CML – Raffles v. Wichelhaus (1864), 2 H. & C. 906 (Exch.): CB 142
Jurisdiction
UK
Facts
The plaintiff (seller) contended that the defendant (buyer), a cotton trader, did not purchase the delivered stock as agreed upon. The defendant claimed that it was in fact the wrong stock, as two ships named Peerless were set to dock at Liverpool. Raffles meant to sell goods to Wichelhaus from the December ship, while Wichelhaus alleged he meant the October ship. Simpson explains that the plaintiff conceded to the defendant’s claim (on a demurrer) in which he admits that the defendants had intended to purchase from the October arrival.
Issues
Was there a contract?
Holding
No Wichelhaus.
Reasoning
Since there was no agreement regarding a material term of the contract (date of delivery), there was “no contract at all”. There is ambiguity about which ship Peerless the contract is about, and therefore no “meeting of the minds”.
No contract because neither interpretation was more reasonable than the other.
Ratio
Consensus ad idem (“meeting of the minds”) is necessary for contract formation. All essential elements of a contract must be present for the contract to be in existence.
Comments
Pleaded on demurrer (accepts facts, contests law) but it is enough that an answer was available in law – the defendant’s argument was therefore capable of raising a defence (jury might find there was a misunderstanding) and so the demurrer fails
“For procedural reasons the court never decided whether there was a contract or not. All that was actually decided was that it was open to the defendant to show that the contract was ambiguous and that he intended the October ship. If the case had gone to trial it would then have been open to the jury to hold either that there was no contract or to hold that there was a contract either for the October ship or the December ship. In modern times this would turn on whether a reasonable man would deduce an agreement from the behaviour of the parties, but in 1864 it might well have been thought to turn on whether the parties actually intended the same ship.”
Contemporary doctrinal resistance to modifying Ks through oral evidence about what was “really” meant
Decided at a time when generalized principles, rather than specific circumstances, were applied (see Atiyah above)
R says it doesn’t matter which boat it came on, as long as 125 bales were provided
At the time, specifying the name of the ship was normal because of timing (affected the price against which the K will be competing) and risk (if the boat sank, neither had a claim on the other) – so including more than one ship in the K is a trickier proposition
If the suggestion persists that the seller can determine when/however the cotton will arrive, you lose the idea that the seller is making individual Ks with buyers: the seller could give himself a wide margin to wait for the best possible moment to sell (timing all in seller’s control), and if one boat sank seller could tell all parties that their boat had sunk
R genuinely believed that his K didn’t relate to a shipment on the first Peerless; W had no economic incentive to accept delivery from the second Peerless, as the price of cotton had fallen
Practically, W was now free to pay a lower price for the cotton, and R was not able to sell the cotton at the price he’d hoped for – this case would only have proceeded if the difference between expected and actual price was more than enough to pay for the litigation
The value of this holding has come to be something perhaps other than the judges had intended (no reasoning in case report)
Argued for objective (not subjective) meeting of the minds (an outsider had to be able to say that there was agreement)
CVL – Terrasse Holdings v. Saunders, Quebec, 1989 CB 144
Jurisdiction
Quebec
Facts
Respondent was a rental agent working for a company that had been hired by the appellants to rent units in a building. In 1976, the respondent earned $69 460 in commissions, and 62% of the units in the building had been rented. After a dispute between the appellants and the company employing the respondent, the appellant promised the respondent a bonus of “as high as $60 000 to $70 000” if he would stay working for them to rent the remainder of the units in the building.
Issues
(1) Was there a binding contract? (2) Is there any other cause of action?
1) All of the elements necessary for the formation of a legally binding contract were not present
Given the absence of a fixed amount of remuneration for the respondent’s work, there was no “meeting of the minds” – this essential material term was not established
The burden of proof for the existence of a contract is on the person invoking the contract (in this case, the respondent)
2) The respondent can claim damages based on unjust enrichment (1493 CCQ)
They offered to pay him this bonus because he could have made as much money elsewhere, and his work was valuable to the appellants.
The presence of unjust enrichment brings into existence a quasi-contract.
Because the appellants continued to profit from the services of the respondent, he expected a certain remuneration of between $60 000 and $70 000, which he would have earned elsewhere for similar work.
In a quasi-contract, the court can determine the amounts to be awarded, which it cannot do for a contract (court cannot insert material terms into a contract in dispute)
Ratio
Where essential elements to the formation of a contract are missing, no legally binding contract exists. However, if unjust enrichment exists based on a quasi-agreement, the court may provide a remedy and determine the value of the unjust enrichment.
Comments
Notion of reliance. Saunders believed he was working on the basis that there was a contract. Would not have continued to work for them without the incentive.
