration that the first defendant was contractually bound to transfer 825 common shares with voting rights, 311 six per cent. voting preference shares and 24,337 non-voting redeemable preference shares in the capital of the third defendant, A. Harvey & Co. Ltd. to the plaintiff at the price of Canadian $2,175,000; alternatively, a declaration that the second defendant held any interest in the said shares which he may have obtained from the first defendant upon trust for the plaintiff, or subject to an obligation to assign and transfer such interest to the plaintiff; further an order setting aside any transfer of the shares by the first defendant to the second defendant, damages, and an injunction restraining the first and second defendants from presenting to the third defendant for registration any transfer of the shares; as against the first defendant ' specific performance of the contract and an injunction restraining the first defendant from parting with or disposing of any of the shares; as against the third defendant an injunction restraining it from registering any transfer of the shares by the first defendant to the second defendant. By a counterclaim in which the Royal Trust Company of Canada, a London-based associate company of the first defendant, was joined as a defendant, the second defendant sought a declaration that the Royal Trust Company of Canada (C.I.) Ltd. was contractually bound to transfer the shares to him and for specific performance of that contract. In its defence the first defendant declared, inter alia, that it would not take part in any issues raised between the plaintiff and the second defendant, but indicated that in the event of an order for specific performance being made in favour of the plaintiff it would claim as equitable relief interest on the purchase moneys from 16 October 1981 down to the date of payment at a specified rate which was lower than the rate specified in the invitation telex. The first defendant also indicated that if the second defendant succeeded in his counterclaim then similar relief would be sought by the first defendant against the second defendant. The facts are stated in the judgment. Michael Essayan Q. C. and Michael Driscoll for the plaintiff. Leolin Price Q. C. and James Denniston for the second and third defendants. Edward Nugee Q. C. and Oliver Weaver for the first defendant and the Royal Trust Company of Canada. 29 November. PETER GIBSON J. read the following judgment. In this action the plaintiff, Harvela Investments Ltd. ("Harvela"), a Newfound- land company, seeks specific performance of what it claims is a contract for the sale to it by the first defendant, the Royal Trust Company of Canada (C.l.) Ltd. ("Royal Jersey"), of certain shares in the third defendant, A. Harvey & Co. Ltd. ("Harveys"). Royal Jersey, a Jersey company, has since about April 1979 been the registered holder of those shares on behalf of the trustees for the time being of a Scottish settlement made by Mrs. Lillian Campbell in 1962. The second defendant, Sir Leonard Outerbridge, who is Mrs. Campbell's brother and a nonagenar- ian, denies the existence of the contract claimed by Harvela. He claims that there is a valid contract for the sale of the same shares by Royal Jersey to himself. By his counterclaim he seeks specific performance of the contract and he has joined as defendants to that counterclaim not only Harvela and Royal Jersey but also Royal Jersey's London-based associated company, the Royal Trust Company of Canada ("Royal London") which is now the sole tmstee of Mrs. Campbell's settlement. In his original defence and counterclaim Sir Leonard had claimed that there was a prior option agreement for the sale of some of those shares to him and that he had duly exercised that option; accordingly in his counterclaim he claimed in the alternative specific performance of the contract brought into being by the exercise of the option. But that part of the defence and counterclaim was abandoned at the start of the fourth day of the hearing before me, before any oral evidence had been heard. As a result this action has been fought on the basis of documentary evidence alone. Harvey is a Newfoundland company. It owns 11 acres of the water- front of St. Johns, Newfoundland, and has several subsidiaries engaged in transportation, warehousing and distribution activities. Its history is that it was formed as the successor to the business of a partnership carried on by two members of the Harvey family and an Outerbridge. The partners had succeeded to the business founded by a Harvey over 100 years ago. For many years the issued share capital in Harveys was held as to one- half by a member or members of the Harvey family and as to the other half by a member or members of the Outerbridge family. But in the early 1960's some shares owned by a Harvey were purchased by Sir Leonard and the Outerbridges then, between them, held the majority of the shares in Harveys. Mrs. Campbell is an Outerbridge and when she transferred to her settlement some of her Harvey shares the votes of such of the Harvey shares so transferred as were voting shares were exercised by an Outer- bridge acting as proxy for the trustee or trustees of her settlement. If one leaves aside the votes on the shares comprised in Mrs. Campbell's settlement, the Outerbridges control between them only about 40 per cent. of the Harveys' votes. Harvela is a company owned and controlled by Mrs. Susan Patten who is a Harvey and it has approximately 43 per cent. of the issued share capital of Harveys. The Harveys shares comprised in Mrs. Campbell's settlement are 825 common shares with voting rights, 311 six per cent. voting preference shares and 24,337 non-voting redeem- able preference shares. The voting shares control about 12 per cent. of the Harveys' votes. Thus if Harvela were to acquire those shares it would have voting control of Harveys. If Sir Leonard were to acquire those shares, so long as the other Outerbridge shareholders voted with him he would have control of Harveys. In the circumstances the minority holding comprised in Mrs. Campbell's settlement is a crucial holding which determines whether Harveys is controlled by Mrs. Patten through Harvela or whether control rests with Sir Leonard and other members of the Outerbridge family as long as they act together. Mrs. Campbell made her settlement on 21 September 1962 in discre- tionary form for the benefit of herself, her children and remoter issue and the respective spouses and widows and widowers of her children and issue. Royal London was until 4 April 1979 the sole trustee of the settlement. On 30 October 1978 Mrs. Patten and her husband called on Royal London to inquire whether it was prepared to consider a sale of the 825 common and 311 six per cent. preference shares in Harveys. They were told by a trust officer of Royal London that it might be prepared to consider a sale, but he indicated to them that there were various matters to be considered, including the probable necessity of referring the matter to the Campbell family. A Newfoundland lawyer, Mr. Chalker, made a written offer on 8 November 1979 on behalf of Harvela. The total sum offered was $443,600 (I add that references to dollars in this judgment are references to Canadian dollars) made up of $500 per common share and $100 per six per cent. preference share. Royal London calculated that there would be a substantial capital gains tax liability if it sold the shares to Harvela and it sought ways to avoid