queen mary law journal · carlill v carbolic smoke ball co8 is a leading case which illustrates the...

Q u e e n M a r y L a w J o u r n a l

First-Year Essay Competition, Autumn 2015

First-Year Essay Competition, Autumn 2015

Anisa Daud 1

Elvina Han Ning Leong 9

Kevin Roche 15

Malwina Anna Wójcik 23

Saleh Zaheer 31

Queen Mary Law JournalFirst-Year Essay Competition

Autumn 2015

The Queen Mary Law Journal seeks to publish innovative student legal scholarship.

Published by the Queen Mary Law Society in the United Kingdom.

Queen Mary Law Journalc/o School of LawMile End RoadLondon E1 4NS

Email: [email protected]

All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, electronic, mechanical, recording or otherwise, or stored in any retrieval system of any nature, without the prior, express written

permission of the Queen Mary Law Journal. Exceptions are permitted with regard to fair dealing for the purpose of research of private study, or criticism or review,

as permitted under the Copyrights, Designs and Patents Act 1988. Enquiries concerning reproducing outside these terms should be sent to the Editor-in-Chief.

© 2015 Queen Mary Law Journal

E D I T O R I A L B O A R D F I R S T - Y E A R E S S AY C O M P E T I T I O N , A U T U M N 2 0 1 5

Editors-in-ChiefEmma Randall

Sukania Prem Kumar

Managing EditorsNicole CharlesKevin Roche

General EditorsAmir Ben ShabatSaurabh Chaudry

Amy Chen Anna Maria Deligkari

Jia Yen Ong Pascal Krummenacher

Carolyn MinaudoRebecca Neumann

Rosalyn PierceNiall Rand

Michelle Silongan

Postgraduate EditorsNatalie Corthésy

Aleksandra Jolkina

Design & TypographyKevin Roche

1 s t y e a r e s s a y c o m p e t i t i o n - C o n t r a c t L a w

Anisa Daud1st year LLB, Queen Mary, University of London

“It is a mistake to think that all contracts can be analysed into the form of offer and acceptance” (Lord Denning). How is, and how should, contract formation be determined? Can the mirror image approach be improved?

The offer and acceptance rule proposes that this is the general application

for all contracts, but this universal rule has faced many criticisms from

academics and judges. Ewan McKendrick argues that ‘contracts are made in

many different ways and it is extremely difficult, if not impossible, to frame

rules that can be applied across such a broad spectrum’.1 Contracts can be

unilateral or bilateral, they can be in writing or made orally, and they can

also be made by email. In this essay, I will explain how contracts can be

made, what the exceptions to the general offer and acceptance rule are, and

whether contract formation should be determined. Furthermore, I will also

consider if the mirror image approach can be improved.

The formation of a contract today requires a definite offer by one party

and a definite acceptance of that offer by another party. The courts also

seek to know if there was an intention to create legal relations; if all of

these requirements are met, there is an enforceable contract. However, Jack

Beatson states that ‘it would be a mistake to think that all contracts can

thus be analysed into the form of offer and acceptance’.2 Lord Denning,

1. Ewan McKendrick, Contract Law: Text, Cases and Materials (6th edn, OUP 2014) 45.

2. J Beatson, A Burrows and J Cartwright, Anson’s Law of Contract (29th edn, OUP 2010) 30.

Queen Mary Law Journal2

the leading judicial critic, has also criticised this approach of analysing

contracts in terms of offer and acceptance. In order to conclude that there

is a contract we must first see if there is a binding agreement between the

parties; for an agreement to exist there must be a ‘meeting of minds’, but

to determine this agreement, there must also be a valid and communicated

offer. ‘An offer is an expression of willingness to contract on the specified

terms without further negotiation, so that it requires only acceptance for a

binding agreement to be formed’.3 In Gibson v Manchester City Council,4

the courts determined whether there was an offer or an invitation to treat by

using the objective approach. The plaintiff, Mr Gibson, was a council house

tenant who had applied for details to buy his council house. The council

treasurer stated that the council ‘may be prepared to sell the house to you.’5

After completing his application Mr Gibson alleged that he had entered into

a contract with the defendant. The House of Lords held that there was no

contract by examining the language that was used; they concluded that ‘the

letter was not an offer that Mr Gibson had accepted, rather it was inviting

Mr Gibson to make an offer to buy.’6 By determining this case objectively

does create a sense of certainty and it does play a key role in contract law;

however this approach has been open to criticisms as it appears to be quite

technical and removes itself from reality. There have been arguments to

adopt a broader approach when we want to know whether or not parties have

reached an agreement. Lord Denning put this argument forward in this case,

‘to my mind it is mistake to think that all contracts can be analysed into the

form of offer and acceptance… you should look at all the correspondence as

a whole.’7 Even though this can bring on more uncertainty, it is important

3. Jill Poole, Textbook on Contract Law (12th edn, OUP 2014) 36.

4. [1978] 1 All ER 972.

