Judgment of the Court delivered by Tipping J 

Introduction

The appellant, Miss Heather Fleming, brought proceedings in the High Court against the personal representatives of her late de facto husband Frank Beevers. Her proceedings had a dual ambit. First she claimed on conventional constructive trust principles an interest in the house at Musselburgh Rise owned by Mr Beevers which the parties occupied during their relationship. Fraser J awarded her a one third interest. From that award there is no appeal by either side.

The second and separate aspect of Miss Fleming’s claim was the proposition that the late Mr Beevers had promised to leave her in his will his half interest in a property in Queenstown which the parties had jointly acquired plus his grand piano. This was not a claim under the Testamentary Promises Act 1949 but a claim that Mr Beevers had bound himself in contract to leave her his half share of the Queenstown property and the piano in his will. Fraser J dismissed this claim holding that although each party intended to leave the other his or her interest in the Queenstown property by will, this arrangement did not amount to a legally binding contract of which specific performance could be ordered. Nor was the Judge satisfied that there was an enforceable contract in relation to the piano.

Background circumstances

When the parties met in 1975 Miss Fleming was 19 and Mr Beevers was in his mid 40’s. They started living together in a de facto relationship in 1976. Mr Beevers died suddenly and unexpectedly on 4 July 1989. Throughout their relationship the parties kept their financial affairs separate. They both contributed in a broadly equal manner to joint expenses. The house in Queenstown, in respect of which the issue arises, was purchased pursuant to a contract dated 12 February 1989. The parties had however discussed the purchase of a property in either Wanaka or Queenstown for some time before the particular property was acquired.

The primary evidence concerning the relevant matters came of course from Miss Fleming. Her evidence was supported in a number of material ways by the evidence of her solicitor, Mrs Medlicott. Mr Churchman argued that as the claim was against a deceased estate the evidence in support should be carefully scrutinised and should be cogent. We accept that proposition and approach the case on that basis. The Judge found that Miss Fleming was a reliable and truthful witness on all essential matters. He also felt he could place weight on Mrs Medlicott’s evidence.

The contract for the purchase of the Queenstown property shows both Mr Beevers and Miss Fleming as purchasers. The price was $138,000. The parties agreed that they would each contribute exactly one half of the purchase price. To this end Miss Fleming borrowed $69,000 on the security of her half share of the property. Mr Beevers produced his half share largely by capitalising his superannuation. The conveyancing was done by Mrs Medlicott. Her settlement statement shows that Miss Fleming and Mr Beevers each produced $69,000. The equality between the parties even extended to the settlement of costs and disbursements. There is a handwritten note on the settlement statement demonstrating that Miss Fleming paid $700 on that account and Mr Beevers $705.87.

Title was taken by the parties as tenants in common in equal shares. Mrs Medlicott gave evidence that she explained to Miss Fleming the difference between joint tenancy and tenancy in common. The key point is that Miss Fleming instructed Mrs Medlicott at the time when the structure of the transaction between the parties was being discussed, that she and Mr Beevers had agreed that each would leave to the other by will his or her half share in the property. Mrs Medlicott told Miss Fleming that in this light the safest way to achieve this was to take title as joint tenants. However because of the funding arrangements, and in particular because Miss Fleming was borrowing the whole of her cash input on the security of her half share, Mrs Medlicott deposed that it was decided the parties would take title as tenants in common in equal shares but on the basis that each would make a will devising his or her share to the other.

The formalities extended to the fact that Miss Fleming’s bank required a guarantee from Mr Beevers of their advance to her. He was willing to give such a guarantee. A formal indemnity was executed by Miss Fleming so that if Mr Beevers was ever required to answer the guarantee Miss Fleming would indemnify him from her other assets. Settlement took place on 10 March 1989. A few days before there was a meeting. Both Miss Fleming and Mr Beevers attended Mrs Medlicott’s office. He of course had to sign the guarantee and there were other papers to do with his financing arrangements which also required his signature. Mrs Medlicott asked Mr Beevers if he had made a will in Miss Fleming’s favour in respect of his half share of the Queenstown property. He replied that he had not. Mrs Medlicott said that it was crucial that he should do so. She offered to prepare written instructions on the spot. Mr Beevers said that she need not do so because he would go straight to his own solicitors, Messrs Caudwells, and get it done. Unfortunately Mr Beevers died only a few months later without having made a new will. His earlier will, executed in July 1979, left everything to his three sons by his earlier marriage.

There is evidence to which Mr Churchman drew attention that Miss Fleming spoke to Mr Beevers about his will only a few days before he died. Mr Churchman suggested that this demonstrated that Mr Beevers had never really intended to bind himself contractually to leave his half share of the Queenstown property to Miss Fleming because he had clearly not made up his mind what to do in his will. We do not read the evidence in that way. It seems clear to us that Mr Beevers’ hesitation related to what he ought to do with his other assets as between his three sons. It is clear from the evidence that there had been a rift between Mr Beevers and his eldest son.

That then is the broad background against which Miss Fleming sought in the High Court to enforce against Mr Beevers’ personal representatives what she contended was his contractually binding promise to leave his half share of the Queenstown property and his grand piano to her in his will.

High Court judgment

The Judge referred to a number of passages in the evidence and then said that having carefully considered the whole of the evidence he was unable to accept that the discussions between the parties about the Queenstown property amounted to a contract by which each became legally bound to leave to the other his or her interest in the Queenstown property by will. Nor did he think there was a contract by which Mr Beevers was to leave to Miss Fleming the grand piano. The essence of the Judge’s reasoning is best set out in his own words. He said:-

“I accept that he intended to leave her the grand piano and that each intended to leave the other his or her interest in the Queenstown property by will, that Mr Beevers intended to make a will on those lines and that his unexpected death intervened before his intention was carried out. I do not consider, however, that this went beyond him forming the intention to benefit her in this way and intimating to her that he would do so. There is a substantial gulf in my opinion between such a situation on the one hand and on the other a contract by which the party concerned becomes legally obliged to carry out the commitment undertaken.”

Judgment was therefore given for the defendants.

Issues

Three questions arise. The first point is whether the Judge was right in his conclusion that the parties did not intend to create a legally binding obligation. ... 

Intention to create legal relations?

This is the point upon which Miss Fleming’s claim foundered before Fraser J. When a business transaction is undertaken between strangers it will almost always be a reasonable inference that they were intending to create a legally enforceable relationship. If, however, a transaction is undertaken between husband and wife or between other family members that will not necessarily be so. Indeed some of the authorities suggest that, catchphrase always to the circumstances of the particular case, there is a presumption that persons in a close familial relationship do not intend to create legally enforceable relations when they undertake business or other financial transactions.

The leading case in England is the decision of the Court of Appeal in Balfour v Balfour [1919] 2 KB 571. In that case there was an agreement between husband and wife whereby the husband agreed to allow the wife a monthly sum in consideration of her agreeing to support herself without calling on him for any further maintenance. The Court held that this was not a contract but simply a domestic arrangement that could not be sued upon. The kernel of the reasoning was that the parties had not intended that their arrangement should have formal legal consequences.

To similar effect was the decision of the Court of Appeal in England in Jones v Padavatton [1969] 2 All ER 616. In that case a mother had agreed to make provision for her daughter if she diligently pursued her studies for the Bar. At p 621 Salmon LJ said:

“Counsel for the mother has said, quite rightly, that as a rule when arrangements are made between close relations 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 … There may, however, be circumstances in which this presumption, like all other presumptions of fact, can be rebutted.”

... An English case on the other side of the line is Parker v Clark [1960] 1 All ER 93 where a young couple were induced to sell their house and move in with an elderly relation on the strength of his promise to leave them a share of the proposed home. It was argued that this was merely a social arrangement with no intention on either side to create a legally binding obligation. Devlin J held that on the facts of that case a legally binding obligation was intended for reasons which need not be set out.

The English cases speak in terms of presumption. The range of circumstances in cases such as these is likely to be so varied that in any particular case a presumption, albeit of fact, is likely to be of limited assistance. Each case will turn on its own facts and there is no substitute for a careful examination of those facts. The catchphrase matter and attendant circumstances may well suggest that the parties had no intention of creating a legally enforceable obligation. The converse may equally be true. If a father promises to pay his son an allowance while he attends university, that without more would ordinarily be construed as creating a moral obligation only. If however, as in this case, a husband and wife (it hardly matters that the relationship is de facto) structure a joint purchase and collateral matters in a formal way with one of the terms of the transaction being the making of corresponding wills the inference that each party intended a legally binding obligation with regard to the wills is, we would have thought, a strong one. Obviously all relevant circumstances must be examined before a final conclusion can be reached. The plaintiff has the onus of satisfying the Court on the balance of probabilities that it is proper to draw the necessary inference.

Fraser J held that Mr Beevers formed the intention of leaving his half of the Queenstown property to Miss Fleming in his will. He was also satisfied that he intimated to her he would do so. He described the obligation thereby resting on Mr Beevers as a “commitment undertaken” but said that it was not a commitment which the parties intended to be legally enforceable. We are unable to accept that view. We acknowledge that Fraser J had the benefit of hearing Miss Fleming give her evidence but we do not think there was really any great dispute on matters of primary fact. The essential question is one of inference.

The evidence establishes that the parties kept their financial affairs separate. It is also established, because the Judge believed Miss Fleming, that she saw it as being of considerable importance that Mr Beevers should make a will in the terms discussed. It is a reasonable inference that she conveyed her views in that respect to him. The intentions of the parties must be derived objectively. At the meeting with Mrs Medlicott Mr Beevers said he was going straight to his solicitors to make a will in accordance with what had been agreed. Miss Fleming had already made a will leaving everything to him.

We do not regard the various steps or elements in the transaction as being discrete, as Mr Churchman submitted. In our judgment the evidence clearly establishes a composite transaction involving the purchase of the Queenstown property, its financing on a separate basis, taking title as tenants in common, the guarantee by Mr Beevers of Miss Fleming’s mortgage, her indemnity to him and the agreement each would leave the other his or her half share by will. We consider it to be quite unrealistic to sever the latter aspect. In our view it was simply part of the whole arrangement pursuant to which the Queenstown property was being acquired. There cannot be the slightest doubt that the other elements were intended to affect the legal relationship between the parties, for example the tenancy in common, as opposed to a joint tenancy. We regard as unpersuasive the proposition that the will making element was, unlike the other elements, not intended to affect the legal relationship between the parties. That suggestion is improbable. It also involves an unnatural severance of what was objectively an important aspect of the whole transaction from the remaining elements.

Thus, with respect to Fraser J, we consider the correct view with regard to the Queenstown property to be that there was one composite transaction in relation to which all material aspects (including the wills) were intended to affect the legal relationship between the parties and to create formal legal obligations. ...

However, with regard to the grand piano we agree with Fraser J. The evidence is insufficient to enable the inference to be drawn that the parties intended to create a legally binding obligation. All Miss Fleming said on this catchphrase was that Mr Beevers told her he would like her to have the grand piano. It does not appear that the piano was part of the Queenstown transaction in any event. ...

Conclusion

Accordingly we differ from the conclusion to which Fraser J came and hold that the parties entered into an oral contract of a composite kind whereunder as a material part Mr Beevers bound himself to leave his half share of the Queenstown property to Miss Fleming in his will. ... We therefore allow the appeal and vacate the dismissal of Miss Fleming’s second cause of action in the High Court. We order the respondents, as Mr Beevers’ administrators, specifically to perform the contract of devise by transferring to the appellant the late Mr Beevers’ half interest in the Queenstown property. The appellant is entitled to costs which we fix at $4,000 plus disbursements and accommodation and travel expenses of counsel to be fixed, if necessary, by the Registrar.

Cur adv vult.

June 6. The following judgments were delivered: --

COCKBURN CJ.

This was an action brought in the Epsom County Court upon a contract for the sale of a quantity of oats by the plaintif to the defendant, which contract the defendant had refused to complete on the ground that the contract had been for the sale and purchase of old oats whereas the oats tendered by the plaintiff had been oats of the last crop, and, therefore, not in accordance with the contract.

The plaintiff was a farmer, the defendant a trainer of racehorses. It appeared that the plaintiff, having some good winter oats to sell, applied to the defendant's manager to know if be wanted to buy oats, and, having received for answer that be (the manager) was always ready to buy good oats, exhibited to him a sample, saying at the same time that he had forty or fifty quarters of the same oats for sale at the price of 35s per quarter. The manager took the sample, and on the following day wrote to say he would take the whole quantity at the price of 34s a quarter.

Thus far the parties were agreed; but there was a conflict of evidence between them whether anything passed at the interview between the plaintiff and the defendant's manager on the subject of the oats being old oats, the defendant asserting that he had expressly said that he was ready to buy old oats and that the plaintiff had replied that the oats were old oats, while the plaintiff denied that any reference had been made to the oats being old or new.

The plaintiff having sent in a portion of the oats, the defendant, on meeting him afterwards, said: “Why, those were new oats you sent me!”, to which the plaintiff having answered: “I knew they were. I had none other,” the defendant replied: “I thought I was buying old oats; new oats are useless to me; you must take them back.” This the plaintiff refused to do, and brought this action.

It was stated by the defendant's manager that trainers as a rule always use old oats, and that his own practice was never to buy new oats if he could get old.

But the plaintiff denied having known that the defendant never bought new oats, or that trainers did not use them; and, on the contrary, asserted that a trainer had recently offered him a price for new oats. Evidence was given for the defendant that 34s a quarter was a very high price for new oats, and such as a prudent man of business would not have given. On the other hand, it appeared that oats were at the time very scarce and dear.

The learned judge of the county court left two questions to the jury, first, whether the word “old” had been used with reference to the oats in the conversation between the plaintiff and the defendant's manager; secondly, whether the plaintiff had believed that the defendant believed, or was under the impression that he was contracting for old oats, in either of which cases he directed the jury to find for the defendant.

It is to be regretted that the jury were not required to give specific answers to the questions so left to them, for it is quite possible that their verdict may have been given for the defendant on the first ground, in which case there would, I think, be no doubt as to the propriety of the judge's direction, whereas now it is possible that the verdict of the jury – or at all events of some of them – may have proceeded on the second ground. We are called upon to consider and decide whether the ruling of the learned judge with reference to the second question was right.

For this purpose we must assume that nothing was said on the subject of the defendant's manager desiring to buy old oats, nor of the oats having been said to be old, while, on the other hand, we must assume that the defendant's manager believed the oats to be old oats, and that the plaintiff was conscious of the existence of such belief, but did nothing directly or indirectly to bring it about, simply offering his oats and exhibiting his sample, remaining perfectly passive as to what was passing in the mind of the other party. The question is whether under such circumstances the passive acquiescence of the seller in the self-deception of the buyer will entitle the latter to avoid the contract. I am of opinion that it will not.