or defer that liability. Early steps which it took to that end were to appoint, on 4 April 1979, as additional trustees Royal Jersey and two officials from that company, to transfer the administration of the settlement to Jersey and to cause all the Harveys shares held for the settlement to be vested in Royal Jersey. Harvela ' improved its offer in May 1979 so that, subject to certain safeguards reserved for itself, the price for the common shares would be increased to the amount stated by independent valuers to be the value of those shares. Initially Harvela required Royal London to keep its offer secret, but on the trustees' insistence Mrs. Campbell and Sir Leonard were consulted about the offer. This prompted Sir Leonard to make an offer in June 1979 amounting to $526,000 for the common and six per cent. preference shares: $600 per common share and $100 per six per cent. preference share. Mrs. Campbell and her adult children and grandchildren all informed the trustees that they supported Sir Leonard's offer and Har- vela's offer was rejected. However, whilst the trustees explored various tax-saving schemes no binding contract to sell the shares to Sir Leonard was concluded. In October 1980 Mr. Patten discussed with Royal London the possibility of Harvela making a further offer for the settlement's Harveys shares and in January 1981 Mr. Chalker on behalf of Harvela offered $856,100 made up of $1,000 per common share and $100 per six per cent. preference share. In June 1981 the trustees took the advice of Chancery leading counsel. Mr. Nugee advised that the trustees had a duty to accept the highest offer they could obtain for the shares. On 17 August 1981 both Harvela and Sir shares and they were told that this was only an invitation to treat and that no offer received would be regarded as binding. In response Harvela offered $1,742,612 payable in two tranches. That sum was made up of $2,025 for each common share, $150 for each six per cent. preference share and $1 for each non-voting preference share. Sir Leonard offered $1,741 942 made up of $2,000 for each common share, $100 for each six per cent. preference share and $2.50 for each non-voting preference share. The trustees then decided that they should invite both Harvela and Sir eonard to submit revised offers on identical terms and conditions. They sent a telex ("the invitation telex") to each of Harvela and Sir Leonard asking each to continue its or his existing offer to 3 p.m. on 16 September 1981 and containing (so far as material) the following terms and conditions: and conditions and value. Accordingly we invite you to submit to [Royal Jersey] any revised offer which you may wish to make by sealed tender or confidential telex to be submitted to our London solicitors, Messrs. Bischoff and Co. . . . by 3 p.m. London time Wednesday 16 September 1981, attention J. Jowitt who has under- taken not to disclose any details of any revised offer to any party taken not to disclose any details of any revised offer to any party before that time. . . . Tenders are to be submitted on the following terms: 1. That tenders are a single offer for all shares held by us. . . . 5. In the event that closing shall not take place within 30 days interest shall be payable by the purchase on the full purchase price at a rate higher by four per cent. than the Bank of Montreal prime rate from time to time for Canadian dollar loans. We hereby agree subject that if any offer made by you is the highest offer received by us we VOL. 2 bind ourselves to accept such offer provided that such offer complies with the terms of this telex " Two mendments to those terms were made by the trustees by a telex dated 16 September 1981 and sent to each of Harvela and Sir Leonard before either had responded to the invitation telex. I need refer only to the amendment to term 5, the words "other than by reason of any delay on our part" being inserted after the words '-within 30 days." Further on 16 September Royal Jersey orally confirmed to Sir Leonard and Harvela that the promise in paragraph C to accept the highest offer was not qualified by the words "subject to acceptance by us of any offer made by you." Thus each of Harvela and Sir Leonard knew that the other had already bid a sum of an amount similar to its or his bid of $1 3/4m. without knowing which of the earlier bids was the higher. Each knew that it was likely that it or he would have to increase its or his previous bid to be successful but each had the assurance that the trustees were promising to be bound to accept the highest offer made in accordance with the terms of the invitation telex. On 16 September 1981 before 3 p.m. Mr. Chalker telexed to Mr. Jowitt Harvela's revised offer; this was in the sum of $2,175,000. Also on 16 September before 3 p.m. the London solicitors of Sir Leonard sent his written revised offer to Mr. Jowitt. That offer was expressed as follows: "The amount of our client's tender is C$2,100,000 or C$101,000 in excess of any other offer which you may receive which is expressed as a fixed monetary amount, whichever is the higher." At 4.47 p.m. the same afternoon Mr. Broughton, the assistant manager of Royal Jersey's trust department. telexed Mr. Chalker that Harvela's tender was unsuccessful. Royal London however decided not to notify Sir Leonard of acceptance of his offer unless Mr. Nugee advised that the offer was valid and satisfied the conditions of Royal Jersey's invitation and that Royal Jersey was bound to accept. Mr. Nugee advised orally on 27 September and in writing on 29 September. Whilst confessing to a feeling of unease regarding the form of the offer, Mr. Nugee advised that Sir Leonard's offer was a valid offer of $2,276,000 which Royal Jersey was bound to accept. Mr. Nugee further advised that Royal Jersey should advise both parties of the tenders which it had received, that it proposed to complete with Sir Leonard and that if Harvela wished to dispute the validity of Sir Leonard's offer it would have to do so by proceeding against both Royal Jersey and Sir Leonard. On 18 September Mr. Chalker asked that the details of the successful tender should be telexed to him and that request was repeated on 27 September. On 29 September Royal Jersey in accordance with advice from Mr. Jowitt telexed each of Sir Leonard and Harvela, giving the details of each bid, and concluded: "In the circumstances our clients are bound to accept and do hereby accept the offer received from Sir Leonard Outerbridge and give notice that they propose and require the purchase of the shares to be completed on 15 October next." Harvela was thus put on notice of the view taken by Royal Jersey as to which of the two bidders had made the highest offer in accordance with the invitation telex and of Royal Jersey's intention to complete with Sir Leonard on 15 October. On 12 October 1981 Harvela commenced proceedings in Jersey against Royal Jersey and Sir Leonard and obtained ex parte injunctions restraining Royal Jersey and Sir Leonard from presenting to Harveys any transfer of the shares for registration, restrain- ing Royal Jersey from disposing of the shares and restraining Harveys from registering any transfer of the shares. On 23 October 1981 those injunctions were confirmed at an inter partes hearing on Harvela giving a cross undertaking as to damages. The parties thereafter proceeded with pleadings and discovery, but on 1 October 1982 Sir Leonard's and transferred to the English High Court on the footing that the proper law