Invitation to Treat (invitatio ad offerum)
Invitations to Treat are distinct from the intention to create legal relations, the invitation is the negotiation period (before an offer is made)
German SC (similar to CML): “What counts is exclusively the perspective of the objective, reasonable person.” (Doesn’t matter if the offeror thinks it isn’t an offer)
Different in French Law: “It can indeed be said that in general, where French law sees a ‘public offer’, English law sees only a an invitation to treat. It is clear, for example, that a display of goods in a shop window constitutes an offer.”
Offer and Acceptance (Classical Sense)
In order to have real offer is there real acceptance
Wills have to be expressed and communication needs to be noted
Offer and acceptance have to match (offer contains necessary terms (main elements) of contract, agreement says)
If the offeree rejects the offeror’s offer, he may make a counter-offer, thus becoming the new offeror
Negotiations
Are we able to separate offer and acceptance in real life situations?
In real life negotiations, it may not be possible to attribute the role of offeror to one of the parties
In real life negotiations, it may not be possible to identify a clear sequence that ends with a final offer and a final acceptance
Reminder: these are default rules—parties can often control these issues.
Problems with the Model
Marcel Fontaine, “Les obligations contractuelles: 1804-1904-2004 et l’avenir” CB 172
Problem with the classical model of offer and acceptance: although possible, not likely in business settings and real-life negotiations where it may not be possible to attribute the roles of offeror and offeree
Classical model is saved because someone will sign the contract at the end
Temporal and Spatial Dimensions of Offer and Acceptance
Why should we care if the offer and acceptance happened at the same time?
Applicable jurisdiction (Entores v. Miles Far East Corp)
One party may claim that they are not bound because the particular moment of formation was never reached
eg. Pharmaceutical Boots cash Chemist Case
External policy reasons (Boots Cash Chemists Poison Control Act)
Possibility to back out before formation
CML – Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern), Ltd., [1953] 1 Q.B. 401 (C.A.): CB 179
Jurisdiction
UK
Facts
The defendants, Boots Cash Chemists, operated a self-serve pharmacy where customers selected the articles from the shelf and then proceeded to the cashier to pay for them. Among the articles for sale were pharmaceutical products which, according to the Pharmacy and Poisons Act, were required to be sold only under the superivision or, or authorization by, a pharmacist. On April 13, 1951, two customers purchased a pharmaceutical product governed by the Act.
Issues
Is a sale of goods completed at the moment when the customer selects an article from the shelf?
Holding
No
Reasoning
Somervell:
A display of items in a store is an invitation to treat, a non-binding invitation to receive offers.
The presentation of the item by the customer to the cashier constitutes an offer to purchase the item.
The contract is completed with the cashier’s acceptance of the customer’s offer.
The sales in question were thus completed under the pharmacist’s supervision and, as such, were legal sales under the Act.
Ratio
A display of goods on is merely an invitation to treat, not an offer.
Entores (in England) made a contract by telex (instant typewriter) with MFE (in Holland) for 100 longtons of cathodes. Telex counter-offer by Entores (London) confirmed “received” by MFE (Amsterdam). Entores (London) wanted to confirm the price – ambiguity between tons and longtons – sent another telex to confirm the price. Dutch company replied that the price was 239.10 per longton – this completed the contract.
Issues
Where was the contract made?
Holding
England Entores.
Reasoning
Denning:
There is a difference between communication by post and instantaneous communication – according to post-box rule (acceptance effective upon dispatch of notice of acceptance), the contract is made at the place where the acceptance is put in the mail.
With instantaneous communication, the acceptance is effective when received by the offeror.
If there is interference, because of the instantaneous nature of the communication, the offeree should be immediately aware that the acceptance was not received, and would try again until he is sure.
If the offeror does not inform the offeree that there was trouble with the reception of the acceptance, and the offeree reasonably believes that his message has been received, the offeror is bound.
If the offeror, through no fault of his own, is unaware that the acceptance has been made, and the offeree reasonably believes it has, there is no contract.
Ratio
When instantaneous communication is the means used for the extension of the offer and the acceptance, the contract is created in the place where the offeror receives the acceptance. That is the proper jurisdiction for the contract.
Comments
Not clear who bears the risk for a communication problem – with telephone, generally nobody’s fault if communication breaks down; with telex, idea that receiver should keep machine in good order, etc. – but Denning leaves room for a grey area when the machine just breaks down ( no K)
Perhaps Denning was more concerned with having the dispute adjudicated on British soil – this is, after all, an application for a “leave to serve notice of a writ out of the jurisdiction”
Acceptance
the offeree must also show intention to accept
A reasonable offeror must consider the conduct of the offeree as a manifestation of consent