The oats offered to the defendant's manager were a specific parcel, of which the sample submitted to him formed a part. He kept the sample for twenty-four hours, and had, therefore, full opportunity of inspecting it, and forming his judgment upon it. Acting on his own judgment, be wrote to the plaintiff offering him a price. Having an opportunity of inspecting and judging of the sample, he is practically in the same position as if he had inspected the oats in bulk. It cannot be said that, if he had gone and personally inspected the oats in bulk, and then, believing – but without anything being said or done by the seller to bring about such a belief – that the oats were old, had offered a price for thern, he would have been justified in repudiating the contract, because the seller, from the known habits of the buyer or other circumstances, had reason to infer that the buyer was ascribing to the oats a quality they did not possess, and did not undeceive him.

I take the true rule to be that where a specific article is offered for sale without express warranty or without circumstances from which the law will imply a warranty, as where, for instance, an article is ordered for a specific purpose and the buyer has full opportunity of inspecting and forming his own judgment, if he chooses to act on his own judgment, the rule caveat emptor applies. If be gets the article he contracted to buy, and that article corresponds with what it was sold as, be gets all he is entitled to, and is bound by the contract. Here the defendant agreed to buy a specific parcel of oats. The oats were what they were sold as, namely, good oats according to the sample. The buyer persuaded himself they were old oats, when they were not so; but the seller neither said nor did anything to contribute to his deception. He has himself to blame. The question is not what a man of scrupulous morality or nice honour would do under such circumstances. The case put of the purchase of an estate, in which there is a mine under the surface, but the fact is unknown to the seller, is one in which a man of tender conscience or high honour would be unwilling to take advantage of the ignorance of the seller; but there can be no doubt that the contract for the sale of the estate would be binding.

Mr. Justice Story, in his work on Contracts (vol. i. s. 516), states the law as to concealment as follows :-"The general rule, both of law and equity, in respect to concealment, is that mere silence with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operate as an injury to the party from whom it is concealed." "Thus," he goes on to say (s. 517), "although a vendor is bound to employ no artifice or disguise for the purpose of concealing defects in the article sold, since that would amount to a positive fraud on the vendee; yet, under the general doctrine of caveat emptor, he is not, ordinarily, bound to disclose every defect of which he may be cognizant, although his silence may operate virtually to deceive the vendee." "But," he continues (s. 518), "an improper concealment or suppression of a material fact, which the party concealing is legally bound to disclose, and of which the other party has a legal right to insist that he shall be informed, is fraudulent, and will invalidate a contract." Further, distinguishing between extrinsic circumstances affecting the value of the subject-matter of a sale, and the concealment of intrinsic circumstances appertaining to its nature, character, and condition, he points out (s. 519), that with reference to the latter, the rule is " that mere silence as to anything which the other party might by proper diligence have discovered, and which is open to his examination, is not fraudulent, unless a special trust or confidence exist between the parties, or be implied from the circumstances of the case." In the doctrine thus laid down I entirely agree.

Now, in this case, there was plainly no legal obligation in the plaintiff in the first instance to state whether the oats were new or old. He offered them for sale according to the sample, as he had a perfect right to do, and gave the buyer the fullest opportunity of inspecting the sample, which, practically, was equivalent to an inspection of the oats themselves. What, then, was there to create any trust or confidence between the parties so as to make it incumbent on the plaintiff to communicate the fact that the oats were not, as the defendant assumed them to be, old oats? If, indeed, the buyer, instead of acting on his own opinion, had asked the question whether the oats were old or new, or had said anything which intimated his understanding that the seller was selling the oats as old oats, the case would have been wholly different. Or, even, if he had said anything which showed that he was not acting on his own inspection and judgment, but assumed as the foundation of the contract that the oats were old, the silence of the seller, as a means of misleading him, might have amounted to a fraudulent concealment such as would have entitled the buyer to avoid the contract. Here, however, nothing of the sort occurs. The buyer in no way refers to the seller, but acts on his own judgment.

The case of Horsfall v. Thomas 1 H. & C. 90; 31 L. J. (Ex.) 322, if that case can be considered good law, is an authority in point. In that case a gun which had been manufactured for a purchaser,had, when delivered,a defect in it, which afterwards caused it to burst; yet it was held that, although the manufacturer, instead of making the purchaser acquainted with the defect, had resorted to a contrivance to conceal it, as the buyer had had an opportunity of inspecting the gun, and had accepted it without doing so, and had used it, it was not competent to him to avoid the contract on the ground of fraud. The case has, however, been questioned, and dissenting altogether from the decision, I notice it only to say that my opinion in the present case has been in no degree influenced by its authority. 

In the case before us it must be taken that, as the defendant, on a portion of the oats being delivered, was able by inspection to ascertain that they were new oats, his manager might, by due inspection of the sample, have arrived at the same result. The case is, therefore, one of the sale and purchase of a specific article after inspection by the buyer. Under these circumstances the rule caveat emptor clearly applies, more especially as this cannot be put as a case of latent defect, but simply as one in which the seller did not make known to the buyer a circumstance affecting the quality of the thing sold. The oats in question were in no sense defective. On the contrary, they were good oats, and all that can be said is that they had not acquired the quality which greater age would have given them. There is not, so far as I am aware, any authority for the proposition that a vendor who submits the subject-matter of sale to the inspection of the vendee is bound to state circumstances which may tend to detract from the estimate which the buyer may injudiciously have formed of its value. Even the civil law, and the foreign law, founded upon it, which require that the seller shall answer for latent defects, have never gone the length of saying that, so long as the thing sold answers to the description under which it is sold, the seller is bound to disabuse the buyer as to any exaggerated estimate of its value.

It only remains to deal with an argument which was pressed upon us, that, as the defendant in the present case intended to buy old oats, and the plaintiff to sell new, the two minds were not ad idem, and that, consequently, there was no contract. This argument proceeds on the fallacy of confounding what was merely a motive operating on the buyer to induce him to buy with one of the essential conditions of the contract. Both parties were agreed as to the sale and purchase of the particular parcel of oats. The defendant believed the oats to be old, and was thus induced to agree to buy them, but he omitted to make their age a condition of the contract. All that can be said is that the two minds were not ad idem as to the age of the oats; they certainly were ad idem as to the sale and purchase of them. Suppose a person to buy a horse without a warranty, believing him to be sound, and the horse turns out unsound, could it be contended that it would be open to him to say that, as he had intended to buy a sound horse, and the seller to sell an unsound one, the contract was void, because the seller must have known from the price the buyer was willing to give, or from his general habits as a buyer of horses, that he thought the horse was sound? The cases are exactly parallel. 

The result is that, in my opinion, the learned judge of the county court was wrong in leaving the second question to the jury, and that, consequently, the case must go down to a new trial. 

BLACKBURN J.

In this case I agree that on the sale of a specific article, unless there be a warranty making it part of the bargain that it possesses some particular duality, the purchaser must take the article he has bought, though it does not possess that quality. And I agree that, even if the vendor was aware that the purchaser thought that the article possessed that quality, and would not have entered into the contract unless he had so thought, still the purchaser is bound, unless the vendor was guilty of some fraud or deceit upon him. A mere abstinence from disabusing the purchaser of that impression is not fraud or deceit, for, whatever may be the case in a court of morals, there is no legal obligation on the vendor to inform the purchaser that be us under a mistake which has not been induced by the act of the vendor. I also agree that when a specific lot of goods are sold by sample, which the purchaser inspects instead of the bulk, the law is exactly the same if the sample truly represents the bulk, though, as it is more probable that the purchaser in such a case would ask for some further warranty, slighter evidence would suffice to prove that in fact it was intended that there should be such a warranty. On this part of the case I have nothing to add to what the Lord Chief Justice has stated.

But I have more difficulty about the second point raised in the case. I apprehend that if one of the parties intend to make a contract on one set of terms and the other intend to make a contract on another set of terms, or, as it is sometimes expressed, the parties are not ad idem, there is no contract, unless the circumstances are such as to preclude one of the parties from denying that he has agreed to the terms of the other. The rule of law is that stated in Freeman v. Cooke 2 Ex. at p. 663; 18 L. J. (Ex.) at p. 119. If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms. 

The jury were directed that, if they believed the word "old" was used, they should find for the defendant-and this was right; for if that was the case, it is obvious that neither did the defendant intend to enter into a contract on the plaintiff's terms, that is, to buy this parcel of oats without any stipulation as to their quality; nor could the plaintiff have been led to believe he was intending to do so. 

But the second direction raises the difficulty. I think that, if from that direction the jury would understand that they were first to consider whether they were satisfied that the defendant intended to buy this parcel of oats on the terms that it was part of his contract with the plaintiff that they were old oats, so as to have the warranty of the plaintiff to that effect, they were properly told that, if that was so, the defendant could not be bound to a contract without any such warranty unless the plaintiff was misled. But I doubt whether the direction would bring to the minds of the jury the distinction between agreeing to take the oats under the belief that they were old, and agreeing to take the oats under the belief that the plaintiff contracted that they were old. 

The difference is the same as that between buying a horse believed to be sound, and buying one believed to be warranted sound; but I doubt if it was made obvious to the jury, and I doubt this the more because I do not see much evidence to justify a finding for the defendant on this latter ground if the word "old " was not used. There may have been more evidence than is stated in the case; and the demeanour of the witnesses may have strengthened the impression produced by the evidence there was; but it does not seem a very satisfactory verdict if it proceeded on this latter ground. I agree, therefore, in the result that there should be a new trial.

HANNEN J.

I think there should be a new trial in this case, not because the ruling of the county court judge was incorrect, but because, having regard to the evidence, I think it doubtful whether the jury sufficiently understood the direction they received to enable them to take it as their guide in determining the question submitted to them.

It appears from the evidence on both sides that the plaintiff sold the oats in question by a sample which the defendant's agent took away for examination. The bargain was only completed after this sample had been in the defendant's possession for two days. This, without more, would lead to the conclusion that the defendant bought on his own judgment as to the quality of the oats represented by the sample and with the usual warranty only, that the bulk should correspond with it. There might, however, be superadded to this warranty an express condition that the oats should be old, and the defendant endeavoured by his evidence to establish that there was such an express bargain between him and the plaintiff. This was the first question which the jury had to consider; but as they have not stated whether they answered it in favour of the defendant, it is possible -- and, from the judge's report, it is most probable -- that they did not so answer it, and the case must be considered on the assumption that there was no express stipulation that the oats were old. 

There might have been an implied term in the contract, arising from previous dealings or other circumstances, that the oats should be old; but the learned judge probably thought the evidence did not make it necessary that he should leave this question to the jury. And the second question which he did leave to them seems intended to ascertain whether there was any contract at all between the parties.

It is essential to the creation of a contract that both parties should agree to the same thing in the same sense. Thus, if two persons enter into an apparent contract concerning a particular person or ship, and it turns out t.hat each of them, misled by a similarity of name, had a different person or ship in his mind, no contract would exist between them: Raffles v Wichelhaus 2 H. & C. 90fi; 3:J L. J. (Ex.) 160. 

But one of the parties to an apparent contract may, by his own fault, be precluded from setting up that he had entered into it in a different sense to that. in which it was understood by the other party. Thus in the case of a sale by sample where the vendor, by mistake, exhibited a wrong sample, it was held that the contract was not avoided by this error of the vendor: Scott v. Littledale  8 E. & B. 815; 27 L. J. (Q.B.) 201.

But if in the last mentioned case the purchaser in the course of the negotiations preliminary to the contract had discovered that the vendor was under a misapprehension as to the sample he was offering, the vendor would have been entitled to show that he had not intended to enter into the contract by which the purchaser sought to bind him. The rule of law applicable to such a case is a corollary from the rule of morality which Mr. Pollock cited from Paley Moral and Political Philosophy, Hook III., ch. v., that a promise is to be performed "in that sense in which the promiser apprehended at the time the promisee received it," and may be thus expressed: "The promiser is not bound to fulfil a promise in a sense in which the promisee knew at the time the promiser did not intend it." And in considering the question, in what sense a promisee is entitled to enforce a promise, it matters not in what way the knowledge of the meaning in which the promiser made it is brought to the mind of the promisee, whether by express words, or by conduct, or previous dealings, or other circumstances. If by any means he knows that there was no real agreement between him and the promiser, he is not entitled to insist that the promise shall be fulfilled in a sense to which the mind of the promiser did not assent. 

If, therefore, in the present case, the plaintiff knew that the defendant, in dealing with him for oats, did so on the assumption that the plaintiff was contracting to sell him old oats, he was aware that the defendant apprehended the contract in a different sense to that in which he meant it, and he is thereby deprived of the right to insist that the defendant shall be bound by that which was only the apparent, and not the real bargain. 

This was the question which the learned judge intended to leave to the jury, and, as I have already said, I do not think it was incorrect in its terms, but I think that it was likely to be misunderstood by the jury. The jury were asked whether they were of opinion, on the whole of the evidence, that the plaintiff believed the defendant to believe, or to be under the impression, that he was contracting for the purchase of old oats; if so, there would be a verdict for the defendant. The jury may have understood this to mean that, if the plaintiff believed the defendant to believe that he was buying old oats, the defendant would be entitled to the verdict, but a belief on the part of the plaintiff that the defendant was making a contract to buy the oats of which he offered him a sample under a mistaken belief that they were old would not relieve the defendant from liability unless his mistaken belief were induced by seine misrepresentation of the plaintiff, or concealment by him of a fact which it became his duty to communicate. In order to relieve the defendant, it was necessary that the jury should find, not merely that the plaintiff believed the defendant to believe that he was buying old oats, but that he believed the defendant to believe that the plaintiff was contracting to sell old oats.

I am more disposed to think that the jury did not understand the question in this last sense, because I can find very little, if any, evidence to support a finding upon it in favour of the defendant. It may be assumed that the defendant believed the oats were old, and it may be suspected that the plaintiff thought he so believed, but the only evidence from which it can be inferred that the plaintiff believed that the defendant thought that the plaintiff was making it a term of the contract that the oats were old is that the defendant was a trainer, that trainers as a rule use old oats, and that the price given was high for new oats and more than a prudent man would have given.

Having regard to the admitted fact that the defendant bought the oats after two days detention of the sample, I think that the evidence was not sufficient to justify the jury in answering the question put to them in the defendant's favour if they rightly understood it, and I, therefore, think there should be a new trial.

Order for a new trial.

In the Court of Exchequer, 1864

[At the time of the negotiations between the plaintiff and defendants, there were two ships at anchor in Bombay, both named “Peerless.” One sailed for England in October; the other, in December].

Declaration. For that it was agreed between the plaintiff and the defendants, to wit, at Liverpool, that the plaintiff should sell to the defendants, and the defendants buy of the plaintiff, certain goods, to wit, 125 bales of Surat cotton, guaranteed middling fair merchant's Dhollorah, to arrive ex "Peerless" from Bombay; and that the cotton should be taken from the quay, and that the defendants would pay the plaintiff for the same at a certain rate, to wit, at the rate of 17¼ d. per pound, within a certain time then agreed upon after the arrival of the said goods in England.

Averments: that the said goods did arrive by the said ship from Bombay in England, to wit, at Liverpool, and the plaintiff was then and there ready, and willing and offered to deliver the said goods to the defendants, &c.

Breach: that the defendants refused to accept the said goods or pay the plaintiff for them.