5. ibid 37.

6. ibid.

7. McKendrick (n 1) 46.

Queen Mary Law Journal Anisa Daud 3

to understand offer and acceptance as the principle, but it is not the only

way a contract can be created.

The orthodox view that all contracts can be formed from an offer and

acceptance may not be true for all unilateral contracts, where the obligation

is all one sided and no acceptance is needed. Professor Simpson states that

Carlill v Carbolic Smoke Ball Co8 is a leading case which illustrates the

‘mysteries surrounding the conception of a unilateral or one-sided contract.’9

In this case no communication was required for the contract to be enforceable,

only a performance was needed; ‘the plaintiff has caught influenza after

using the smoke ball in the required manner.’10 The Court of Appeal held

that the advertisement was an offer since it requested a performance, using

the smoke ball and catching influenza. The Carlill case created a new legal

doctrine into contract law, which was an intention to create legal relations.

This linked to the more recent case of Bowerman v Association of British

Travel Agents Ltd,11 where the notice from the tour operator stated, ‘ABTA

arranges for you to be reimbursed the money you have paid in respect of your

holiday arrangements.’12 In both of these cases, particularly in Carlill, the

performance of an act stated in the offer for unilateral contracts constitutes

an acceptance.

It is important to understand that the rule of offer and acceptance is not

mechanically developed and applied by the courts in every case; the courts

must consider the advantages and disadvantages of each case, and consider

the case as a whole. For example, McKendrick’s text states that ‘there is

8. [1893] QB 256 (CA).


10. Poole (n 3) 39.

11. [1996] CLC 451.



no obvious answer to the question of the time at which an acceptance sent

through the post should take effect.’13 The postal acceptance rule was first

established in the case of Adam v Lindsell14 when the courts had to decide

the moment when a contract formation took place by post. The postal

rule states that ‘the post might be used as a means of communicating the

acceptance of an offer; the acceptance is complete as soon as it is posted.’15

This rule has faced a great number of criticisms, since there is a gap of time

and a delay between ‘sending a letter and receiving it and parties are not

in a position that they can control transmission of letters by post.’16 The

justification for the postal rule, however, is that it provides the best time

and a greater chance for the ‘meeting of minds.’ The courts have made

various attempts to justify the rule on different grounds. In Henthorn v

Fraser17 it was argued that ‘if the offeror has indicated that use of the post is

permissible, then it is the offeror who should bear the risk of that system.’18

This case concluded that the postal rule is applicable only where it was

reasonable for the offeree to have used the post in all of the circumstances.

Several authors, including Elizabeth McDonald, have expressed the view of

‘whether the postal rule should be applied to email and similarly modern

methods of communication.’19 The postal rule is often seen as an out-dated

version of communication and the dispatch rule may no longer exist due

to new methods of communication. These new methods ‘challenge the

approach that new communication technologies require a sub-division within

13. ibid 121.

14. (1818) 106 ER 250.

15. M Ibrahim, A Ababneh and H Tahat, ‘The Postal Acceptance Rule in the Digital Age’ [2007] JICLT 47.

16. ibid 48.

17. [1892] 2 ch 27.

18. Poole (n 3) 63.

19. Elizabeth McDonald, “Dispatching the Dispatch Rule? The Postal Rule, E-Mail, Revocation and Implied

Terms” [2013] WJCLI 1.


contract law.’20 In deciding if the postal rule applies to electronic mail it

must first be determined whether an email is seen as an instantaneous or

non-instantaneous method of communication. In Entores v Miles,21 an email

was described as being instantaneous and was therefore not applicable to

the postal rule. However, Deveral Capps argues that an email should be

covered by the postal rule, ‘whilst emails are, in most cases, exceptionally

quick, they may on occasion take hours or even days to reach their intended

recipient.’22 Another argument that supports the application of the postal

rule to email relates to control. In Household Fire Insurance Co Ltd v Grant,

Thesiger LJ stated that ‘the acceptor, in posting the letter has… put it out

of control and done an extraneous act which clenches the matter.’23 This

same principle can be applied to emails; once the email is sent, the sender

has no control over it or whether it reaches the addressed person. The postal

rule in electronic mail has not been adopted by English Law due to the

sheer number of instantaneous methods of communication available today.