of the contracts claimed by Harvela and Sir Leonard respectively was English. Harvela agreed, But Royal Jersey did not give its consent. Nevertheless on 4 February 1983 this action was commenced in the out of the jurisdiction, but Royal Jersey applied to set aside that order. At the hearing of that application, on Harvela undertaking to the court to abide by any order made buy he the court as to damages in case the court was of opinion that Royal Jersey had sustained any by reason of the injunctions made. on 12 and 23 October 1981 of the Jersey court and on Royal Jersey undertaking not to seek to have the injuctions discharged, no order was made. By its statement of cliam, Harvela claims a declaration that Royal Jersey is contractually bound to transfer the shares to Harvela for $2,175,000, an order for specific performance of that contract and dam- ages. Sir Leonard in his defence denies any such contract and asserts that there is a valid contract between Royal Jersey and himself for the sale of that Royal Jersey is contractually bound to transfer the shares to him and for an order for specific performance of that contract and for damages. Royal Jersey in its defence to Harvela's claim and in its defence to Sir performance Royal Jersey will claim from Harvela interest on the purchase moneys from 16 October 1981 till payment by way of equitable relief at specified rate which is lower than the rate specified in the invitation telex. It further indicates that if Harvela fails to obtain such order Royal Jersey will claim interest from Harvela pursuant to the undertaking in damages given to the court and if Sir Leonard succeeds in obtaining an order for specific performance, Royal Jersey will claim interest from him by way of equitable relief. Harveys in its defence to Harvela's claim states that it seeks to take no active part in the proceedings. Royal London in its defence to Sir Leonard's conterclaim adopts a stance similar to that of Royal Jersey, that is to say that it takes no part in the proceedings but claims interest by way of equitable relief from Sir Leonard if he succeeds in obtaining an order for specific performance. The primary question that arises for decision is whether Harvela or Sir Leonard made the highest offer in accordance with the terms of the invitation telex. Depending on the answer to that question are various consequential questions, including which of Harvela and Sir Leonard should obtain an order for specific performance, whether the suceessful purchaser should be required to pay interest and if so at what rate and whether an inquiry as to damages should be ordered. I start with that primary question. It is common ground between Mr. Essayan, for Harvela, and Mr. Price, for Sir Leonard, that this question turns on the true construction of the invitation telex, Mr. Price submits Septembcr 1981 it was apparent that the second limb of Sir Leonard's offer could take effect because Harvela's offer was for a fixed monetary amount and was hither than the first limb and so constituted his offer; at that time it was also apparent that his offer was the highest offer because it exceeded Harvela's offer by $101,000; Royal Jersey had made no stipulation as to the form of the offer other than that it was to be a single offer for all the shares and that stipulation was obeyed; the certain and unambiguous nature of Sir Leonard's offer was demonstrated by the first that within two hours of 3 p.m. on 16 September Royal Jersey rejected Harvela's bid, and Mr. Price describes as Gilbertian any conclusion that Harvela's offer constituted the highest offer. Mr. Essayan submits first that Sir Leonard's bid was not a single offer as required by the invitation telex and, second, that it was not the highest offer as an invitation to bid by sealed competitive tender is one which implicidly excludes bids framed by reference to other bids. Mr. Essayan's first point rests on the basis that the two limbs of Sir Leonard's bid constituted separate offers. But it seems to me that the short answer to that point is that on the plain wording of Sir Leonard's bid there was only one offer by Sir Leonard, that is to say the higher of was received it was not possible for Royal Jersey to say which of the two limbs was higher or indeed whether the second limb could have any application, but that is irrelevant. What is relevant is whether at 3 p.m. on 16 September there was a single certain bid by Sir Leonard. At that time there was no difficulty, still less any impossibility, in quantifying the amount indicated in the second limb of Sir Leonard's bid as manifestly Harvela's bid was of a fixed monetary amount. Royal Jersey, having then received Harvels's bid, could immediately perceive that Sir Leonard's offer was one of $2,276,000, and only an offer of that sum as being higher than $2,100,000. In my judgment therefore Sir Leonard's offer was a single offer. Mr. Essayan's second point raises an important question of principle in relation to scaled competitive bidding: is it open to a bidder to make a bid by reference to the bid of another? More specifically on the facts of the present case the question for determination is whether it is open to any bidder to make a bid in the form of the higher of a fixed amount and an amount exceeding by a stated sum a rival bid expressed as a fixed monetary amount. I say that because, as was pointed out in course of argument, referential bids may take one of several forms and different considerations may apply to each. The discussion of the various forms of bid proceeded on the footing, which is plainly correct, that if a particular form of bid is open to one bidder it is open to every bidder. The crudest form of referential bid is that of an amount greater by a stated sum than the bid of a rival bidder. If more than one bidder bids in that form, it is obvious that the bidding would be frustrated as there would be an infinite ascension as bid exceeded bid. Mr. Price submitted that such frustration was no different from that produced by two or more bidders chancing upon the same amount which was the highest amount bid. Whilst it is of course right that such coincidence of bids would frustrate that round of bids, I cannot accept that it is right to treat the two possibilities of frustration as being on a par with each other. The risk of a coincidence of the amounts of bids is inevitable but, I would apprehend, contended that it is impossible for a term to be so implied. He submits that the fact that it is only an offer or an invitation to treat into which the court is asked to imply a term is a relevant consideration for the court to take into account, it being open to the vendor unilaterally to put whichever take into account, it being open to the vendor unilaterally to put whichever term he wishes into his offer or invitation. I agree that there is in principle no impossibility inherent in the implication of a term into an offer or an circumstances into a contract will have been present sub silentio in the offer the acceptance of which constitutes the contract and, it may be, in whether it is appropriate in the circumstances of the present case to imply such a term. Both Mr. Essayan and Mr. Price are agreed that the principles stated in in Liverpool City Council v. Irwin [1977] A.C. 239 govern the test to be applied in this case. That authority establishes that there are various categories of implied term. One such category is where master and servant) which demands by its nature and subject