Plea. That the said ship mentioned in the said agreement was meant and intended by the defendants to be the ship called the "Peerless," which sailed from Bombay, to wit, in October; and that the plaintiff was not ready and willing and did not offer to deliver to the defendants any bales of cotton which arrived by the last mentioned ship, but instead thereof was only ready and willing and offered to deliver to the defendants 125 bales of Surat cotton which arrived by another and different ship, which was also called the "Peerless," and which sailed from Bombay, to wit, in December.

...

Mellish (Cohen with him), in support of the plea.

There is nothing on the face of the contract to shew that any particular ship called the "Peerless" was meant; but the moment it appears that two ships called the "Peerless" were about to sail from Bombay there is a latent ambiguity, and parol evidence may be given for the purpose shewing that the defendant meant one "Peerless" and the plaintiff another. That being so, there was no consensus ad idem, and therefore no binding contract. 

Per CURIAM. There must be judgment for the defendants.

Special Case stated by the parties under RSC, Ord 34, r 1, in an action by the plaintiffs for a declaration that sales of poisons made by the defendants at their premises at 73, Burnt Oak Broadway, Edgware, in the county of Middlesex, on 13 April 1951, were effected otherwise than by or under the supervision of a registered pharmacist as required by s 18(1)(a)(iii) of the Pharmacy and Poisons Act, 1933.

The defendants carried on a business of retail sellers of drugs at their shop premises at 73, Burnt Oak Broadway, Edgware, which were entered in the register of premises kept under s 12(1) of the Act of 1933. The premises comprised a single room so adapted that customers might serve themselves. There was accommodation for some sixty customers at one time, and a printed notice displayed at the entrance described the business as “Boots Self Service”. The principal part of the room contained shelves round the walls and on an “island” fixture in the centre, one part being described on a printed notice as “Toilets dept” and the other part as “Chemist's dept.” On the shelves in the chemist's department drugs, including proprietary medicines, were displayed in packages or other containers with a conspicuous indication of the retail price of each. The drugs and proprietary medicines covered a wide range and one section was devoted exclusively to drugs, including proprietary medicines, which were included in or contained substances included in Part I of the Poisons List referred to in s 17(1) of the Act of 1933. No such drugs were displayed on any shelves outside the section and a shutter was fitted to the section so that at any time all the articles in the section could be securely enclosed and excluded from display. None of the drugs came within sched I to the Poisons Rules, 1949 (SI, 1949, No 539).

The staff employed at the premises comprised a manager, a registered pharmacist in personal control of the chemist's department subject to the directions of a superintendent in accordance with s 9(1)(b) of the Act, three assistants, and two cashiers. When the premises were open for the sale of goods the manager, the pharmacist, and one or more assistants were present in the room. A customer entering the premises would pick up an empty wire basket at a barrier, select from the shelves the packages or other containers of drugs and proprietary medicines required, put them in the wire basket, and take them to one of the two exits. At each exit one of the cashiers under the supervision of the pharmacist scrutinised the articles selected, told the customer the total price, and accepted payment. The pharmacist supervised that part of every transaction involving the sale of a drug which took place at the cash desk and was authorised by the defendants at that stage, if he thought fit, to prevent any customer from removing any drugs from the premises. Customers were not informed of this authorisation.

On 13 April 1951, two customers purchased respectively a bottle of medicine known as compound syrup of hypophosphites, containing 0.01 per cent W/V strychnine, and a bottle of Famel syrup, containing 0.023 per cent W/V codeine, both being poisons included in Part I of the Poisons List, but, owing to the small percentage of strychnine and codeine, not coming within the Poisons Rules, 1949, sched I. They followed the procedure outlined.

The question for the opinion of the court was whether each sale was effected by or under the supervision of a registered pharmacist in accordance with s 18(1)(a)(iii) of the Pharmacy and Poisons Act, 1933.

Lloyd-Jones QC and T Dewar for the plaintiffs.

Glyn-Jones QC and Everington for the defendants.

LORD GODDARD CJ.

This is a Special Case stated under RSC, Ord 34, r 1, and agreed between the parties and it turns on s 18(1) of the Pharmacy and Poisons Act, 1933, which provides:

“Subject to the provisions of this Part of this Act, it shall not be lawful—(a) for a person to sell any poison included in Part I of the Poisons List, unless—(i) he is an authorised seller of poisons; and (ii) the sale is effected on premises duly registered under Part I of this Act; and (iii) the sale is effected by, or under the supervision of, a registered pharmacist.”

The defendants have adopted what is called a “self-service” system in some of their shops—in particular, in a shop at 73, Burnt Oak Broadway, Edgware. The system of self-service consists in allowing persons who resort to the shop to go to shelves where goods are exposed for sale and marked with the price. They take the article required and go to the cash desk, where the cashier or assistant sees the article, states the price, and takes the money. In the part of the defendants' shop which is labelled “Chemist's dept” there are on certain shelves ointments and drugs, some of which contain poisonous substances but in such minute quantities that there is no acute danger. These substances come within Part I of the Poisons List, but the medicines in the ordinary way may be sold without a doctor's prescription and can be taken with safety by the purchaser. There is no suggestion that the defendants expose dangerous drugs for sale. Before any person can leave with what he has bought he has to pass the scrutiny and supervision of a qualified pharmacist.

The question for decision is whether the sale is completed before or after the intending purchaser has paid his money, passed the scrutiny of the pharmacist, and left the shop, or, in other words, whether the offer out of which the contract arises is an offer of the purchaser or an offer of the seller.

In Carlill v Carbolic Smoke Ball Co [1893] 1 Q.B. 256, a company offered compensation to anybody who, having used the carbolic smoke ball for a certain length of time in a prescribed manner, contracted influenza. One of the inducements held out to people to buy the carbolic smoke ball was a representation that it was a specific against influenza. The plaintiff used it according to the prescription, but, nevertheless, contracted influenza. She sued the Carbolic Smoke Ball Co for the compensation and was successful. In the Court of Appeal Bowen LJ said ([1893] 1 QB 269):

“… 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 communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.”

Counsel for the plaintiffs says that what the defendants did was to invite the public to come into their shop and to say to them: “Help yourself to any of these articles, all of which are priced”, and that that was an offer by the defendants to sell to any person who came into the shop any of the articles so priced. Counsel for the defendants, on the other hand, contends that there is nothing revolutionary in this kind of trading, which, he says, is in no way different from the exposure of goods which a shop-keeper sometimes makes outside or inside his premises, at the same time leaving some goods behind the counter. It is a well-established principle that the mere fact that a shop-keeper exposes goods which indicate to the public that he is willing to treat does not amount to an offer to sell. I do not think I ought to hold that there has been here a complete reversal of that principle merely because a self-service scheme is in operation. In my opinion, what was done here came to no more than that the customer was informed that he could pick up an article and bring it to the shop-keeper, the contract for sale being completed if the shop-keeper accepted the customer's offer to buy. The offer is an offer to buy, not an offer to sell. The fact that the supervising pharmacist is at the place where the money has to be paid is an indication that the purchaser may or may not be informed that the shop-keeper is willing to complete the contract. One has to apply common sense and the ordinary principles of commerce in this matter. If one were to hold that in the case of self-service shops the contract was complete directly the purchaser picked up the article, serious consequences might result. The property would pass to him at once and he would be able to insist on the shop-keeper allowing him to take it away, even where the shop-keeper might think it very undesirable. On the other hand, once a person had picked up an article, he would never be able to put it back and say that he had changed his mind. The shop-keeper could say that the property had passed and he must buy.

It seems to me, therefore, that it makes no difference that a shop is a self-service shop and that the transaction is not different from the normal transaction in a shop. The shop-keeper is not making an offer to sell every article in the shop to any person who may come in, and such person cannot insist on buying by saying: “I accept your offer”. Books are displayed in a bookshop and customers are invited to pick them up and look at them even if they do not actually buy them. There is no offer of the shop-keeper to sell before the customer has taken the book to the shop-keeper or his assistant and said that he wants to buy it and the shop-keeper has said: “Yes.” That would not prevent the shop-keeper, seeing the book picked up, from 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 a shelf does not amount to an acceptance of an offer to sell, but is an offer by the customer to buy. I feel bound also to say that the sale here was made under the supervision of a pharmacist. There was no sale until the buyer's offer to buy was accepted by the acceptance of the purchase price, and that took place under the supervision of a pharmacist. Therefore, judgment is for the defendants.

Judgment for the defendants.

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 defendants, 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, 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 50 l. 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 upon 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 on which they offered persons the use of those chairs were stated in the notice which was put up by the pile of chairs, namely, that the sum charged for the 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 these 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 convenience 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 circumstance 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 inconsistent 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.

... 

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 539bound 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 those 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 7.30 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.

...

Appeal allowed.

... The defendants, who were the proprietors and vendors of a medical preparation called “The Carbolic Smoke Ball,” inserted in the Pall Mall Gazette of November 13, 1891, and in other newspapers, the following advertisement:

“100l. reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000l. is deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter.

During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.

One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s., post free. The ball can be refilled at a cost of 5s. Address, Carbolic Smoke Ball Company, 27, Princes Street, Hanover Square, London.”

The plaintiff, a lady, on the faith of this advertisement, bought one of the balls at a chemist's, and used it as directed, three times a day, from November 20, 1891, to January 17, 1892, when she was attacked by influenza. Hawkins, J., held that she was entitled to recover the 100l. The defendants appealed.

LINDLEY, L.J. [The Lord Justice stated the facts, and proceeded:—]

I will begin by referring to two points which were raised in the Court below. I refer to them simply for the purpose of dismissing them. First, it is said no action will lie upon this contract because it is a policy. You have only to look at the advertisement to dismiss that suggestion. Then it was said that it is a bet. Hawkins, J., came to the conclusion that nobody ever dreamt of a bet, and that the transaction had nothing whatever in common with a bet. I so entirely agree with him that I pass over this contention also as not worth serious attention.

Then, what is left? The first observation I will make is that we are not dealing with any inference of fact. We are dealing with an express promise to pay 100l. in certain events. Read the advertisement how you will, and twist it about as you will, here is a distinct promise expressed in language which is perfectly unmistakable — “100l. reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the iufluenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball.”

We must first consider whether this was intended to be a promise at all, or whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is No, and I base my answer upon this passage: “1000l. is deposited with the Alliance Bank, shewing our sincerity in the matter.” Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called in aid by the advertiser as proof of his sincerity in the matter — that is, the sincerity of his promise to pay this 100l. in the event which he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it.

Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer. In point of law this advertisement is an offer to pay 100l. to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v. Carwardine 4 B. & Ad. 621, which has been followed by many other decisions upon advertisements offering rewards.

But then it is said, “Supposing that the performance of the conditions is an acceptance of the offer, that acceptance ought to have been notified.” Unquestionably, 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. But is that so in cases of this kind? I apprehend that they are an exception to that rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required — which I doubt very much, for I rather think the true view is that which was expressed and explained by Lord Blackburn in the case of Brogden v. Metropolitan Ry. Co. 2 App. Cas. 666 , 691 — if notice of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance.

We, therefore, find here all the elements which are necessary to form a binding contract enforceable in point of law, subject to two observations. First of all it is said that this advertisement is so vague that you cannot really construe it as a promise — that the vagueness of the language shews that a legal promise was never intended or contemplated. The language is vague and uncertain in some respects, and particularly in this, that the 100l. is to be paid to any person who contracts the increasing epidemic after having used the balls three times daily for two weeks. It is said, When are they to be used? According to the language of the advertisement no time is fixed, and, construing the offer most strongly against the person who has made it, one might infer that any time was meant. I do not think that was meant, and to hold the contrary would be pushing too far the doctrine of taking language most strongly against the person using it. I do not think that business people or reasonable people would understand the words as meaning that if you took a smoke ball and used it three times daily for two weeks you were to be guaranteed against influenza for the rest of your life, and I think it would be pushing the language of the advertisement too far to construe it as meaning that.

But if it does not mean that, what does it mean? It is for the defendants to shew what it does mean; and it strikes me that there are two, and possibly three, reasonable constructions to be put on this advertisement, any one of which will answer the purpose of the plaintiff. Possibly it may be limited to persons catching the “increasing epidemic” (that is, the then prevailing epidemic), or any colds or diseases caused by taking cold, during the prevalence of the increasing epidemic. That is one suggestion; but it does not commend itself to me. Another suggested meaning is that you are warranted free from catching this epidemic, or colds or other diseases caused by taking cold, whilst you are using this remedy after using it for two weeks. If that is the meaning, the plaintiff is right, for she used the remedy for two weeks and went on using it till she got the epidemic. Another meaning, and the one which I rather prefer, is that the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball.

Then it is asked, What is a reasonable time? It has been suggested that there is no standard of reasonableness; that it depends upon the reasonable time for a germ to develop! I do not feel pressed by that. It strikes me that a reasonable time may be ascertained in a business sense and in a sense satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find out from a skilled physician how long the effect of such ingredients on the system could be reasonably expected to endure so as to protect a person from an epidemic or cold, and in that way you will get a standard to be laid before a jury, or a judge without a jury, by which they might exercise their judgment as to what a reasonable time would be.

It strikes me, I confess, that the true construction of this advertisement is that 100l. will be paid to anybody who uses this smoke ball three times daily for two weeks according to the printed directions, and who gets the influenza or cold or other diseases caused by taking cold within a reasonable time after so using it; and if that is the true construction, it is enough for the plaintiff.

I come now to the last point which I think requires attention — that is, the consideration. It has been argued that this is nudum pactum — that there is no consideration. We must apply to that argument the usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the use of the ball is no advantage to them, and that what benefits them is the sale; and the case is put that a lot of these balls might be stolen, and that it would be no advantage to the defendants if the thief or other people used them. The answer to that, I think, is as follows. It is quite obvious that in the view of the advertisers a use by the public of their remedy, if they can only get the public to have confidence enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the use an advantage which is enough to constitute a consideration.

But there is another view. Does not the person who acts upon this advertisement and accepts the offer put himself to some inconvenience at the request of the defendants? Is it nothing to use this ball three times daily for two weeks according to the directions at the request of the advertiser? Is that to go for nothing? It appears to me that there is a distinct inconvenience, not to say a detriment, to any person who so uses the smoke ball. I am of opinion, therefore, that there is ample consideration for the promise.

...

It appears to me, therefore, that the defendants must perform their promise, and, if they have been so unwary as to expose themselves to a great many actions, so much the worse for them.

BOWEN, L.J.

I am of the same opinion. We were asked to say that this document was a contract too vague to be enforced.

The first observation which arises is that the document itself is not a contract at all, it is only an offer made to the public.

The defendants contend next, that it is an offer the terms of which are too vague to be treated as a definite offer, inasmuch as there is no limit of time fixed for the catching of the influenza, and it cannot be supposed that the advertisers seriously meant to promise to pay money to every person who catches the influenza at any time after the inhaling of the smoke ball. It was urged also, that if you look at this document you will find much vagueness as to the persons with whom the contract was intended to be made — that, in the first place, its terms are wide enough to include persons who may have used the smoke ball before the advertisement was issued; at all events, that it is an offer to the world in general, and, also, that it is unreasonable to suppose it to be a definite offer, because nobody in their senses would contract themselves out of the opportunity of checking the experiment which was going to be made at their own expense. It is also contended that the advertisement is rather in the nature of a puff or a proclamation than a promise or offer intended to mature into a contract when accepted. But the main point seems to be that the vagueness of the document shews that no contract whatever was intended.

