Details of Case Cannot Slot into Formula

It is generally accepted in modern writings on the English law of contract that during the latter half of the nineteenth century a concept of contract developed, together with an associated body of legal doctrine, which is now referred to as the ‘classical law of contract’ Within this conceptual framework lies the doctrinal foundation of offer and acceptance. Stripped to its essentials, the doctrine of ‘offer and acceptance provides that to form a valid contract an ‘offeror’ must make an offer to do or not do something to an ‘offeree’, and the offeree’ must accept the offer [1]. Furthermore, the acceptance should be an unqualified assent to the offer [2] in effect there should be a meeting of minds in order for contractual formation. However, there are particular situations where the details of a case cannot slot into this prescribe formula, illustrated by Lord Wilberforce in the case of New Zealand Shipping Co. Ltd V AM Satterthwaite (The Eurymedon) [3]

‘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 facts to fit uneasily into marked slots of offer and acceptance’.

Lord Wilberforce highlights the strict nature of offer and acceptance in English law and how in cases that challenges this paradigm are in sense force to comply ‘black and white’ notion of offer and acceptance.

In modern commercial practise this issue has arisen to certain circumstances known as ‘battle of forms’, where parties want to enter into a contract but press for position in an attempt to use the rules of law so as to ensure that the contract is on terms of their choosing [4] . This is demonstrated in Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [5] , the plaintiff offered to deliver a machine tool for £75,535, on the terms set out in the quotation, which included a price variation clause. The defendant buyers replied on, giving an order with differences from the sellers’ quotation and stating that the order was to be on the buyers’ terms, which did not include the price variation clause. The order contained a tear off slip for the plaintiff to sign, which stated that the order was to be on the buyers’ terms. The sellers returned the completed slip with a covering letter stating that the slip with a covering letter stating that the delivery was to be ‘in accordance with our revised quotation of May 23rd ‘.When the machine came to be delivered, the claimant sought to rely on the price variation clause. The Court of Appeal unanimously held that he could not, because a contract had been concluded on the buyer’s term.

The reasoning of the majority, Lawton and Bridge LJJ proceeded upon traditional lines. They adopted the ‘mirror image’ approach to contractual formation, holding that to constitute a valid acceptance the acceptance must mirror exactly the terms of the offer. Applying this, they held that the buyers’ order could not be construed as an acceptance of the sellers’ offer because it did not mirror exactly the terms of the sellers’ offer and therefore amounted to a counter-offer. They then held that this counter-offer was accepted by the sellers signing the tear-off acknowledgement on the buyers’ order form. The letter accompanying the acknowledgement slip was held not to be an attempt to reintroduce the terms of the sellers’ original offer and so was not a counter-offer, but was simply a means of identifying the order for the machine tool. Lord Denning, on the other hand, rejected this approach, holding it to be ‘out-of-date’. He held that ‘the better way is to look at all the documents passing between the parties’ and to identity whether or not the parties reached ‘agreement on all material points’. Applying this reasoning, he held that the signing of the tear-off acknowledgement by the sellers was the ‘decisive document’, which made it clear that the contract was concluded on the buyers’ terms. Nevertheless, the reasoning of Lord Denning has been criticised on the ground that it is productive of uncertainty because it gives too little guidance to the courts, or to legal advisers, in determining whether or not an agreement has been reached. [6]

Butler case has demonstrated that the traditional approach of the courts has been to focus on the correspondence between parties. An alternative view is that the courts should place greater emphasis. However, cases can be found in which the court have decided no contract was concluded between the parties even though they had apparently acted on the basis that they were in a contractual relationship [7] . Such was in Sterlings Hydraulics Ltd v Dichomatik Ltd [8] , the purchaser’s terms prevailed. The purchaser faxed an order to the supplier, stating that it was ‘subject to the terms and conditions as set out below and overleaf’. The supplier faxed an acknowledgement, which stated at the bottom of the second page ‘Delivery based on our General Terms of Sale’. These ‘terms of sale’ were not set out in the fax. The High court held that the words contained on the acknowledgment were insufficient to indicate that it was intended to be a counter offer, and to dispute the purchaser’s terms and conditions.