matter certain obligations. Those obligations will be implied by the general law, not by reference to tests such as what the officious bystander, still less what a party, would have said if asked about such obligations, but because they are legal incidents of that relationship. Those obligations must be necessary terms required by that relationship. It is not enough that they are reasonable. However, what is necessary must, I think, be determined by a broad consideration of the relationship and the subject matter thereof, and a term may be implied even though it is possible to envisage circumstances in which the absence of the term would not frustrate the contract between the particular parties. For example, in the Liverpool case it was held that there was an implied obligation on the landlord to take reasonable care to keep in reasonable repair the lifts and other means of access to flats let to tenants in a 15-storey tower block. If one postulates as tenant a pregnant woman with a young child living on the 15th floor (see per Lord Salmon, at p. 262) the necessary implication of a term relating to the lifts is obvious. It is less so if one postulates as tenant on that floor a fit mountaineer with athletic children, or indeed a tenant on the first floor in normal health. In the present case the relationship relied on by Mr. Essayan is that of vendor and bidder in sealed competitive bidding as well as the relationship between bidder and bidder in that situation. Mr. Price submitted that there was no reason why the law should intervene by implying a term in relation to sealed competitive bidding and he contrasted the relationship relied on by Mr. Essayan with the two relationships providing the established examples of this type of implied term (namely, landlord and tenant, and master and servant). But I do not see why the categories of relationship need be so limited and provided that I can be satisfied that the term contended for is a term required by the relationships relied on, I would be prepared to imply that term, I should also refer to one further point taken by Mr. Price. He has stressed the facts, which are accepted by Mr. Essayan, first, that it would be easy for a vendor inviting sealed competitive bids to insert a term which made clear that referential bids are excluded, and second, that such a term is sometimes to be found. But whilst it is right for the court to take these facts into account, they are not in themselves conclusive. It would be easy to include in contracts for tenancies of flats in high-rise blocks terms such as those which the cow implied in the Liverpool case, nor would it be in the least surprising if such provisions were found in some contracts. In my judgment the question that I must determine is whether in sealed competitive bidding a bid framed by reference to another's bid is excluded as a necessary incident of the relationship between vendor and bidder, and between bidder and bidder. A vendor is free to choose the method by which he sells his property, but a vendor who opts for sealed competitive bidding must be presumed to have done so deliberately. It will be noted that in the present case the trustees had in 1979 insisted on Harvela's earlier secret bid being referred to Sir Leonard. It is pertinent to ask: what can be taken to have been the purpose of a vendor in choosing to sell by means of inviting sealed competitive bids? Mr. Price says that the purpose is simply to get the best price. No doubt every vendor wants that, but the vendor who has opted for sealed bids has plainly chosen not to proceed by way of open bids and the difference between the two methods is that in sealed bidding the bidder does not know what any other bidder has bid or is bidding, whereas in open bidding (of which the prime example is an auction) the bidder does know and, save for the opening bid (which is not expected to be the maximum bid), he pitches his bid by reference to, and so as to surpass, the previous bid. In making a sealed bid when only a single bid is possible, the bidder is expected by vendor and competitor alike to bid the maximum amount that the bidder is prepared to pay. If referential bidding is possible, the bidder does not bid the maximum amount that he is prepared to pay; he bids the maximum increment over the bid of another. In this respect it seems to me that referential bids in whatever form are inconsistent with the purpose and essential nature of sealed bids. I do not lose sight of the points made by Mr. Price as to the ease with which referential bids may be excluded by appropriate language and to the use of such language in practice. Nevertheless unless compelled by authority to a contrary conclu- sion I would be prepared to imply a term into the invitation telex excluding referential bids as being a term required by the relationship between vendor and bidder, and between bidder and bidder. There are only two reported cases bearing on the point. The first is the decision of the Court of Appeal in South Hetton Coal Co. v. Haswell, Shotton and Easington Coal and Coke Co.[1898] 1 Ch. 465. In that case the defendant company was the lessee of two coal measures ("A" and "B"). The A coal measures were valuable but there was a considerable liability in respect of the B coal measures. There were two prospective the plaintiff and Mr. Barwick to submit sealed tenders by a specified date and indicated to both that "the highest net money tender I receive (all other things being equal and satisfactory) that tender I will at once accept." The tenders by arrangement were handed in and opened in the presence of all parties. Mr. Barwick's tender was for #31,100 plus the acceptance of the assignment of, and the giving of an indemnity in respect of, the B coal measures. The plaintiff's tender was for such a sum as a transfer of the B coal measures if Mr. Barwick's offer was upon that footing. There was no doubt therefore that the plaintiff's bid was, at the time it was made, one in a definite sum of #31,300. The liquidator declined to recognise the plaintiff's tender and accepted Mr. Barwick's tender. The plaintiff claimed specific performance of his alleged contract. The defend- ants applied to strike out the statemen t of claim and North J. did so on the ground that the condition as to all other things being equal and satisfactory was not satisfied. The plaintiff appealed and it was argued that the plaintiff's bid was the highest net money tender and that it was immaterial to the liquidator that the offer was made in such a form as to give the plaintiff an advantage over its competitor. That argument received short shrift in the Court of Appeal. Without calling on councel for the efendants Sir Nathaniel Lindley M.R. (with whom Rigby and Vaughan Williams L.JJ. concurred) said, at p. 468: "But now we have to consider whether [the liquidator] was bound to accept [the plaintiff's offer]. That raises two questions. Does the offer fairly answer the description of what the liquidator had bound himself to accept--in other words, does it answer the description of being 'the highest net money tender I receive'? It appears to me obviously not. Whether it was a tender at all depended entirely, not upon the construction of the letter, but upon whether other people tendered. That is not what the liquidator wanted, and that is not what he bound himself to accept. He says 'Send me your highest net money tender, and I will consider it.' [The plaintiff's offer] is merely illusory. It does not answer the description in a business sense, and it does not answer the description in a legal sense. I do not think that the liquidator was under the slightest obligation to accept this, although he might have accepted it. That is not the ground to which North J. attached most importance, but to my mind it is decisive. 