It seems to me that in order to arrive at a right conclusion we must read this advertisement in its plain meaning, as the public would understand it. It was intended to be issued to the public and to be read by the public. How would an ordinary person reading this document construe it? It was intended unquestionably to have some effect, and I think the effect which it was intended to have, was to make people use the smoke ball, because the suggestions and allegations which it contains are directed immediately to the use of the smoke ball as distinct from the purchase of it. It did not follow that the smoke ball was to be purchased from the defendants directly, or even from agents of theirs directly. The intention was that the circulation of the smoke ball should be promoted, and that the use of it should be increased.

The advertisement begins by saying that a reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic after using the ball. It has been said that the words do not apply only to persons who contract the epidemic after the publication of the advertisement, but include persons who had previously contracted the influenza. I cannot so read the advertisement. It is written in colloquial and popular language, and I think that it is equivalent to this: “100l. will be paid to any person who shall contract the increasing epidemic after having used the carbolic smoke ball three times daily for two weeks.” And it seems to me that the way in which the public would read it would be this, that if anybody, after the advertisement was published, used three times daily for two weeks the carbolic smoke ball, and then caught cold, he would be entitled to the reward.

Then again it was said: “How long is this protection to endure? Is it to go on for ever, or for what limit of time?” I think that there are two constructions of this document, each of which is good sense, and each of which seems to me to satisfy the exigencies of the present action. It may mean that the protection is warranted to last during the epidemic, and it was during the epidemic that the plaintiff contracted the disease. I think, more probably, it means that the smoke ball will be a protection while it is in use. That seems to me the way in which an ordinary person would understand an advertisement about medicine, and about a specific against influenza. It could not be supposed that after you have left off using it you are still to be protected for ever, as if there was to be a stamp set upon your forehead that you were never to catch influenza because you had once used the carbolic smoke ball. I think the immunity is to last during the use of the ball. That is the way in which I should naturally read it, and it seems to me that the subsequent language of the advertisement supports that construction. It says: “During the last epidemic of influenza many thousand carbolic smoke balls were sold, and in no ascertained case was the disease contracted by those using” (not “who had used”) “the carbolic smoke ball,” and it concludes with saying that one smoke ball will last a family several months (which imports that it is to be efficacious while it is being used), and that the ball can be refilled at a cost of 5s. I, therefore, have myself no hesitation in saying that I think, on the construction of this advertisement, the protection was to enure during the time that the carbolic smoke ball was being used.

My brother, the Lord Justice who preceded me, thinks that the contract would be sufficiently definite if you were to read it in the sense that the protection was to be warranted during a reasonable period after use. I have some difficulty myself on that point; but it is not necessary for me to consider it further, because the disease here was contracted during the use of the carbolic smoke ball.

Was it intended that the 100l. should, if the conditions were fulfilled, be paid? The advertisement says that 1000l. is lodged at the bank for the purpose. Therefore, it cannot be said that the statement that 100l. would be paid was intended to be a mere puff. I think it was intended to be understood by the public as an offer which was to be acted upon.

But it was said there was no check on the part of the persons who issued the advertisement, and that it would be an insensate thing to promise 100l. to a person who used the smoke ball unless you could check or superintend his manner of using it. The answer to that argument seems to me to be that if a person chooses to make extravagant promises of this kind he probably does so because it pays him to make them, and, if he has made them, the extravagance of the promises is no reason in law why he should not be bound by them.

It was also said that the contract is made with all the world — that is, with everybody; and that you cannot contract with everybody. It is not a contract made with all the world. There is the fallacy of the argument. 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 any one 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 advertisements 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 to be bound, then it 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 Willes, J.'s, judgment in Spencer v. Harding Law Rep. 5 C. P. 561 , 563. “In the advertisement cases,” he says, “there never was any doubt that the advertisement amounted to a promise to pay the money to the person who first 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 advertisement 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.

Then it was said that there was no notification of the acceptance of the contract. One cannot doubt that, as 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 the English law — I say nothing about the laws of other countries — to make a contract. But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose 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 communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.

That seems to me to be the principle which lies at the bottom of the acceptance cases, ... Now, if that is the law, how are we to find out whether the person who makes the offer does intimate that notification of acceptance will not be necessary in order to constitute a binding bargain? In many cases you look to the offer itself. In many cases you extract from the character of the transaction that notification is not required, and in the advertisement cases it seems to me to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition notification is dispensed with. It seems to me that from the point of view of common sense no other idea could be entertained. If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write me a note saying that they have accepted my proposal? Why, of course, they at once look after the dog, and as soon as they find the dog they have performed the condition. The essence of the transaction is that the dog should be found, and it is not necessary under such circumstances, as it seems to me, that in order to make the contract binding there should be any notification of acceptance.

It follows from the nature of the thing that the performance of the condition is sufficient acceptance without the notification of it, and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of that common sense reflection. He does, therefore, in his offer impliedly indicate that he does not require notification of the acceptance of the offer.

A further argument for the defendants was that this was a nudum pactum — that there was no consideration for the promise — that taking the influenza was only a condition, and that the using the smoke ball was only a condition, and that there was no consideration at all; in fact, that there was no request, express or implied, to use the smoke ball. ...

The short answer, to abstain from academical discussion, is, it seems to me, that there is here a request to use involved in the offer. Then as to the alleged want of consideration. The definition of “consideration” given in Selwyn's Nisi Prius, 8th ed. p. 47, which is cited and adopted by Tindal, C.J., in the case of Laythoarp v. Bryant 3 Scott, 238, 250, is this: “Any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment, or inconvenience sustained by the plaintiff, provided such act is performed or such inconvenience suffered by the plaintiff, with the consent, either express or implied, of the defendant.” Can it be said here that if the person who reads this advertisement applies thrice daily, for such time as may seem to him tolerable, the carbolic smoke ball to his nostrils for a whole fortnight, he is doing nothing at all — that it is a mere act which is not to count towards consideration to support a promise (for the law does not require us to measure the adequacy of the consideration). Inconvenience sustained by one party at the request of the other is enough to create a consideration.

I think, therefore, that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them, because the use of the smoke balls would promote their sale.

...

A. L. SMITH, L.J.

The first point in this case is, whether the defendants' advertisement which appeared in the Pall Mall Gazette was an offer which, when accepted and its conditions performed, constituted a promise to pay, assuming there was good consideration to uphold that promise, or whether it was only a puff from which no promise could be implied, or, as put by Mr. Finlay, a mere statement by the defendants of the confidence they entertained in the efficacy of their remedy. Or as I might put it in the words of Lord Campbell in Denton v. Great Northern Ry. Co. 5 E. & B. 860, whether this advertisement was mere waste paper.

That is the first matter to be determined. It seems to me that this advertisement reads as follows: “100l. reward will be paid by the Carbolic Smoke Ball Company to any person who after having used the ball three times daily for two weeks according to the printed directions supplied with such ball contracts the increasing epidemic influenza, colds, or any diseases caused by taking cold. The ball will last a family several months, and can be refilled at a cost of 5s.” If I may paraphrase it, it means this: “If you” — that is one of the public as yet not ascertained, but who, as Lindley and Bowen, L.JJ., have pointed out, will be ascertained by the performing the condition — “will hereafter use my smoke ball three times daily for two weeks according to my printed directions, I will pay you 100l. if you contract the influenza within the period mentioned in the advertisement.” Now, is there not a request there? It comes to this: “In consideration of your buying my smoke ball, and then using it as I prescribe, I promise that if you catch the influenza within a certain time I will pay you 100l.”

It must not be forgotten that this advertisement states that as security for what is being offered, and as proof of the sincerity of the offer, 1000l. is actually lodged at the bank wherewith to satisfy any possible demands which might be made in the event of the conditions contained therein being fulfilled and a person catching the epidemic so as to entitle him to the 100l. How can it be said that such a statement as that embodied only a mere expression of confidence in the wares which the defendants had to sell? I cannot read the advertisement in any such way. In my judgment, the advertisement was an offer intended to be acted upon, and when accepted and the conditions performed constituted a binding promise on which an action would lie, assuming there was consideration for that promise.

...

In the next place, it was said that the promise was too wide, because there is no limit of time within which the person has to catch the epidemic. There are three possible limits of time to this contract. The first is, catching the epidemic during its continuance; the second is, catching the influenza during the time you are using the ball; the third is, catching the influenza within a reasonable time after the expiration of the two weeks during which you have used the ball three times daily. It is not necessary to say which is the correct construction of this contract, for no question arises thereon. Whichever is the true construction, there is sufficient limit of time so as not to make the contract too vague on that account.

Then it was argued, that if the advertisement constituted an offer which might culminate in a contract if it was accepted, and its conditions performed, yet it was not accepted by the plaintiff in the manner contemplated, and that the offer contemplated was such that notice of the acceptance had to be given by the party using the carbolic ball to the defendants before user, so that the defendants might be at liberty to superintend the experiment. All I can say is, that there is no such clause in the advertisement, and that, in my judgment, no such clause can be read into it; and I entirely agree with what has fallen from my Brothers, that this is one of those cases in which a performance of the condition by using these smoke balls for two weeks three times a day is an acceptance of the offer.

It was then said there was no person named in the advertisement with whom any contract was made. That, I suppose, has taken place in every case in which actions on advertisements have been maintained, from the time of Williams v. Carwardine 4 B. & Ad. 621, and before that, down to the present day. I have nothing to add to what has been said on that subject, except that a person becomes a persona designata and able to sue, when he performs the conditions mentioned in the advertisement.

Lastly, it was said that there was no consideration, and that it was nudum pactum. There are two considerations here. One is the consideration of the inconvenience of having to use this carbolic smoke ball for two weeks three times a day; and the other more important consideration is the money gain likely to accrue to the defendants by the enhanced sale of the smoke balls, by reason of the plaintiff's user of them. There is ample consideration to support this promise. I have only to add that as regards the policy and the wagering points, in my judgment, there is nothing in either of them.

Appeal dismissed.

JEFFRIES J.

This judgment is most conveniently commenced by a description of the plaintiffs themselves because they became an issue with the defendant Council, as set out hereafter. Markholm Construction Co Ltd is the first plaintiff, a building contractor with the special purpose of conducting a housing construction business. The managing director is Mark Graham Markholm who gave evidence on behalf of the company, and is the father of the second plaintiff. The second plaintiff still lives with his parents, and is an apprentice carpenter employed by the first plaintiff. He is now aged 19 1/2 years.

The defendant is the territorial local authority, and in addition to that function has been engaged in developing land within the city boundaries for subdivision and sale. The particular subdivision which is the subject of these proceedings is one of 37 sections at Maupuia, which is situated in the eastern suburbs of the city. The first plaintiff's business premises are situated in that area and the home of the Markholm family also. They are some reasons why from the beginning the Markholms took a lively interest in the subdivision, now to be outlined.

By identical advertisements placed in daily newspapers circulating in the city appearing on 24 March, 31 March and 7 April the defendant gave notice of its intention to dispose of sections by ballot. Because of the importance of the newspaper advertisement it is now set out in its entirety:

"WELLINGTON CITY COUNCIL

MAUPUIA

NEW SINGLE-UNIT AND MULTI-UNIT SECTIONS FOR SALE

Rangitane Street, Cobar Close, Tamahine Street, Waiwera Crescent

Prices range from $15,000 to $25,000

Payment by cash or by a minimum of 25% deposit with the balance payable over a period not exceeding 3 years with interest at 13% per annum.

Cash purchasers will receive a discount of 10% of the sale price provided the balance is paid within one month of the availability of title.

No restriction on building time.

No means test.

Some sites are affected by an electricity easement.

This subdivision will be disposed of by ballot.

Plans, pricelists, Conditions of Sale, and other details are available from the Housing and Property Branch, Second Floor, Municipal Office Building, Mercer Street, (PO Box 2199, Wellington) tel 724-599 ext 777.

Offers to Purchase must be submitted (on the forms provided) to the Housing and Property Branch not later than 12 Noon, Friday, April 13, 1984.

I A McCUTCHEON, Town Clerk."

It is perhaps convenient first to make some observations upon the advertisement placed in the newspapers by the Council:

1. The subdivision at Maupuia was completed and the sections were ready to go to the public immediately.

2. The prices for each section had been fixed in the range of $15,000 to $25,000.

3. Terms were offered for those who wished them but a counterbalancing substantial reduction in purchase price of 10% was offered for cash within one month of the availability of title.

4. It seems the Council by mention of no restriction on building time and no means test meant to convey that notwithstanding it was a public body it did not intend to impose restrictions which had not been unknown in the past. It seemed it wished to rank itself as a straight, commercial developer making sections available to all comers, and Council documents produced at the hearing confirmed that.

5. There was an unequivocal statement that the sections would be disposed of by ballot which indicated it clearly expected more applications than sections. It seemed to understand the market response would be extremely favourable which conflicts, to an extent, with the "commercial developer" image.

6. It does say "Offers to Purchase" etc are to be submitted, but that may be capable of more than one interpretation and is not necessarily conclusive. On the plaintiffs' first analysis of facts set out hereafter the "offers to purchase" are "accepted" on withdrawal of a number from the ballot, but the first contract is complete on the acceptance of the Council's offer to hold a ballot.

7. The public were invited to attend the Council to examine plans, price lists, conditions of sale.

Mr Markholm senior, on behalf of his company, and Mr Markholm junior on his own behalf, completed the Council's document described in the advertisement as "offers to purchase" and lodged them with the City Council on the last day, namely 13 April 1984. The "offers to purchase" executed by each of the Markholms enabled them to list in order preferences for the various lots available. At the City Council offices they were able to obtain a list of the sections for which a ballot was to be held, and each section had a fixed price within the range of prices referred to in the advertisement. The so-called "offers" were completed by each of the Markholm men together with the prices on each section stipulated for by the Council.

The next communication received by the plaintiffs from the Council was a letter dated 5 June 1984, and I reproduce the letter addressed to Mr Mark William Stephen Markholm, who is the second plaintiff. That letter states as follows:

"Maupuia Subdivision

I am writing to inform you that the ballot for the above subdivision is to take place on 18 June 1984 at 2.00 pm in the Concert Chamber.

The Council is only prepared to accept one application from each family or household. Your application therefore has been amalgamated with that of Markholm Construction Co Ltd under your name. If you wish to change the name on the amalgamated application you may do so by notifying the Council within the next seven (7) days.

You may be interested to know that further sections will become available once the matter of this subdivision has been resolved.

Your ballot number is 97 and you are cordially invited to attend to witness the draw. If there are any enquiries relating to this matter please do not hesitate to contact either myself or Mr C McNeilly.