But the authors of the ‘The Postal Acceptance Rule in the Digital Age’ still

argue that ‘the logical conclusion would be that email acceptance do benefit

from the postal rule and email may be the last bastion for the application

of such rule.’24

The approach of the courts is to first seek out whether there was an offer and

having found it, determine if there was a matching acceptance. McKendrick

states that in practice ‘the process is much more complex as the facts of

20. Eliza Mik, ‘The Unimportance of being ‘Electronic’ or Popular Misconception about “Internet contracting’

[2011] IJLIT 1.

21. [1955] 2 All ER 493.

22. Deveral Capps, ‘Electronic Mail and Postal Rule’ [2004] ICCLR 2.

23. ibid; [1879] 4 Ex D 216.

24. Ibrahim (n 15) 52.


cases tend to not fit neatly into the rules that the courts have devised.’25

The ‘battle of the forms’ cases such as Butler Machine Tool Company v Ex-

Cell-O Corporation, illustrates this point.26 The case showed inconsistency

from the action of the seller, ‘on the one hand, they signed the buyer’s tear-

off acknowledgement slip (thus indicating their assent to the buyer’s terms),

but also referred to their own terms and conditions of business.’27 The courts

held that because of this. The sellers were not entitled to the sum claimed

as the contract had been concluded on the buyer’s terms. Longmore LJ

stated in the judgement, ‘that Butler was not a precedent for abandoning

the traditional analysis, noting that the traditional offer and acceptance

analysis was applied by the other members of the court.’28 As a result, the

traditional rule would still apply to battle of the form cases. The justification

for this conclusion was that it provided a greater degree of certainty, which is

required in order to create effective commercial relationships. Lord Denning

on the other hand, rejected the mirror image approach. He held that ‘the

better way is to look at all the documents passing between the parties and

glean from them…whether they have reached agreement on all material

points.’29 Both approaches in this case have been questioned by the majority

and Lord Denning; the former has been criticised on the grounds that it

encourages business men to carry on as normal, ‘in the hope of getting ‘last

shot’ in and it places the party in receipt of the last communication in a

very difficult position.’30 On the other hand, Lord Denning’s approach has

been criticised on the grounds that it creates uncertainty and gives little

guidance to the courts when trying to examine if an agreement has been


26. [1979] 1 WLR 401.


28. Phillip Morgan “Battle of Forms: Restating the Orthodox” [2010] CLJ 231.

29. Ewan McKendrick, “The Battle of the Forms and the Law of Restitution” [1988] OJLS 198.

30. ibid 198.


reached. Although the mirror image approach suffers some drawbacks, ‘it is

suggested that the deficiencies of alternative solutions should preclude those

solutions from adoption by the courts.’31

While the traditional offer and acceptance analysis faces many difficulties,

Morgan and McKendrick believe that the Court of Appeal was correct to not

follow Lord Denning’s analysis of the ‘out-dated approach.’ This approach

‘resets on insufficient precedential foundation, and is questionable after

Gibson.’32 As seen in this paper, contracts can be formed in many different

ways and will not always be as straightforward as the offer and acceptance

rule, so it is important that courts do provide a degree of flexibility and

consider the facts of each individual case. Moving forward, it is important

that the courts take elements of Lord Denning’s approach by adopting a

more global approach when it comes to future cases. This approach allows

for more flexibility and the chance to make more sensible decisions.

31. Rick Rawling “The Battle of Forms” [1979] MLR 721.

32. Morgan (n 29) 232.


Elvina Han Ning Leong1st year LLB, Queen Mary, University of London

Lord Ackner, who gave the leading judgement in Walford v Miles, said that, as a matter of principle, an agreement to negotiate in good faith is not generally enforceable in English law as it is ‘unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that uncertainty lies.’ Is this still true? Should it be true?

Lord Ackner’s judgement regarding good faith in Walford v Miles1 has been

extremely contentious as it established a rule wherein a duty to negotiate

in good faith is not recognised in English courts, which differs greatly from

other legal systems.2 This essay aims to prove that even though the idea of

good faith in negotiations is not assimilated into English law, judges are not

disregarding the requirement of good faith as a subjective test used on a

case by case basis to determine the compatibility of good faith. Also, it seeks

to establish that the noncommittal approach to good faith in negotiations is

the best way to protect the interests of contracting parties. To achieve this,

this essay will first discuss the idea of good faith and trace the application

of Lord Ackner’s rule. Thereafter, it will explore the basis and rationale

behind Lord Ackner’s judgement, while considering if the duty of good faith

in negotiations should be enforceable.