1 think that we should be encouraging trickery and making a very bad precedent if we held that this was, in any fair sense of the word, the highest net money tender which the liquidator had bound himself to accept. I do not accuse these gentlemen of trickery; but if we said that this letter answered door to gross fraud, not only on purchasers, but on vendors also." He then went on to the question which North J. had determined in the defendant's favour and held that on that ground, too, the appeal failed. The decision of the Court of Appeal was, as Mr. Price rightly points inviting bids. The words "the highest net money tender" are more precise than "the highest offer" even though every offer received by Royal Jersey would, if not of a fixed sum, have to be reduced to money terms. As I read the remarks of Lindley M.R., the words of invitation used in the South Hetton case [1898] 1 Ch. 465 were construed as requiring the tender to state a monetary sum and this excluded a bid by reference to the amount offered by a competitor. I doubt if the words in the present case "the highest offer" can as a matter of construction be read in the same way. Mr. Price also pointed to the fact that the referential formula used in the South Hetton case was different. It was in what might be described as the crudest referential form, viz., a bid only of an amount expressed as greater than the other bid, as distinct from the more sophisticated form of Sir Leonard's bid. But in condemning, as Lindley M.R. did, the form of the bid in terms of fraud and trickery, in my judgment he was going beyond merely holding that as a matter of construction the referential bid failed to answer the particular words used. It is clear that he thought referential bids tricky and highly undesirable. The force of that criticism must apply to every form of referential bid. It is to be noted that the gross fraud to which he said the court would be opening the door was not only on purchasers (i.e. rival bidders) but also on vendors. In my judgment those observations give some support to the approach urged by Mr. Essayan, that in the relationship between vendor and bidder in sealed bidding, as well as between bidder and bidder, the law should require the exclusion of referential bids. A similar view was expressed by the majority of the New York Court of Appeal in S.S.I. Investors Ltd. v. Korea Tungsten Mining Co. Ltd., (1982) 449 N.Y.S. 2d 173. In that case pursuant to an invitation to submit sealed competitive bids a bid was made of U.S.$556,000 "and/or $1 more than the highest bidding price you have received." The ratio of the decision of all six of the judges whose views are briefly reported in the memorandum of judgment was that the purported bid was too uncertain because of the words "and/or" in the absence of words such as "whichever is the higher." Five of the six judges, however, went on to say, at p. 174: "Even if it were to be concluded that this deficiency was remedied by necessary implication, however, the 'one-dollar-more' alternative, standing alone, was indefinite and meaningless without reference to the bid or bids of other bidders. although in some circumstances a certain by reference to external objective facts, in the context of sealed competitive bidding the necessary certainty cannot be imported by cross-reference to the bids of others participating in the same competitive bidding over the objection of the owner or another bidder." I have some doubts as to whether the language used, if capable of being remedied and if remedied in the way suggested would in English law be held too uncertain. But it is the following passage that is material to the present case, at p. 174: "The very essence of sealed competitive bidding is the submission of independent, self-contained bids, to the fair compliance with which not only the owner but the other bidders are entitled. As the Appellate Division observed, to give effect to this or any similar bidding practice in which the dollar amount of one bid was tied to the bid or bids of another or others in the same bidding would be to recognise means whereby effective sealed competitive bidding could be wholly frustrated. In the context of such bidding, therefore, a submission by one bidder of a bid dependent for its definition on the bids of others is invalid and unacceptable as inconsistent with and potentially destructive of the very bidding in which it is submitted. On the only other occasion a similar ploy appears to have received judicial attention, over 80 years ago, it was likewise rejected." Reference is then made to the South Hetton case [1898] 1 Ch. 465. Again the formula used in S.S.I. Investors Ltd. v. Korea Tungstekn Mining Co. Ltd. is not exactly the same as that used by Sir Leonard, but again the sentiments expressed are consistent with and support the view that I have formed. Mr. Price relied on the opinion expressed by Judge Fuchsberg, who whilst concurring in the decision that the referential bid failed as being too uncertain, dissented on the question of the validity of the referential bid. The judge said, at p. 175: " Nor do I see any reason, in the absence of illegally, and in the context of a private sector business transaction in our relatively free enterprise society, to concern ourselves with the possible or potential effect of appellant's novel offer on commercial competitive bidding. This problem, if it turns out to be one, could easily be abated by appropriate conditions imposed by those who invite bids, or, if the legislature thought it of sufficient general interest, by statutory enactment." But, as I have already indicated, the fact that it is easy to exclude referential bids by express terms does not in itself prevent the implication of a term. Nor, to my mind, does the possibility that the legislature would choose to intervene prevent a term being implied. No doubt, Parliament could easily have legislated to impose on landlords the obligations relating to common parts of tower blocks which the House of Lords in the Liverpool case [1977] A.C. 239 was prepared to imply. Accordingly the authorities seem to me to be not inconsistent with the conclusion that referential bids are necessarily excluded from sealed competitive bidding and indeed to provide support for that conclusion, 1 would add that I am happy to base my decision on a broad ground covering all forms of referential bid. I would not have thought it right for the law to imply a term excluding some forms of referential bidding, leaving more sophisticated forms open to the ingenious bidder. It follows that I must treat Sir Leonard's bid as inconsistent with the implied term excluding referential bids and that Harvela's, and not Sir Leonard's, bid was the highest offer in accordance with the terms of the invitation telex. I am therefore prepared to make the declaration sought by Harvela. I turn next to the consequences flowing therefrom. The question that then arises is whether any enforceable contract between Royal Jersey and Harvela was created at 3 p.m. on 16 September 1981. Mr. Essayan submits that a contract for the sale by Royal Jersey of the shares to Harvela came into existence at that time, the