Applicants who are successful in the ballot will be required to sign a formal application for their particular section and pay a deposit of not less than 25% of the total purchase price within seven (7) days following the ballot.

Yours faithfully

EF Camplin [signed]

Chief Clerk, Housing & Property Branch"

An identical letter was sent to the first plaintiff except that it was informed its application had been amalgamated with that of Mr Mark William Stephen Markholm under that name. In confirmation of that action the ballot number allotted to the company was the same as to Mr Mark William Stephen Markholm, namely 97.

Mr Markholm senior reacted immediately to the Council's proposal to amalgamate his company's application by ringing and complaining to a Council officer without success.

A further letter dated 14 June was received by each of the plaintiffs informing them that the defendant Council at its meeting on Wednesday 13 June 1984 had decided to cancel the ballot which was to be held on Monday 18 June. No reasons were given to either of the plaintiff applicants for this sudden alteration in the arrangements.

Both plaintiffs consulted a firm of solicitors who wrote to the Council in a letter dated 15 June 1984 alleging that their clients considered that the advertisements published by the Council created a contract between offerors and the Council entitling offerors to take part in the ballot for the purchase of a section. It further alleged that by the cancellation the Council was attempting to refuse to be bound by the terms of that contract and that proceedings would be commenced for specific performance. A secondary claim, but ranking almost equal in importance to the plaintiffs' case, and mentioned in the solicitor's letter to the Council dated 15 June, concerned the purported amalgamation of the two applications after the advertisement, which contained no such possibility. The plaintiffs claim, with justification, to amalgamate confuses both separate legal personalities resulting in uncertainty as to who in fact is the applicant.

The plaintiffs duly issued their proceedings, which were filed on 19 June alleging the said contract and seeking a permanent injunction, declarations and an order for specific performance together with a claim for general damages. At the same time the plaintiffs filed a motion for an interim injunction restraining the defendant until further notice of this Court from readvertising for sale by ballot certain sections at Maupuia on the Miramar Peninsular, or taking any further steps toward conducting a sale of the said sections other than pursuant to advertisements seeking applicants for the purchase of the said sections already published by the defendant during March and April 1984.

The City Council filed a statement of defence on 20 June 1984 which simply denied the principal allegations contained in the plaintiffs' statement of claim without exploring in any way the issues behind the facts alleged. That document was followed by a very short affidavit from the Assistant Town Clerk sworn and filed on 25 June 1984 which had annexed to it the documents lodged with the City Council by the plaintiffs on 13 April 1984, and referred to above. The affidavit contained an acknowledgement that at the time of the said advertisements it was the intention of the council to conduct a ballot as so advertised but at no time was it the intention of the council to bind itself by contract to conduct such ballot.

The plaintiffs' case was first before this Court on 26 June 1984 when they sought an interim injunction restraining the defendant from readvertising for sale by ballot sections at Maupuia. Next day a decision was given holding that the plaintiffs had established a serious question to be tried but on account of the unusual situation contained in the facts the hearing was adjourned so that further information could be placed before the Court in the exercise of its discretion whether to grant an interim injunction, as requested. At the conclusion of that hearing counsel for the defendant gave an undertaking that no further steps would be taken until the Court's final decision. After considering the interim decision it apparently was agreed the most convenient way of dealing with the litigation in that state was to set it down for a substantive hearing which took place on 26 July 1984. I think this was a practical course to follow and the question of an interim injunction need not now trouble the Court. However there is an equitable remedy of specific performance sought, which is dealt with hereafter.

At the resumed hearing on the substantive matter to be decided by the Court both sides called evidence resulting in a much clearer factual picture of the events but in essence the legal issue is essentially unchanged. The evidence, particularly from the defendant, greatly assists the Court in what it considers is the appropriate remedy.

The issue now to be decided by the Court is whether or not there was a contract between the plaintiffs and the Council to conduct a ballot. The Court can begin by saying that there is practically no dispute on the facts as they speak for themselves in documents which passed between the parties, and those made available at the hearing. The central issue for decision is whether or not those facts brought these parties into a legally binding contract to hold a ballot? The plaintiffs by their counsel argued that the facts lent themselves to two alternative analyses, both of which resulted in a binding contract. That was how the case was argued at the first hearing and the original statement of claim was amended so as to conform with that argument.

The first analysis is that out of the factual dealings there arose two separate contracts, namely:

1. A contract between the Council and the applicants that the Council would conduct a ballot for sale of sections on the stated terms and conditions of advertisement. On this analysis the plaintiffs argued the offer was made by the Council in its advertisement. Such offer was accepted by the plaintiffs (as applicants) when they completed the application in the prescribed manner.

2. A contract to be entered into between the Council and successful applicants (offerors) for sale of sections. Offer made by the intended purchaser in the application. Such offer would be accepted by the Council at the moment of the withdrawal of the applicant's number making him successful in the ballot. For clarity it is convenient to state here that both counsel engaged in this litigation agree that is the moment when the contract for sale and purchase of land between a successful balloteer and the Council would arise. On the defendant's argument that is the only contract which could arise out of the whole transaction from start to finish. That, of course, is the dispute for the plaintiffs maintain there was a prior contract, referred to above.

The plaintiffs' counsel's argument is that the first contract is a unilateral contract of the kind described in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (CA), perhaps one of the first and most fundamental cases a law student encounters at the beginning of his studies in contract law. The plaintiffs also relied upon the auction cases which are referred to hereafter. The passage in Carlill relied upon is that from the judgment of Bowen LJ at pp 268-269 as follows:

"It was also said that the contract is made with all the world - that is, with everybody; and that you cannot contract with everybody. It is not a contract made with all the world. There is the fallacy of the argument. 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 any one 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 advertisements 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 to be bound, then it 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 Willes, J's, judgment in Spencer v Harding (LR 5 CP 561, 563). 'In the advertisement cases,' he says, 'there never was any doubt that the advertisement amounted to a promise to pay the money to the person who first gave information. The difficulty suggested was that it was 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 advertisement 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 viniculum juris on the other side of the contract was ascertained, and it became settled."

Counsel argued that with the advertisement there were no further terms to negotiate or discuss. The advertisement was a document of a commercial character showing a clear intention to create legal relations. See Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 (HL) per Lords Wilberforce, Simon and Fraser. Carlill distinguishes cases in which there is an offer to negotiate, or chaffer, or to receive offers.

Here no further terms required discussion or negotiation. The wording of the advertisement was quite unequivocal; "This subdivision will be disposed of by ballot". On the basis of that advertisement once an applicant lodged a timely application with the Council he then became a balloteer in equal position to every other applicant in a ballot.

There is authority from North America which would support the plaintiffs' case: The Queen in right of Ontario v Ron Engineering & Construction Eastern Ltd (1981) 119 DLR (3d) 267. In that case a construction company submitted a tender for a building contract on terms that an accompanying deposit was to be forfeited if the tender was withdrawn or if the tenderer refused to proceed. The tendering company became aware its tender was alarmingly undershot and sought to withdraw the tender and recover the deposit. In that case it was held the terms of the submission of the tender created a binding contract on the tenderer and the owner was entitled to retain the deposit according to the terms on which the tender was submitted. Counsel for the plaintiffs acknowledged it was a stronger case on the facts than the plaintiffs could advance but nevertheless submitted the principle applied, as set out in the judgment of the Supreme Court of Canada delivered by Estey J for the Court, at pp 274-275 of the report:

"The tender submitted by the respondent brought contract A into life. This is sometimes described in law as a unilateral contract, that is to say a contract which results from an act made in response to an offer, as for example in the simplest terms. 'I will pay you a dollar if you will cut my lawn'. No obligation to cut the lawn exists in law and the obligation to pay the dollar comes into being upon the performance of the invited act. Here the call for tenders created no obligation in the respondent or in anyone else in or out of the construction world. When a member of the construction industry responds to the call for tenders, as the respondent has done here, that response takes the form of the submission of a tender, or a bid as it is sometimes called. The significance of the bid in law is that it at once becomes irrevocable if filed in conformity with the terms and conditions under which the call for tenders was made and if such terms so provide. There is no disagreement between the parties here about the form and procedure in which the tender was submitted by the respondent and that it complied with the terms and conditions of the call for tenders. Consequently, contract A came into being. The principal term of contract A is the irrevocability of the bid, and the corollary term is the obligation in both parties to enter into a contract (contract B) upon the acceptance of the tender. Other terms include the qualified obligations of the owner to accept the lowest tender, and the degree of this obligation is controlled by the terms and conditions established in the call for tenders."

...

This Court has reached the decision that the plaintiffs' case, that with timely completion of applications lodged with the Council there came into existence a contract between themselves and the Council to hold a ballot, is sound in law. The advertisement of the Council informed the world that it had prepared itself fully and completely to sell its sections at Maupuia for stipulated prices and terms. Nothing could be clearer than "This subdivision will be disposed of by ballot".

Admittedly the date of the ballot had not been fixed but it could be implied without difficulty it would have been reasonably soon, which turned out to be the case. The Council by the advertisement went to some lengths to stress the unconditional nature of the sales, realising, no doubt, within the community there was widespread knowledge of previous conditional sales of sections.

The advertisement stimulated considerable interest and 241 separate applications resulted. This quantum of interest set the alarm bells ringing in the Council Chambers and the reason is set out hereafter. To advertise without qualification that a ballot would be held was to give a clear signal that bargains were to be had. The signal was certainly received by many.

The basic answer by the Council is that there was never any intention to create the legal relationship whereby it bound itself to hold a ballot. That intention is to be objectively assessed. There can be little doubt the Council was fully aware it was engaged in commercial transactions. It had the complete control of the subdivision and timing of going to the market on its own hands, and the decision to go to ballot was deliberate and calculated. The prices for the 37 sections were fixed at what it thought were the current market valuations as assessed by its City Valuer and the documents made available to the Court from the Council's records clearly establishes that. It turned out its valuations were well astray, but that is not the point. The Council cannot embark on such a course and then suddenly withdraw. See New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1974] 1 NZLR 505 in the majority judgment of Lord Wilberforce in the Privy Council at p 510, lines 1-20 and Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 in the judgment of Cooke J at pp 562-563, which cases provide guidance to this Court.

The alternative argument advanced to the Court was a fact analysis in the following way:

1. The advertisement constituted an invitation to treat whereby the Council sought a pool of offerors to whom to ballot its sections.

2. Each application constituted an offer to participate in the ballot which was accepted by the Council when on 5 June it notified the applicants of their ballot number. The Council is then bound to hold a ballot in accordance with advertised conditions.

3. The Council accepted applications from both Markholm Construction Co Ltd and MWS Markholm. The purported amalgamation of applications is ineffective and acceptance is on the basis of advertised conditions.

In the interests of brevity the Court does not find it necessary to say other than this analysis seems to avoid the necessity of implication as to time of the ballot, but reaches the same result. The Court's decision is based on the first analysis which has the incidental effect of holding the amalgamation was wrong for the reasons now set out. Under the second analysis this point was more arguable from the defendant's viewpoint.

Much evidence was given to the Court at the hearing by the Assistant Town Clerk, who was the Council's main witness, concerning the purported amalgamation of applicants. I do not think the Council was permitted to follow unilaterally such a course when it had given no notice whatsoever of its intention to do so. Amalgamation of applicants may have superficial attraction on some ground of fairness but unless done completely, which means appropriate notice, and careful implementation of the scheme, it probably is better not to do it at all. In any event it was inconsistent with the straightforward entrepreneurial course it had set for itself with this particular subdivision. As the decision of this Court is not to grant specific performance, for reasons to be outlined, the issue of amalgamation can be left with those observations but it does enable the first plaintiff to recover damages.

There is left then the claim by the plaintiffs for an order that the defendant specifically perform the contract with the first and second plaintiffs to hold a ballot and do all acts necessary to complete performance of any contracts that might arise out of a successful drawing by one, or both, of the plaintiffs. In the alternative if relief cannot be had under specific performance the plaintiffs claimed damages in the sum of $3000 each. The claim for specific performance is equitable relief and this Court's decision is to withhold such relief.

...

The Court decides the proper remedy is damages. It is not one of the easier cases in the assessment of damages. The two basic heads are loss of a chance and inconvenience. ... Mr Markholm had applied for some multi-unit sections and 107 people had applied for the same multi-unit sections as Mr Markholm. Mr Knox calculated his highest probability at 9.3% of gaining a multi-unit section. Mr Knox quantified the 9.3% chance with a possible capital gain of $10,000 at $934. He calculated his chance on single unit sections at 3.9%. Mr Markholm is an apprentice carpenter with special abilities which increases his loss. There was also disappointment for him. I assess his damages at $900.

The company should not have had its application amalgamated in the way already described. The company is in the business of a builder and has some commercial absorptive capacity and no disappointment. I fix its damages at $750.

There have been two separate hearings and I make one order for costs to cover three days and both plaintiffs. The defendant is to pay $2000 costs plus disbursements and witnesses' expenses.

Judgment for plaintiffs.

This was an action for the conversion of a horse. Pleas, not guilty, and not possessed.

The cause was tried before Keating, J., at the last Summer Assizes at Stafford, when the following facts appeared in evidence: The plaintiff was a builder residing in London. The defendant was an auctioneer residing at Tamworth. Towards the close of the year 1869, John Felthouse, a nephew of the plaintiff, being about to sell his farming stock by auction, a conversation took place between the uncle and nephew respecting the purchase by the former of a horse of the latter; and, on the 1st of January, 1860, John Felthouse wrote to his uncle as follows:

"Bangley, January 1st, 1861.

Dear Sir, I saw my father on Saturday. He told me that you considered you had bought the horse for 30l. If so, you are labouring under a mistake, for 30 guineas was the price I put upon him, and you never heard me say less. When you said you would have him, I considered you were aware of the price, as I would not take less.

JOHN FELTHOUSE."

The plaintiff on the following day replied as follows:

"London, January 2nd, 1862.

Dear Nephew, Your price, I admit, was 30 guineas. I offered 30l,-never offered more: and you said the horse was mine. However, as there may be a mistake about him, I will split the difference, - 30l. 15s. - I paying all expenses from Tamworth. You can send him at your convenience, between now and the 25th of March. If I hear no more about him, I consider the horse mine at 30l. 15s.

PAUL FELTHOUSE."

To this letter the nephew sent no reply; and on the 25th of February the sale took place, the horse in question being sold with the rest of the stock, and fetching 33l., which sum was handed over to John Felthouse.

On the following day, the defendant (the auctioneer), being apprised of the mistake, wrote to the plaintiff as follows

"Tamworth, February 26th, 1861.

Dear Sir, I am sorry I am obliged to acknowledge myself forgetful in the matter of one of Mr. John Felthouse's horses. Instructions were given me to reserve the horse: hut the lapse of time, and a multiplicity of business pressing upon me, caused me to forget my previous promise. I hope you will not experience any great inconvenience. I will do all I can to get the horse again: but shall know on Saturday if I have succeeded.

WILLIAM BINDLEY."

On the 27th of February, John Felthouse wrote to the plaintiff, as follows:

"Bangley, February 27th, 1861.

My dear Uncle, My sale took place on Monday last, and we were very much annoyed in one instance. When Mr. Bindley came over to take an inventory of the stock, I said that horse (meaning the one I sold to you) is sold. Mr. B. said it would be better to put it in the sale, and he would buy it in without any charge. Father stood by whilst he was running it up, but had no idea but he was doing it for the good of the sale, and according to his previous arrangement, until he heard him call out Mr. Glover. He then went to Mr. B. and said that horse was not to be sold. He exclaimed he had quite forgotten, but would see Mr. Glover and try to recover it, and says he will give 5l. to the gentleman if he will give it up: but we fear it doubtful. I have kept one horse for my own accommodation whilst we remain at Bangley: and, if you like to have it for a few months, say five or six, you are welcome to it, free of any charge, except the expenses of travelling: and if, at the end of that time, you like to return him, you can; or you can keep him, and let me know what you think he is worth. I am very sorry that such has happened; but hope we shall make matters all right; and would have given 5l. rather than that horse should have been given up.

JOHN FELTHOUSE."

On the part of the defendant it was submitted that the letter of the 27th of February, 1861, was not admissible in evidence. The learned judge, however, overruled the objection.

It was then submitted that the property in the horse was not vested in the plaintiff at the time of the sale by the defendant. A verdict was found for the plaintiff, damages 33l., leave being reserved to the defendant to move to enter a nonsuit, if the court should be of opinion that the objection was well founded. ...

WILLES, J.

I am of opinion that the rule to enter a nonsuit should be made absolute.

The horse in question had belonged to the plaintiff's nephew, John Felthouse. In December, 1860, a conversation took place between the plaintiff and his nephew relative to the purchase of the horse by the former. The uncle seems to have thought that he had on that occasion bought the horse for 30l., the nephew that he had sold it for 30 guineas: but there was clearly no complete bargain at that time.

On the 1st of January, 1861, the nephew writes, "I saw my father on Saturday. He told me that you considered you had bought the horse for 30l. If so, you are labouring under a mistake, for 30 guineas was the price I put upon him, and you never heard me say less. When you said you would have him, I considered you were aware of the price."

To this the uncle replies on the following day, " Your price, I admit, was 30 guineas. I offered 30l.; never offered more: and you said the horse was mine. However, as there may be a mistake about him, I will split the difference. If I hear no more about him, I consider the horse mine at 30l. 15s."

It is clear that there was no complete bargain on the 2nd of January: and it is also clear that the uncle had no right to impose upon the nephew a sale of his horse for 30l. 15s. unless he chose to comply with the condition of writing to repudiate the offer. The nephew might, no doubt, have bound his uncle to the bargain by writing to him: the uncle might also have retracted his offer at any time before acceptance. It stood an open offer: and so things remained until the 25th of February, when the nephew was about to sell his farming stock by auction.

The horse in question being catalogued with the rest of the stock, the auctioneer (the defendant) was told that it was already sold. It is clear, therefore, that the nephew in his own mind intended his uncle to have the horse at the price which he (the uncle) had named, 30l. 15s.: but he had not communicated such his intention to his uncle, or done anything to bind himself. Nothing, therefore, had been done to vest the property in the horse in the plaintiff down to the 25th of February, when the horse was sold by the defendant. 

It appears to me that, independently of the subsequent letters, there had been no bargain to pass the property in the horse to the plaintiff, and therefore that he had no right to complain of the sale.

...

BYLES, J.

I am of the same opinion, and have nothing to add to what has fallen from my Brother Willes.

KEATING, J.

I am of the same opinion. Had the question arisen as between the uncle and the nephew, there would probably have been some difficulty. But, as between the uncle and the auctioneer, the only question we have to consider is whether the horse was the property of the plaintiff at the time of the sale on the 25th of February. It seems to me that nothing had been done at that time to pass the property out of the nephew and vest it in the plaintiff. A proposal had been made, but there had before that day been no acceptance binding the nephew. ...

PART 4

Electronic transactions

Subpart 1—Preliminary provisions

209 Interpretation

In this Part, unless the context otherwise requires,—

data storage device means any article or device (for example, a disk) from which information is capable of being reproduced, with or without the aid of any other article or device

electronic includes electrical, digital, magnetic, optical, electromagnetic, biometric, and photonic

electronic communication means a communication by electronic means

electronic signature, in relation to information in electronic form, means a method used to identify a person and to indicate that person’s approval of that information

information includes information (whether in its original form or otherwise) that is in the form of a document, a signature, a seal, data, text, images, sound, or speech

information system has the meaning set out in section 213(2)

legal requirement has the meaning set out in section 219(2)

transaction includes—

1. • (a) a transaction of a non-commercial nature;
   • (b) a single communication;
   • (c) the outcome of multiple related communications.

214 Time of receipt

An electronic communication is taken to be received,—

• (a) in the case of an addressee who has designated an information system for the purpose of receiving electronic communications, at the time the electronic communication enters that information system; or
• (b) in any other case, at the time the electronic communication comes to the attention of the addressee.

217 Time of communication of acceptance of offer

1. For the purpose of the formation of a contract, an acceptance by electronic communication of an offer is taken to be communicated to the offeror at the time determined by section 214 to be the time of receipt for that electronic communication.

2. Subsection (1) does not apply if—

   • (a) the parties to the contract otherwise agree; or
   • (b) an enactment provides otherwise.

The Law Reports (Chancery Division)

BACON, V.C., JAMES and MELLISH, L.JJ., BAGGALLAY, J.A.

1876 January 25, 26.
1876 March 31; April 1.

An offer to sell property may be withdrawn before acceptance without any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person.

Semble, that the sale of the property to a third person would of itself amount to a withdrawal of the offer, even although the person to whom the offer was first made had no knowledge of the sale.

Semble, that the acceptance of an offer to sell constitutes a contract for sale only as from the time of the acceptance. The contract does not relate back to the time when the offer was made.

The owner of property signed a document which purported to be an agreement to sell it at a price fixed. But a postscript was added, which he also signed — “This offer to be left over until Friday 9 A.M.”:—

Held, that the document amounted only to an offer, which might be withdrawn at any time before acceptance, and that a sale to a third person which came to the knowledge of the person to whom the offer was made was an effectual withdrawal of the offer.

Decision of Bacon, V.C., reversed.

ON Wednesday, the 10th of June, 1874, the Defendant John Dodds signed and delivered to the Plaintiff, George Dickinson, a memorandum, of which the material part was as follows:—

“I hereby agree to sell to Mr. George Dickinson the whole of the dwelling-houses, garden ground, stabling, and outbuildings thereto belonging, situate at Croft, belonging to me, for the sum of £800. As witness my hand this tenth day of June, 1874.

The bill alleged that Dodds understood and intended that the Plaintiff should have until Friday 9 A.M. within which to determine whether he would or would not purchase, and that he should absolutely have until that time the refusal of the property at the price of £800, and that the Plaintiff in fact determined to accept the offer on the morning of Thursday, the 11th of June, but did not at once signify his acceptance to Dodds, believing that he had the power to accept it until 9 A.M. on the Friday.

In the afternoon of the Thursday the Plaintiff was informed by a Mr. Berry that Dodds had been offering or agreeing to sell the property to Thomas Allan, the other Defendant. Thereupon the Plaintiff, at about half-past seven in the evening, went to the house of Mrs. Burgess, the mother-in-law of Dodds, where he was then staying, and left with her a formal acceptance in writing of the offer to sell the property. According to the evidence of Mrs. Burgess this document never in fact reached Dodds, she having forgotten to give it to him.

On the following (Friday) morning, at about seven o'clock, Berry, who wag acting as agent for Dickinson, found Dodds at the Darlington railway station, and handed to him a duplicate of the acceptance by Dickinson, and explained to Dodds its purport. He replied that it was too late, as he had sold the property. A few minutes later Dickinson himself found Dodds entering a railway carriage, and handed him another duplicate of the notice of acceptance, but Dodds declined to receive it, saying, “You are too late. I have sold the property.”

It appeared that on the day before, Thursday, the 11th of June, Dodds had signed a formal contract for the sale of the property to the Defendant Allan for £800, and had received from him a deposit of £40.

The bill in this suit prayed that the Defendant Dodds might be decreed specifically to perform the contract of the 10th of June, 1874; that he might be restrained from conveying the property to Allan; that Allan might be restrained from taking any such conveyance; that, if any such conveyance had been or should be made, Allan might be declared a trustee of the property for, and might be directed to convey the property to, the Plaintiff; and for damages.

The cause came on for hearing before Vice-Chancellor Bacon on the 25th of January, 1876.

...

From this decision both the Defendants appealed, and the appeals were heard on the 31st of March and the 1st of April, 1876.

...

JAMES, L.J., after referring to the document of the 10th of June, 1874, continued:—

The document, though beginning “I hereby agree to sell,” was nothing but an offer, and was only intended to be an offer, for the Plaintiff himself tells us that he required time to consider whether he would enter into an agreement or not. Unless both parties had then agreed there was no concluded agreement then made; it was in effect and substance only an offer to sell. The Plaintiff, being minded not to complete the bargain at that time, added this memorandum — “This offer to be left over until Friday, 9 o'clock A.M., 12th June, 1874.” That shews it was only an offer. There was no consideration given for the undertaking or promise, to whatever extent it may be considered binding, to keep the property unsold until 9 o'clock on Friday morning; but apparently Dickinson was of opinion, and probably Dodds was of the same opinion, that he (Dodds) was bound by that promise, and could not in any way withdraw from it, or retract it, until 9 o'clock on Friday morning, and this probably explains a good deal of what afterwards took place.

But it is clear settled law, on one of the clearest principles of law, that this promise, being a mere nudum pactum, was not binding, and that at any moment before a complete acceptance by Dickinson of the offer, Dodds was as free as Dickinson himself. Well, that being the state of things, it is said that the only mode in which Dodds could assert that freedom was by actually and distinctly saying to Dickinson, “Now I withdraw my offer.” It appears to me that there is neither principle nor authority for the proposition that there must be an express and actual withdrawal of the offer, or what is called a retractation. It must, to constitute a contract, appear that the two minds were at one, at the same moment of time, that is, that there was an offer continuing up to the time of the acceptance. If there was not such a continuing offer, then the acceptance comes to nothing. Of course it may well be that the one man is bound in some way or other to let the other man know that his mind with regard to the offer has been changed; but in this case, beyond all question, the Plaintiff knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if Dodds had told him in so many words, “I withdraw the offer.” This is evident from the Plaintiff's own statements in the bill.

The Plaintiff says in effect that, having heard and knowing that Dodds was no longer minded to sell to him, and that he was selling or had sold to some one else, thinking that he could not in point of law withdraw his offer, meaning to fix him to it, and endeavouring to bind him,” I went to the house where he was lodging, and saw his mother-in-law, and left with her an acceptance of the offer, knowing all the while that he had entirely changed his mind. I got an agent to watch for him at 7 o'clock the next morning, and I went to the train just before 9 o'clock, in order that I might catch him and give him my notice of acceptance just before 9 o'clock, and when that occurred he told my agent, and he told me, you are too late, and he then threw back the paper.” It is to my mind quite clear that before there was any attempt at acceptance by the Plaintiff, he was perfectly well aware that Dodds had changed his mind, and that he had in fact agreed to sell the property to Allan. It is impossible, therefore, to say there was ever that existence of the same mind between the two parties which is essential in point of law to the making of an agreement. I am of opinion, therefore, that the Plaintiff has failed to prove that there was any binding contract between Dodds and himself.

MELLISH, L.J.:—

I am of the same opinion. The first question is, whether this document of the 10th of June, 1874, which was signed by Dodds, was an agreement to sell, or only an offer to sell, the property therein mentioned to Dickinson; and I am clearly of opinion that it was only an offer, although it is in the first part of it, independently of the postscript, worded as an agreement. I apprehend that, until acceptance, so that both parties are bound, even though an instrument is so worded as to express that both parties agree, it is in point of law only an offer, and, until both parties are bound, neither party is bound. It is not necessary that both parties should be bound within the Statute of Frauds, for, if one party makes an offer in writing, and the other accepts it verbally, that will be sufficient to bind the person who has signed the written document. But, if there be no agreement, either verbally or in writing, then, until acceptance, it is in point of law an offer only, although worded as if it were an agreement. But it is hardly necessary to resort to that doctrine in the present case, because the postscript calls it an offer, and says, “This offer to be left over until Friday, 9 o'clock A.M.” Well, then, this being only an offer, the law says — and it is a perfectly clear rule of law — that, although it is said that the offer is to be left open until Friday morning at 9 o'clock, that did not bind Dodds. He was not in point of law bound to hold the offer over until 9 o'clock on Friday morning. He was not so bound either in law or in equity. Well, that being so, when on the next day he made an agreement with Allan to sell the property to him, I am not aware of any ground on which it can be said that that contract with Allan was not as good and binding a contract as ever was made. Assuming Allan to have known (there is some dispute about it, and Allan does not admit that he knew of it, but I will assume that he did) that Dodds had made the offer to Dickinson, and had given him till Friday morning at 9 o'clock to accept it, still in point of law that could not prevent Allan from making a more favourable offer than Dickinson, and entering at once into a binding agreement with Dodds.

Then Dickinson is informed by Berry that the property has been sold by Dodds to Allan. Berry does not tell us from whom he heard it, but he says that he did hear it, that he knew it, and that he informed Dickinson of it. Now, stopping there, the question which arises is this — If an offer has been made for the sale of property, and before that offer is accepted, the person who has made the offer enters into a binding agreement to sell the property to somebody else, and the person to whom the offer was first made receives notice in some way that the property has been sold to another person, can he after that make a binding contract by the acceptance of the offer? I am of opinion that he cannot. The law may be right or wrong in saying that a person who has given to another a certain time within which to accept an offer is not bound by his promise to give that time; but, if he is not bound by that promise, and may still sell the property to some one else, and if it be the law that, in order to make a contract, the two minds must be in agreement at some one time, that is, at the time of the acceptance, how is it possible that when the person to whom the offer has been made knows that the person who has made the offer has sold the property to someone else, and that, in fact, he has not remained in the same mind to sell it to him, he can be at liberty to accept the offer and thereby make a binding contract? It seems to me that would be simply absurd. If a man makes an offer to sell a particular horse in his stable, and says, “I will give you until the day after to-morrow to accept the offer,” and the next day goes and sells the horse to somebody else, and receives the purchase-money from him, can the person to whom the offer was originally made then come and say, “I accept,” so as to make a binding contract, and so as to be entitled to recover damages for the non-delivery of the horse? If the rule of law is that a mere offer to sell property, which can be withdrawn at any time, and which is made dependent on the acceptance of the person to whom it is made, is a mere nudum pactum, how is it possible that the person to whom the offer has been made can by acceptance make a binding contract after he knows that the person who has made the offer has sold the property to some one else? It is admitted law that, if a man who makes an offer dies, the offer cannot be accepted after he is dead, and parting with the property has very much the same effect as the death of the owner, for it makes the performance of the offer impossible. I am clearly of opinion that, just as when a man who has made an offer dies before it is accepted it is impossible that it can then be accepted, so when once the person to whom the offer was made knows that the property has been sold to some one else, it is too late for him to accept the offer, and on that ground I am clearly of opinion that there was no binding contract for the sale of this property by Dodds to Dickinson, and even if there had been, it seems to me that the sale of the property to Allan was first in point of time. However, it is not necessary to consider, if there had been two binding contracts, which of them would be entitled to priority in equity, because there is no binding contract between Dodds and Dickinson.