invitation telex constituting an offer to sell and the making by Harvela of the bid in response constituting the acceptance which took effect as soon as Harvela was seen to have made the highest offer. Alternatively, if the invitation telex and Harvela's bid did not itself constitute a contract, he submits that the invitation telex was an offer to enter into a contract, which offer was accepted by Harvela's bid and the contract thereby created to enter into a contract is in law treated as itself the contract for sale of the shares. Mr. Essayan has yet a third string to his bow, that is to say that if the contract to enter into a contract should not be treated as itself a contract for sale but as a distinct contract, that contract is specifically enforceable. Mr. Price takes two points: first, that the invitation telex was no more than an invitation to treat and Harvela's bid was an offer which has never been accepted, and second, that no consideration has been provided by Harvela for the alleged contract. Mr. Price's first point turns on the construction of the invitation telex. He relies on the wording of that telex using as it does, terms usually indicative of an invitation to treat. Thus, it refers first to the previous "offers" of Harvela and Sir Leonard (each of which can only have been an offer and not the acceptance of an offer) and invites a revised "offer." Prima facie "offer" would bear the same meaning throughout the telex and it is the term invariably used in relation to what each of Harvela and Sir Leonard was invited to do. further, Royal Jersey's part was to "accept" the highest offer. In its original form, with the promis by Royal Jersey to be bound to accept the highest offer being expressly made subject to acceptance by Royal Jersey, there would in my view have been much to be said for Mr. Price's submission that this was an invitation to treat. But the removal of that qualification "subject to acceptance" in my judgment was very significant. It is trite law that the true character in law of a document is not determined merely by the label or description given to it by the parties: one must look at all the provisions of the document to see whether it has been accurately labelled or described by the parties. In the present case I must look at all the terms of the invitation telex as modified to determine whether it amounted to an offer. In contrast to Royal Jersey's invitation of 17 August 1982 in which it was expressly stated that that communication was an invitation to treat and that the trustees did not bind themselves to accept the highest or any offer, the invitation telex as modified contained an unequivocal promise to be bound to accept the highest offer. The word "offer" in an appropriate context can mean no more than "bid" and that to my mind is its plain meaning here. Whether that bid is intended to be only an offer or an acceptance for the Purposes of the law of contract will depend on all the cirarcumstances; and where as here the person inviting the bid indicates clearly that he binds himself to accept the highest bid, that invitation goes beyond being a mere invitation to treat and is itself an offer capable of being accepted by a bid in response to that invitation. I accept Mr. Essayan's submission that the present case is an example of a unilateral contract in the sense of a contract brought into existence by the act of one party in response to a conditional promise by another. Royal Jersey by the invitation telex promised to accept Harvela's bid if that were the highest offer in accordance with the terms of the invitation telex, and Harvela by responding thereto by making the highest bid brought the contract into existence. Mr. Essayan referred me to the were a roved in Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256. lt is sufficient to read a passage from the judgment of Bowen L.J. in which he refers to those remarks as well as discussing the nature of the offer by the defendants in the Carlill case in their advertisement to pay offer by the defendants in the Carlill case in their advertisement to pay #100 to any person who contracted influenza after having used one of their smoke balls. he said, at pp. 268--269. "It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? It is an offer to become liable to anyone who, before it is retracted, performs the condition, and, although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement. It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertise- ments are offers to negotiate--offers to receive offers--offers to chaffer, as I think, some learned judge in one of the cases has said. If this is an offer tobe bound, then is is a contract the moment the person fulfils the condition. That seems to me to be sense, and it is also the ground on which all these advertisement cases have been decided during the century; and it cannot be put better than in Wiles J.'s judgment in Spencer v. Harding. 'In the advertisement cases,' he says, 'there never was any doubt that thheadvefrtsemcet amount~edto a promise to pay the money to the person who fist gave information. The difficulty suggested was that it was a contract with all the world. But that, of course, was soon overruled. It was an offer to become liable to any person who before the offer should be retracted should happen to be the person to fulfil the contract, of which the advertise- ment was an offer or tender. That is not the sort of difficulty which presents itself here. If the circular had gone on "and we undertake to sell to the highest bidder" the reward cases would have applied, and there would have been a good contract in respect of the persons. As soon as the highest bidder presented himself, says Willes J., the person who was to hold the vinculum juris on the other side of the contract was ascertained, and it became settled " Mr. Price's second point was that there was no consideration moving from Harvela. He said that Harvela merely did what it was invited to do, me to a case in the Nova Scotia Supreme Court, Saltzberg and Rubin v Hollis Securities Ltd. (1964) 48 D.L.R. (2d) 344. In that case a vendor invited bids for the purchase of the vendor's property and informed the bidders that the highest offer would be accepted. Patterson J. held that on the true construction of the invitation it was only an invitation to treat and not an offer. I say nothing about that part of the decision which relates to the construction of the invitation in the particular circumstances of that case. But the judge briefly commented that there was no consider- ation for the promise that the highest tender would be accepted. That comment, if I may respectfully say so, was correct if he was confining himself to the position before the bids were made pursuant to the invitation. But what the judge does not appear to have considered (no doubt because of the conclusion that he reached on the construction of the invitation) was whether the performance of the act which the vcndor had invited, that is to say the submission of the bid, constituted consider- ation moving from the bidder to the vendor for the contract claimed by the bidder. On the face of the report, cases like Spencer v. Harding, 5 C.P. 561 and the Carlill case [1893] 1 Q.B. 256 were not considered. In the Carlill case it was argued by the defendant company that there was no consideration for the contract claimed by the plaintiff. But the Court of the advertisement, that is to say the use of the smoke ball, was in itself