Cur. adv. vult.

March 6. LINDLEY, J.

This was an action for the recovery of damages for the non-delivery by the defendants to the plaintiffs of 1000 boxes of tinplates, pursuant to an alleged contract, which I will refer to presently. The action was tried at Cardiff before myself without a jury; and it was agreed at the trial that in the event of the plaintiffs being entitled to damages they should be 375l.

The defendants carried on business at Cardiff and the plaintiffs at New York, and it takes ten or eleven days for a letter posted at either place to reach the other. The alleged contract consists of a letter written by the defendants to the plaintiffs on the 1st of October, 1879, and received by them on the 11th, and accepted by telegram and letter sent to the defendants on the 11th and 15th of October respectively. These letters and telegram were as follows:—

[The learned judge read the letter of the 1st of October, 1879, from the defendants to the plaintiffs.

It contained a reference to the price of tinplates branded “Hensol,” and the “offer of 1000 boxes of this brand 14 × 20 at 15s. 6d. per box f. o. b. here with 1 per cent. for our commission; terms, four months' bankers' acceptance on London or Liverpool against shipping documents, but subject to your cable on or before the 15th inst. here.”

The answer was a telegram from the plaintiffs to the defendants sent on the 11th of October, 1879: “Accept thousand Hensols.” On the 15th of October, 1879, the plaintiffs wrote to the defendants: “We have to thank you for your valued letter under date 1st inst., which we had on Saturday P.M., and immediately cabled acceptance of the 1000 boxes ‘Hensol,’ 1c. 14/20 as offered. Against this transaction we have pleasure in handing you herewith the Canadian Bank of Commerce letter of credit No. 78, October 13th, on Messrs. A. R. McMaster & Brothers, London, for 1000l. … Will thank you to ship the 1000 ‘Hensols’ without delay.”]

These letters and telegram would, if they stood alone, plainly constitute a contract binding on both parties. The defendants in their pleadings say that there was no sufficient writing within the Statute of Frauds, and that they contracted only as agents; but these contentions were very properly abandoned as untenable, and do not require further notice. The defendants, however, raise two other defences to the action which remain to be considered.

First, they say that the offer made by their letter of the 1st of October was revoked by them before it had been accepted by the plaintiffs by their telegram of the 11th or letter of the 15th. The facts as to these are as follows: On the 8th of October the defendants wrote and sent by post to the plaintiffs a letter withdrawing their offer of the 1st. The material part of this letter was as follows: “Confirming our respects of the 1st inst. we hasten to inform you that there having been a regular panic in the tinplate market during the last few days, which has caused prices to run up about twenty-five per cent. we are reluctantly compelled to withdraw any offer we have made to our constituents, and must therefore also consider our offer to you for 1000 boxes ‘Hensols’ at 17s. 6d. to be cancelled from this date.” This letter of the 8th of October reached the plaintiffs on the 20th of October. On the same day the plaintiffs telegraphed to the defendants demanding shipment, and sent them a letter insisting on completion of the contract.

[The learned judge read the letter. In it the plaintiffs expressed astonishment at the contents of the letter of the 8th, recapitulated the transactions, and said “practically and in fact a contract for 1000 boxes came into existence between you and ourselves. It requires the consent of both parties to a contract to cancel same. If instead of writing to us on the 8th you had cabled ‘offer withdrawn,’ you would have protected yourselves and us too. We disposed of the 1000 boxes on the 17th at a net profit of 1850 dollars … We write our friend Philip S. Philips, Esq., of Aberkllery, requesting him to call on you and demand delivery as agreed.” In a postscript they added, “You speak of offer of 1000 boxes Hensol at 17s. 6d. The only firm offer we received from you under date 1st of October was 1000 boxes at 15s. 6d., and ten per cent. f. o. b. Cardiff; we cable you to-night ‘demand shipment.’”]

This letter is followed by one from the defendants to the plaintiffs of the 25th of October refusing to complete.

[The learned judge read it. The defendants acknowledged the receipt of the cable message of the 20th, inclosed the credit note sent in the letter of the 15th, and added, “Our offer having been withdrawn by our letter of the 8th inst. we now return the above credit, for which we have no further need, but take this opportunity to observe that in case of any future business proposals between us, we must request you to conform to our rules and principles, which require bankers' credit in this country, whereas the firm of A. R. McMaster & Brothers are not classified as such.”]

There is no doubt that an offer can be withdrawn before it is accepted, and it is immaterial whether the offer is expressed to be open for acceptance for a given time or not: Routledge v. Grant, 4 Bing. 653.

For the decision of the present case, however, it is necessary to consider two other questions, viz.: 1. Whether a withdrawal of an offer has any effect until it is communicated to the person to whom the offer has been sent? 2. Whether posting a letter of withdrawal is a communication to the person to whom the letter is sent?

It is curious that neither of these questions appears to have been actually decided in this country. As regards the first question, I am aware that Pothier and some other writers of celebrity are of opinion that there can be no contract if an offer is withdrawn before it is accepted, although the withdrawal is not communicated to the person to whom the offer has been made. The reason for this opinion is that there is not in fact any such consent by both parties as is essential to constitute a contract between them. Against this view, however, it has been urged that a state of mind not notified cannot be regarded in dealings between man and man; and that an uncommunicated revocation is for all practical purposes and in point of law no revocation at all. This is the view taken in the United States ... and it is adopted by Mr. Benjamin. The same view is taken by Mr. Pollock in his excellent work on Principles of Contract, ed. ii., p. 10, and by Mr. Leake in his Digest of the Law of Contracts, p. 43. This view, moreover, appears to me much more in accordance with the general principles of English law than the view maintained by Pothier.

I pass, therefore, to the next question, viz., whether posting the letter of revocation was a sufficient communication of it to the plaintiff. The offer was posted on the 1st of October, the withdrawal was posted on the 8th, and did not reach the plaintiff until after he had posted his letter of the 11th, accepting the offer. It may be taken as now settled that where an offer is made and accepted by letters sent through the post, the contract is completed the moment the letter accepting the offer is posted: Harris' Case, Law Rep. 7 Ch. 587; Dunlop v. Higgins, 1 H. L. 381, even although it never reaches its destination. When, however, these authorities are looked at, it will be seen that they are based upon the principle that the writer of the offer has expressly or impliedly assented to treat an answer to him by a letter duly posted as a sufficient acceptance and notification to himself, or, in other words, he has made the post office his agent to receive the acceptance and notification of it. But this principle appears to me to be inapplicable to the case of the withdrawal of an offer. In this particular case I can find no evidence of any authority in fact given by the plaintiffs to the defendants to notify a withdrawal of their offer by merely posting a letter; and there is no legal principle or decision which compels me to hold, contrary to the fact, that the letter of the 8th of October is to be treated as communicated to the plaintiff on that day or on any day before the 20th, when the letter reached them. But before that letter had reached the plaintiffs they had accepted the offer, both by telegram and by post; and they had themselves resold the tin plates at a profit. In my opinion the withdrawal by the defendants on the 8th of October of their offer of the 1st was inoperative; and a complete contract binding on both parties was entered into on the 11th of October, when the plaintiffs accepted the offer of the 1st, which they had no reason to suppose had been withdrawn.

Before leaving this part of the case it may be as well to point out the extreme injustice and inconvenience which any other conclusion would produce. If the defendants' contention were to prevail no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it. It appears to me that both legal principles, and practical convenience require that a person who has accepted an offer not known to him to have been revoked, shall be in a position safely to act upon the footing that the offer and acceptance constitute a contract binding on both parties.

The defendants' next defence is that, as the plaintiffs never sent a banker's acceptance on London or Liverpool as stipulated in the contract, they cannot maintain any action for its breach. The correspondence which preceded the contract satisfies me that the defendants attached importance to this particular mode of payment; and although the plaintiffs sent letters of credit which were practically as good as a banker's acceptance, yet I cannot say that they did in fact send a banker's acceptance according to the contract.

By the terms of the contract bankers' acceptances on London or Liverpool were to be sent against, — i.e., were to be exchanged for — shipping documents; and if the defendants had been ready and willing to perform the contract on their part on receiving proper bankers' acceptances, I should have been of opinion that the plaintiffs would not have sustained this action. But it is perfectly manifest from the correspondence that the defendants did not refuse to perform the contract on any such ground as this. It is true that the defendants in their letter of the 31st of October, say that, “even if we had not withdrawn our offer we would all the same have returned your credit,” and the defendants' solicitors in their letter of the 26th of November, say that, “if your clients (i.e. the plaintiffs), had fulfilled the terms of the contract at the outset the goods were ready to be shipped;” but the defendants' own letters of the 8th, 13th, and 25th of October, shew conclusively that this was not the case and that the defendants stood on their notice of withdrawal and would not have performed the contract even if bankers' acceptances had been sent. Their letter of the 25th of October in which they return the plaintiffs' first letter of credit is explicit on this point. The defendants do not return the letter of credit because it is not a banker's acceptance, but because the offer was withdrawn; and the inference I draw from that letter is that if the offer had not been withdrawn the defendants would not have returned the letter of credit although in future transactions they might have been more particular. In face of this refusal, it was useless for the plaintiffs to send a banker's acceptance, and although when they found their first letter of credit returned they sent another which was declined, still the defendants never receded from their first position, or expressed any readiness to ship the goods on receiving a banker's acceptance; and it is plain to my mind that they were not prepared to do so.

On the other hand, I am satisfied that if the defendants had taken this ground the plaintiffs would have sent bankers' acceptances in exchange for shipping documents, and I infer as a fact that the plaintiffs always were ready and willing to perform the contract on their part, although they did not in fact tender proper bankers' acceptances. ...

For the reasons above stated I give judgment for the plaintiffs for 375l. and costs.

Judgment for plaintiffs.

Preamble

The States Parties to this Convention,

Bearing in mind the broad objectives in the resolutions adopted by the sixth special session of the General Assembly of the United Nations on the establishment of a New International Economic Order,

Considering that the development of international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States,

Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade,

Have agreed as follows:

PART I. SPHERE OF APPLICATION AND GENERAL PROVISIONS

Chapter 1. Sphere of Application

Article 1

1. This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
   • (a) when the States are Contracting States; or
   • (b) when the rules of private international law lead to the application of the law of a Contracting State.
2. The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract.

...

PART II. FORMATION OF THE CONTRACT

...

Article 15

1. An offer becomes effective when it reaches the offeree.
2. An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.

Article 16

1. Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.
2. However, an offer cannot be revoked:
   • (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
   • (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

Article 17

An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.

CHANCERY DIVISION
CH-2016-000090
Arnold J
12/07/2016

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Approved Judgment

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MR JUSTICE ARNOLD: 

This is an appeal from a decision of HHJ Dight sitting in the County Court at Central London on 5 April 2016.  The issue before the judge was whether a pending appeal had been compromised.  The background to the matter is, as the judge rightly said, of little relevance.  In brief, however, there had been a dispute between the appellant, Caroline Gibbs, and the respondent, Lakeside Developments Ltd, with regard to the forfeiture of a lease of a property situated at 47 Cooper’s Close, London E1 4BB. The appellant had pursued a claim for damages which was tried in the County Court before District Judge Parfitt.  In his judgment the district judge found against the appellant and dismissed her claim.  She then sought permission to appeal.  Permission to appeal was granted by HHJ Walden-Smith on 24 September 2015.  Subsequently the substantive appeal was fixed to be heard on, as I understand it, 7 April 2016.

In the run-up to the hearing of the appeal the parties unsurprisingly gave consideration to whether a compromise could be reached and there was correspondence between them.  For present purposes, the correspondence starts with a letter from the appellant to the respondent’s solicitors dated 1 March 2016.  The key passage of that letter is in the following terms:

“The offer you have made is insufficient.  I acknowledge that it is a substantial sum, but it is not enough for me to accept.  I have given very careful consideration to a sum that I would accept in order to bring an end to these proceedings and to avoid the ongoing risks.  The minimum sum I will accept is the sum of £90,000 with each party to bear its own costs, provided that (1) this offer is accepted by no later than 4pm on Wednesday, 9 March 2016; and (2) the monies are transferred into an account nominated by me before 4pm on Wednesday 16 March 2016.  After 9 March we shall only be a month from the appeal and substantial further costs will need to be incurred.  I emphasise that the sum of £90,000 is the lowest amount I would accept.  It is not a starting point for negotiation, so if you come back to me with any offer below this sum it will be rejected.  An agreement on the sum of £90,000 will be a full and final settlement of all claims between us and I would like that reflected in any agreed order for the court.  As the appeal is fast approaching, I would be grateful for an early response.”

(Quote unchecked)

That letter was responded to in an email from Mr Hal Branch of the respondent’s solicitors to the appellant on 8 March 2016.  In that email Mr Branch stated as follows: 

“The claimant accepts your offer.  I attach a draft consent order for your consideration and approval.  If approved, kindly sign and return it to me and I will file it at court.  I consider that the consent order does deal with all the relevant matters, but if you or your barrister Mr Douthwaite disagrees kindly let me know.”

(Quote unchecked)

As is common ground, the consent order that was attached to the email deviated from the terms of the appellant’s offer in that, whereas her offer required payment by 4pm on 16 March 2016, paragraph 3 of the consent order provided for payment of the £90,000 by 8 April 2016.  For the moment, I will stop my recitation of the facts there.

The issue between the parties is whether by that exchange an agreement of compromise was concluded or not.  As is common ground, the relevant principle to be applied is that stated in Foskett’s Law of Compromise at paragraph 3.22 as follows: 

“The essential task is to determine whether the parties' negotiations have crystalized into a contractually binding agreement.  In order to achieve this the traditional test applying an objective test is to seek to identify a definite offer by one party and a definite acceptance of that offer by the other party.” 

In his judgment the judge concluded that the email of 8 March 2016 was not an acceptance of the offer contained in the letter of 1 March, but rather a counter-offer. 

...

On the appeal it is submitted on behalf of the appellant that the judge fell into error in his interpretation of the email of 8 March 2016.  Counsel for the appellant submits that the first sentence of the email is clear and unequivocal.  It states that the respondent accepts the appellant’s offer.  Nothing in the email suggests to the contrary.  Still less does the email purport on its face to convey a counter-offer.  True it is that the email refers to a draft consent order which is attached for the appellant’s consideration and approval.  Nevertheless, on the face of the email, so it is argued, there is a clear acceptance of the offer.  In those circumstances it is submitted that it is simply immaterial that the proposed consent order which was put forward for discussion contained a different date for the payment of the settlement sum.  That was, so counsel for the appellant submits, merely a proposed formal document to give effect to the agreement.  As a formal document to give effect to the agreement, if it did not accurately reflect the agreement which had been reached, it could be varied or rectified as necessary so as to accurately reflect the agreement that had been reached.

Counsel for the appellant reinforced his argument by postulating what the position would have been if the email had not referred to or attached a draft consent order, and in particular if the consent order had only been sent, let us say, two days later.  In those circumstances, he submits that it would be plain that there had been an acceptance of the offer giving rise to a binding contract, and the fact that the consent order sent subsequently did not accurately reflect the terms of the agreement would not prevent the contract from being binding. 

Against that, counsel for the respondent submits that the email of 8 March has to be construed as a whole and that, given that it attached a draft consent order for consideration by the appellant, it follows that the terms of the draft consent order form part of the whole that has to be considered.  Once that whole is considered, counsel for the respondent submits, it is clear that the respondent was not agreeing to all of the terms of the offer contained in the letter of 1 March, and in particular the respondent was not agreeing to pay the £90,000 by 16 March, rather it was only offering to do so by 8 April.  Objectively considered, it is submitted that that amounts to a counter-offer, and in law a counter-offer is a rejection of the offer.  Accordingly, there was no agreement between the parties.

In my judgment, the judge was correct in the conclusion to which he came so far as the central issue is concerned.  When one considers the terms of the offer contained in the letter of 1 March it is clear that it has two aspects.  The first is that there must be acceptance of the offer to accept £90,000 in full and final settlement of all claims by no later than 4pm on Wednesday 9 March 2016. Secondly, that payment must be made by transfer to an account nominated by the appellant before 4pm on 16 March 2016. As counsel for the appellant himself accurately described it, it was a package.  As a package, it fell to be accepted in whole or not at all. 

When one considers the appellant’s response, it can be seen that it does not amount to an acceptance of the whole of the package.  On the contrary, there is a different date put forward for the date of payment.  That cannot be regarded as in some way insignificant.  On the contrary, the terms of the appellant’s offer made plain the importance of the date for payment as well as the date for acceptance of the offer.  Indeed, it will be noted that the date for payment proposed by the respondent in the draft consent order was the day after the date on which the hearing of the appeal was scheduled. 

Accordingly, the correct analysis is that the email of 8 March, notwithstanding that it started with the words “the claimant accepts your offer,” was in fact a counter-offer and thus a rejection of the claimant’s offer.  There was consensus as to the sum to be paid by way of settlement, but there was not consensus as to the date by which that sum had to be paid.

...

It seems to me that the subsequent correspondence between the parties confirms the conclusion which, I agree with the judge, is in any event is anyway to be drawn from the email of 8 March, namely that the email of 8 March was not an acceptance of the offer contained in the 1 March letter and the parties were not ad idem. 

For those reasons I consider that the judge was correct to conclude that there had been no compromise of the appeal and this appeal must therefore be dismissed. 

...

Cur adv vult

COOKE J.

This case raises a short but quite difficult question as to whether communication by a would-be purchaser to a real estate agent of acceptance of a counter-offer by the property owners created a contract of sale and purchase of land. In the High Court Ellis J held that in the circumstances it did not, and the would-be purchaser, Mr Powierza, appeals. The agent was Mr Lee of Were Realty (South Auckland) Ltd. The owners were the trustees of the Daley family trust; Mr Richardson dealt with the matter on their behalf; the property was occupied by an elderly widow. It will be convenient to refer to the three main protagonists by their surnames only.

In late August 1984 Powierza approached Lee with a view to purchasing a suitably zoned property in South Auckland for establishing a motor vehicle dealer's premises. Lee was familiar with the Daley property but at that stage held no authority from the owners. Initially therefore he acted as Powierza's agent. Lee prepared a form of sale and purchase agreement on one of his company's standard forms; he obtained Powierza's signature to it. It provided for a purchase price of $325,000 conditional on $200,000 finance by 31 October 1984 and on City Council approval by the same date. A deposit of $10,000 was provided for upon the agreement becoming unconditional. The balance was to be paid in cash on or before possession date, 30 March 1985.

Clause 11.1 provided:

"If the name of a licensed real estate agent is stated on the front page of this agreement it is acknowledged that the sale evidenced by this agreement has been made through that agent whom the vendor appoints as his agent to effect the sale. The charges payable to the agent shall be in accordance with the professional scale of charges adopted by the Real Estate Institute of New Zealand (Incorporated) and in force at the date of this agreement."

Lee then approached the owners and caused the document to be delivered to Richardson, who in due course said that they would give Lee and also another real estate agent the opportunity of selling the property. Later Richardson said that a better offer would have to be forthcoming. Powierza's offer was increased to $405,000, the document being amended accordingly and initialled by Powierza and returned by Lee to Richardson. On the night of Sunday 23 September Richardson rang Lee and said that the offer would be accepted by the trustees but that they needed an extended settlement date, such as the end of June, to enable them to relocate Mrs Daley. It has not been contended that there was any contract at this stage.

On Monday 24 September Lee collected the document from Richardson. He found some changes. The important ones were that the deposit had been increased to $40,000, the possession date altered to 30 June 1985 and the condition as to Council consent struck out. More important still, the three vendors, trustees whose full names and occupations had now been written into the document in place of a bare reference to the family trust, had each signed the document.

There is no doubt that the document, so amended and signed, when released to Lee embodied a counter-offer by the owners. Further, it contained in cl 11.1 a signed authority to Lee which would satisfy s 62 of the Real Estate Agents Act 1976. At that stage Lee clearly had some authority from the owners. As to the extent of that authority, Richardson was asked in cross-examination "They went to Mr Lee with authority for him to obtain acceptance of that counter-offer that you had made". He replied "I would assume that as an inference, yes". That acknowledgement is consistent, I think, with the true interpretation of cl 11.1. The clause gave authority "to effect the sale". That must mean to bring about a sale on the terms specified.

The ordinary consequences of the signing of such a document and its delivery to the agent cannot, I think, be doubted. When an owner signs as vendor a sale and purchase agreement containing, not only all the terms of a proposed agreement and the names of both parties, but also a clause giving the agent authority to effect the sale, by delivering that document to the agent he ordinarily authorises the agent to conclude a contract by obtaining the signature of the other party and retaking delivery of the document from the other party. There is nothing to take this case out of that ordinary rule. Indeed Richardson's evidence tends to confirm that such was the intention of the trustees.

In the light of that evidence and the contents of the document, Mr Johnson for the respondents accepted in this Court that if on 24 September Lee had obtained Powierza's signature to the document unaltered and had received the document back from Powierza, a binding contract would have come into existence. In other words, that was a mode of acceptance of the counter-offer implicitly designated by the owners. I think that this concession was rightly made.

...

I continue the narrative largely in the words of Ellis J. Lee immediately discussed the amendments with Powierza, who accepted and initialled the deletion of the City Council condition. As to the deposit he told Lee that if they really wanted $40,000 he would probably pay it, but would Lee inquire whether they would accept $20,000. Lee crossed out the $40,000 and inserted $20,000. He obtained Powierza's initialling of this alteration also, thinking that there was a strong possibility that Richardson would agree.

On the Monday evening Lee rang Richardson and said that Powierza would prefer the deposit to be $20,000, but Richardson explained that they needed $40,000 to relocate Mrs Daley; he told Lee to ring him at 1 pm next day at a given telephone number.

On Tuesday Lee rang Powierza, who agreed to pay the $40,000 but requested Lee to ask for the deposit to be spread: $20,000 on acceptance and $20,000 on the contract becoming unconditional. It seems that at this stage Powierza, Lee and Richardson were all under the mistaken impression that, as it stood, the document provided for payment of the deposit when the contract was made, whereas in fact it was upon the contract becoming unconditional. At 1 pm Lee rang Richardson and told him of Powierza's proposition. Richardson said he was unable to discuss the matter then but would ring Lee that evening. Lee thereafter came to realise that it would be more advantageous to Powierza to leave standing the provision in the document as to the date of payment of the deposit, rather than to spread the deposit in a way providing for an immediate payment of $20,000. He discussed this with Powierza, who agreed, so Lee struck out the $20,000, reinstated the $40,000 and caused Powierza to initial the change. Lee took the document with him. This was at about 2.30 pm on 25 September.

The primary argument of Mr Stewart for the appellant is that the contract was concluded at that time.

Lee tried unsuccessfully to communicate with Richardson, but Richardson rang him at 8 pm that evening. Richardson spoke first, beginning the conversation by saying words to the effect "I have some bad news for you. I have signed another agreement for $435,000 at 5 o'clock this evening". Lee protested, but unavailingly. Richardson had previously dictated a letter to Lee (not received until the following morning) saying that they had not agreed terms of any settlement and that the negotiations were at an end. The Judge held that at 8 pm Richardson had withdrawn the counter-offer before Lee had conveyed acceptance by Powierza.

...

With regard to the discussions about a deposit of $20,000 or a spread deposit totalling $40,000, Ellis J held that these amounted to no more than suggestions by Powierza. The Judge described them as tentative inquiries and having been treated as such by Richardson. He held that they did not amount to a rejection of the trustees' counter-offer. The line between rejecting an offer and merely inquiring as to a possible variation can be a fine one, but the basic test is the effect on a reasonable person in the shoes of the offeror. The Judge approached the question correctly, citing standard textbooks and authorities. I do not think that he has been shown to have been wrong in his finding that there was no rejection. The crossing out of the $40,000 and the insertion of the $20,000 and the accompanying initialling by Powierza were mainly for convenience; the Judge was not bound to elevate this into rejection.

In this Court the main argument of Mr Johnson for the trustees was that, whereas the parties would have been bound in contract if Powierza had signed or initialled acceptance of the counter-offer on Monday 24 September, a series of interventions on that and the following day had the effect of putting an end to Lee's authority to receive an acceptance on behalf of the vendors. In particular it was argued that in his telephone conversation with Lee at 1 pm on 25 September Richardson put the negotiations "on hold". In substance it is said that he withdrew the counter-offer or at least the designation of the agent as a person to whom Powierza could communicate acceptance. This is a different contention from that on which the Judge decided the case, and we do not have the benefit of his opinion on it.

In his evidence-in-chief Richardson said:

"I think on the Monday evening I got a phone call from Mr Lee in which he told me his clients were very unhappy about the size of the deposit.

Court: Remember exact words? - Yes as near as I can remember: And would I and my fellow trustees consider a deposit of $20,000.

To counsel: I told him I didn't believe we would: that 10% was a normal deposit and we needed the money to assist in relocating Mrs Daley. I suggested he recommit the matter to his client and ring me at 1 pm next day at phone 34-855, Tuesday. I must interpose I am not certain whether 12 or 1, one of those times as I am not free in the intervening period. That phone number is a businessmen's health club in Federal Street, the Atrium Club. Before the middle part of Tuesday I had no other connection with Mr Lee or anyone else on the matter. I went to Atrium Club and there received a phone call. I was in the plunge pool and Lee said that his clients were still unhappy about deposit but that he might be able to get them to agree to two instalments of $20,000. I said that I was too busy to discuss that now but that regardless of the timing of payments the $40,000 deposit was required and I gave Lee phone numbers to call me back for the rest of the afternoon and early evening so that he could come back to me as to whether there was firm commitment to a $40,000 deposit.

Court: You did not realise at that stage that the contract required deposit to be paid on fulfilment of in finance clause? - I had not realised that.

That is unusual? - Yes.

To counsel: The 20 plus 20 proposal, I understood that I wanted him to go back to his purchasers; in fact get commitment to $40,000 because he had said he thought he could get them to agree and then I would be relaxed about discussing how the two lots of $20,000 came in."

In his cross-examination he accepted that there was an amicable discussion on the Monday evening in the course of which he explained that he required the full deposit. The passage in cross-examination continues:

"You gave Lee phone number to contact you at one o'clock or 12 noon the next day? - Yes.

When Mr Lee phoned you he said the purchaser was agreeable to $40,000 but wished to know if you would take 20 now and 20 when unconditional? - No.

What do you say he said? - That his clients were still concerned about the deposit but he thought he might be able to get them to agree to $20,000 now and $20,000 later.

When unconditional? - He probably said when unconditional; I just know it was to be broken into two payments and he thought he might get agreement.

You were wet from the plunge pool and unable to discuss the matter with Lee at that stage? - Yes but I told him $40,000 was the germane matter and that a question of the time of payment could be a matter for discussion and asked him to get it confirmed that they would pay $40,000 and gave him my phone numbers."

The Judge made a favourable reference to Richardson as a witness. We can safely accept his evidence. With regard to the effect of what Richardson said on 24 and 25 September there is no need to distinguish between Powierza and Lee, since anything said to Lee was said to a common agent. The question must be whether reasonable persons in their shoes should have understood that Richardson had revoked authority to communicate to Lee acceptance of the trustees' counter-offer made in the terms set out in the document as signed by them.

Accepting Richardson's evidence, I have come to the conclusion that what he said to Lee would not reasonably convey that understanding. His concern was to have a deposit of $40,000. He said nothing to suggest that the counter-offer of the trustees to accept that deposit, on the very terms stated in the document they had signed, was no longer open.

... 

At best what is now argued to have been revocation was equivocal, which is not enough: revocation must be manifested. Accordingly I think that a contract was made at about 2.30 pm on 25 September by communication of acceptance in an authorised mode, namely to the common agent.

In accordance with the traditional approach I have considered this case in terms of an offer-and-acceptance analysis. But if one stands back and applies the broader objective test whether a concluded agreement emerges (see Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560), I think that the result is the same. By 2.30 pm all parties had signified their assent to the same terms by signing and initialling the sale and purchase agreement and leaving it in the hands of an intermediary.

In the result I would allow the appeal, vacate the High Court judgment, and declare that a binding contract was made on 25 September 1984 as set out in the written agreement for sale and purchase signed and initialled by the parties. The plaintiff claimed primarily specific performance - which prima facie he is entitled to - but on terms. No argument was addressed to this Court on the question of relief, so that question should be remitted to the High Court for determination.

...

"The lapse of an offer may be expressed or implied. In the former case, the offer states an expiration of the offer after a fixed period of time....

[Offers also] self terminate after the lapse of a reasonable period of time. A reasonable period of time depends on the type of contract transaction involved and surrounding circumstances. Thus, an offer to sell real estate may remain open for weeks because most buyers need to obtain financing or perform due diligence before being able to accept. In another scenario, the offer may lapse almost immediately. A stockbroker calls a client to offer for sale shares in an initial public offering. The client asks for some time to review her finances to determine how many shares she is able to buy. The client calls the stockbroker back a few minutes later and finds out the shares were sold to another client. Given the nature of stock transactions, the stockbroker's offer lapsed at the time the client ended the first phone call. Interestingly, the same scenario occurred back in 1866, when the court in Ramsgate Victoria Hotel v. Montefiore (1866) LR 1 Ex 109, held that an offer accepted months after it was received had been revoked due to the lapse of time. The contract was for the sale of shares and the court reasoned that the price of shares is volatile and that there was a high possibility of a significant change in price, therefore it is sensible to hold that the lapse of a reasonable period of time had occurred."