sufficient consideration. In my judgment similarly, Harvela provided consideration when it did what Royal Jersey invited to to do, that is to say it submitted the highest bid. The consideration moving to Royal Jersey which it wanted. If further consideration were needed, it can be found in the detriment suffered by Harvela in having gone to the expense of making its bid through its lawyers. In my judgment therefore there was an enforceable contract at 3 p.m. on 16 September 1981 between Royal Jersey and Harvela. It matters not whether one treats the contract that came into existence then as a contract for the sale of the shares or, as I am inclined to think, a contract whereby Royal Jersey bound itself to accept Harvela's bid, which amounts to a contract to enter into a contract. As Lord Wright said in Hillas and Co. Ltd. v. Arcos Ltd., 147 L.T. 503, 515: "A contract de praesenti to enter into what in law is an enforceable contract, is simply that enforceable contract, and no more and no less; . . ." Even if these first two ways in which Mr. Essayan put his case were wrong and the contract entered into at 3 p.m. on 16 September 1981 must be treated as a contract distinct from the contract for the sale of shares, it is still a specifically enforceable contract conferring on Harvela an interest in the shares: see Daulia Ltd. v. Four Millbank Nominees Ltd. [1978] Ch. 231, 241 per Goff L.J The next question that arises is whether Sir Leonard entered into a contract with Royal Jersey for the purchase of the shares at a price of $2,276,000. Mr. Price says that Sir Leonard did. Mr. Nugee says that he did not, there never having been any consensus ad idem between Sir Leonard and Royal Jersey for the sale of the shares to Sir Leonard other than as the winner of the contest between him and Harvela to make the highest bid in accordance with the invitation telex. The owner of property who has bound himself contractually to sell it to A may of course enter into a binding contract to sell the same property to B, and if authority were needed for that it can be found in the South Hetton case [1898] 1 Ch. 465, 468 where Lindley M.R. said: "I have not the slightest doubt that if the liquidator had thought fit to accept the plaintiffs' offer it would have been open to him to do say nothing as to the right of Mr. Barwick to object, but, as between the liquidator and the plaintiffs, I do not doubt that the liquidator might have accepted that offer." As a contract between Royal Jersey and Harvela came into existence on 16 September 1981 by virtue of Harvela having made the highest offer, Royal Jersey could not enter into a contract for the sale of the shares without a further act by Royal Jersey accepting Sir Leonard's bid. On 29 September 1981 Royal Jersey did indicate to Sir Leonard its acceptance of that bid and prima facie a contract between Royal Jersey and Sir Leonard for the sale of the shares to him then came into existence. In Royal Jersey's defence to the counterclaim of Sir Leonard it has not been pleaded that there was any mistake vitiating any such contract. Let me nevertheless deal with Mr. Nugee's point that there was such a mistake. Leonard's bid in that it thought that it was bound by the terms of the invitation telex to do so. But whether that was a unilateral mistake (and Mr. Nugee referred me to various passages in Chitty on Contracts, 25th d. (1983), paras. 330 et seq. on unilateral mistake) or as 1It~hin, a Price that the mistake was one of law rather than of fact. The mistake related to the effect in law of Sir Leonard's bid, and both Royal Jersey and Sir Leonard on the view that I have formed made a mistake of law. Accordingly as the law now stands, that mistake would not prevent the formation of the contract between Royal Jersey and Sir Leonard. Which contract should the court now enforce, given that each of Harvela and Sir Leonard seeks specific performance of contracts for the sale of the same shares to it or him? The answer to that question is simple. The court will not order specific performance of Sir Leonard's contract as that would necessitate a breach of Royal Jersey's prior contract with Harvela. In my judgment Harvela is entitled to an order for specific performance of its contract. The next question relates to interest on the purchase money to be paid by Harvela. Royal Jersey claims that as a term of the order for specific performance, Harvela should be required to pay interest to Royal Jersey by way of equitable relief. Mr. Nugee in putting forward that claim submitted that while Royal Jersey would have been entitled to interest at the contractual rate specified in term 5 of the invitation telex, i.e. at the rate of 4 per cent. above the Bank of Montreal prime rate for Canadian dollar loans, he was only asking for interest at a lower rate. He said that Royal Jersey might have asked for interest at the short term investment account rate (c.f. Bartlett v. Barclays Bank Trust Co. Ltd. (Nos. 1 and 2) [1980] Ch. 515, 547) but he was content to limit his claim to a rate equal to the one-month fixed Canadian dollar LIBOR (London Inter-Bank Offered Rate) quoted at 11 a.m. London time on 16 October 1981 and each renewal date thereafter. Despite the seeming moderation of Royal Jersey's demands, and even without the compounding of interest claimed by Royal Jersey, the interest from the completion date (16 October 1981) to 15 November 1983 amounts to a little over $650,000. In marked contrast, the income received by the trustees from the shares is limited to $1,866 per annum on the 311 six per cent. preference shares. The 24,337 non-voting preference shares are entitled to no dividend and no dividends have been paid in or in respect of the period since 16 October 1981 on the common shares. There is no evidence before me to indicate what dividends (if any) Harveys might yet properly declare on its common shares in respect of that period. The general rule in equity as to the payment of interest on unpaid purchase moneys on a sale of land where there is a delay in completion and the vendor remains in occupation was stated by Sir John Leach V.C. in Esdaile v. Stephenson. 1 Sim. & St. 122, 123, quoted with approval by Wilberforce J. in In re Hewitt's contract [1963] 1 W.L.R. 1298, 1302. Leach V.C. said: "Where there is no stipulation as to interest, the general rule of the court is, that the purchaser, when he completes his contract after the time mentioned in the particulars of sale, shall be considered as in possession from that time, and shall from thence pay interest at #4 per cent., taking the rents and profits. If, however, such interest is much more in amount than the rents and profits, and it it clearly made out that the delay in completing the contract was occasioned by the vendor, there, to give effect to the general rule, would be to enable the vendor to profit by his own wrong; and the court, therefore, gives the vendor no interest, but leaves him in possession of the interim rents and profits." There are two points of distinction that leap to the eye. First, the rule was expressed in relation to the sale of land and we are here concerned with the sale of shares. Mr. Price, in his submissions on the footing that interest was sought against Sir Leonard if he obtained an order for specific performance, suggested that the court should not apply to contracts for the sale of shares the same rules as applied to the sale of land. But in the absence of special circumstances justifyng a different rule it seems to me that the same principle should apply. I do not understand Mr. Essayan to take any point on this distinction. The second point of distinction lies in the fact that the Vice-Chancellor prefaced his comments with the words "Where there is no stipulation as to interest," whereas here the parties did specifically agree that interest at a specified rate should be paid save in one particular circumstance, that is to say where there has been delay on the part of Royal Jersey. Mr. Nugee says that even if, contrary to his submission, Royal Jersey could not rely on the contractual term as to interest, all that means is that the contractual term has no application and the court is free to do equity by applying its ordinary rules. I accept that if Harvela is not obliged by term 5 of the invitation telex to pay interest the court is not precluded in the exercise of its discretion from requiring Harvela to pay interest, but in my judgment the existence of the contrac- tual terms and the exemption of Harvela thereunder (if that can be shown) would be very material matters for the court to take into consideration in the exercise of its discretion. In my judgment, where the parties have considered and agreed the circumstances in which interest will or will not be payable by the purchaser, it would require very special circumstances for the court to interfere and impose on the purchaser who is not required to pay interest under the contract an obligation to pay interest in order to obtain the vendor's performance of the contract. I shall therefore consider first whether Harvela is, under the contract, liable to pay interest. It can only escape that liability if the delay in completion is on the part of the trustees. Mr. Nugee submits that the delay cannot be so described. I cannot agree. It is to be noted that the relevant delay is not qualified in the contract in any way such as one sometimes finds: for example, where it is stipulated that the delay must have been caused by the wilful default of the vendor. The delay in completion was certainly not on the part of Harvela, which, Royal Jersey accepts, was willing to complete on 16 October 1981. Though I cannot avoid feeling some sympathy with Royal Jersey and its advisers, faced as they were with an awkward problem of law, the simple fact of the matter is that they erroneously thought that Royal Jersey was bound to accept Sir Leonard's offer; it was for that reason that Royal Jersey did not complete what can now be seen to have been its contract to sell to Harvela. True it is that had Royal Jersey indicated an intention to complete with Harvela, Sir Leonard would have been likely to have obtained an injunction pending such completion; but in that event, no doubt Royal Jersey would have obtained the comfort of a cross-undertak- ing in damages from Sir Leonard. That is not what happened. Royal jersey it was which refused to complete with Harvela and in my judgment it is clear beyond argument that the delay in completion was on the part of Royal Jersey. Accordingly Royal Jersey has no contractual right to interest. Ought the court nevertheless to require interest to be paid on the basis of the equitable rules applicable to delays in completing contracts where there is no contractual term as to interest? I can see no special circum- stances which would require the court as a matter of equity to improve in Royal Jersey's favour upon the terms of its contract with Harvela. Indeed as Mr. Essayan pointed out, the two conditions laid down by Sir John satisfied in that the interest greatly exceeds the income from the property sold and the delay has been occasioned by the vendor, Royal Jersey. Mr. Nugee's riposte to that was that this would be to ignore the basis of the rule which is to prevent a vendor from profiting by his own wrong, and that, he says, is not an apt description of his client. But in its context Leach V.-C.'s remark seems to me to be directed simply to the vendor who commits a wrong in the sense of breaking his contractual obligation to complete timeously, yet profits by receiving more by way of interest from the innocent purchaser than the purchaser would have received by way of income from the property. Having regard to the fact that the delay was occasioned by Royal Jersey and not by Harvela, to the very great disparity between the interest claimed and the dividends received, and to the contractual terms as to interest, I am far from satisfied that equity requires the imposition of a term on Harvela as to interest at the rate should be allowed to keep the dividends too, because they were paid after the shares belonged in equity to Harvels; but on this I propose to apply by analogy the rule as states in Esdaile v. Stephenson and not to allow Harvela both freedom from interest as well as the retention of the dividends. I think that it would be equitable to direct specific performance on the terms that Royal Jersey is entitled to retain and receive all dividends paid and to be paid on any of the shares in respect of the period from 16 October 1981 to completion. That leaves only the claims by each of Harvela and Sir Leonard for damages. Harvela claims damages for the failure by Royal Jersey to complete on the contractual completion date and it asks for an inquiry as to damages. It is conceded by Mr. Nugee that Harvela, owning as it pleaded and has been admitted 43 per cent. of the Harveys shares, would have had control of Harveys had completion of its contract duly occurred and that some damage to Harvela has resulted such that it is appropriate for there to be an inquiry as to damages. I therefore make that order. Sir Leonard's claim for damages is on a different footing. That claim is a claim for damages in lieu of specific performance. Mr. Price, in asking for an inquiry as to damages, accepts that he must show Sir Leonard has suffered some damage even though the amount thereof cannot yet be quantified. He says that it is obvious that Sir Leonard has suffered damage through not receiving the shares. He relies on two matters. First, he says hat the shares which Sir LLeonard contracted to buy were worth more than what Harvela bid for them as is demonstrated by the fact that he was willing to pay $101,000 more than any bid by Harvela. But Sir Leonard would have had to establish that he suffered loss by Royal Jersey not selling the shares to him for $2,276,000, a price which in a letter dated 29 September 1981 to Mrs. Campbell he described as crippling. There is no evidence before me of such loss. Second, Mr. Price says that the failure of Royal Jersey to transfer the shares to Sir Leonard has deprived Sir Leonard of control of Harweys. But it is accepted by Mr. Price that Sir Leonard would not have control of Harveys even if the shares in the settlement were transferred to him, because he would need the consent of other Outerbridge shareholders to exercise such control. It is not alleged that he has any right to such control. It is, of course, well established that damages may in an appropriate case be awarded notwithstanding that it is only in respect of a loss of a chance subject to contingences. But no facts have been put before me from which I can safely infer that Sir Leonard has suffered any damage. In the circumstances I shall award Sir Leonard nominal damages of #2 only and I refuse the request for an inquiry. Declaration and order accordingly. Solicitors: Slaughter & May; McKenna & Co.; Bischoff & Co. [Reported by IAN SAXTON, ESQ., Barrister-at-Law]