The term ‘good faith’ is known to be ‘elusive’.3 It is difficult to construe

a solid definition for it as it has multiple meanings which vary in different

1. [1992] 2 WLR 174, [1992] 2 AC 128 (Ackner LJ).

2. Some examples include the legal systems in France, Germany and Israel.

3. R Korde, ‘Good Faith and Freedom of Contract’ [2000] UCL Jurisprudence Review 142, 165.


contexts. Academics such as Brownsword,4 have distinguished good faith

into two aspects: where it can be applicable in both the execution of a

contract, where performance of the contract should be in accordance to

what was agreed, as well as the construction of the contract, where parties

are expected to negotiate in a fair manner. For the purposes of this essay, the

second facet of good faith is relevant as it expects parties to engage in ‘fair

and open dealings’.5 Therefore, this implies that good faith in negotiations

aims to change the adversarial nature of negotiations and imposes certain

obligations on the parties, including not to ‘take advantage, in the course

of the negotiations, of the known ignorance of the other party’6 and to

not ‘withdraw from the negotiations without first giving a reason and a

reasonable opportunity for the other party to respond’.7

Since Lord Ackner’s judgement in Walford, there have been immense debates

regarding the rule that was established. Additionally, there seems to be a

general trend towards distinguishing cases as incompatible with Walford

and upholding Lord Bingham’s dictum in Interfoto instead, which states

that English law does not want to commit to an overarching principle of

good faith but seeks to use objective reasoning to determine breach, even

if the outcome is similar to that of civil legal traditions where good faith is

enforced.8 This is evident in cases such as Petromec v Petroleo9 and more

recently, Yam Seng Pte Ltd v International Trade Corporation Ltd.10

4. R Brownsword, ‘Good Faith in Contracts Revisited’ (1996) 49 CLP 111, 157.

5. Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433 (Bingham L).

6. A Berg, ‘Promises to Negotiate in Good Fatih’ [2003] 119 LQR 357, 363.

7. ibid.

8. Interfoto (n 5) 445.

9. [2005] EWCA Civ 891.

10. [2013] EWHC 111 (QB).

Queen Mary Law Journal Elvina Han Ning Leong 11

Firstly, in Petromec,11 it was ruled that because the parties intended to be

bound by good faith in their negotiations, the court should not interfere

and disregard their intention to be legally bound. Although Lord Justice

Longmore distinguished the case from Walford by noting that there was

an express agreement to negotiate in good faith, he also addressed some of

the issues of uncertainty raised by Lord Ackner. Longmore LJ believes that

‘unless there are special forces present’, ‘there should be no difficulty in

deciding what the result of good faith negotiations is likely to have been’ and

therefore, ‘the difficulty of a problem should not be an excuse for the court

to withhold relevant assistance… by declaring a blanket unenforceability of

the obligation’.12

Secondly, the judgement in Yam Seng13 can be said to be revolutionary as

Mr Justice Leggatt ruled that even though there was no explicit term of

good faith, the duty of good faith was to be recognised with respect to the

intentions of the parties. He believed that good faith is the cornerstone of

every contract as contracts should be constructed based on honesty, which

is an aspect of good faith and should be adhered to.14 He then reiterated

Lord Bingham’s15 proposal for an objective test of good faith and defended

the notion that good faith should be recognised on a case by case basis.

However, it should be noted that other rulings, such as that of Abballe vs

Alstom UK Ltd16 still adhered to the principle set out in Walford, stating that

agreements to agree are unenforceable. As a whole, there is some inclination

for English courts to be more flexible in enforcing good faith and prescribe

11. Interfoto (n 5).

12. ibid [118]-[119].

13. Yam Seng Pte Ltd (n 10).

14. ibid [121]-[123], [131].


16. [2000] EWHC Technology 122 [4].


to the objective approach which was introduced in Interfoto.17

It would now be relevant to investigate the basis of Lord Ackner’s

judgement. He relied on two cases, the first being Courtney Fairbairn Ltd

v Tolaini Brothers (Hotels) Ltd.18 Lord Denning drew an analogy between

contracts to contract and contracts to negotiate and held that if the former

is unenforceable, the latter would not be recognised due to its uncertainty in

identifying when a breach occurred and the damages that should be awarded.

Subsequently, Lord Bingham19 stated that English law does not recognise a

legal duty to negotiate in good faith as any commitment to the legitimacy of

good faith in negotiations. Hence, in Walford, Lord Bingham’s dictum was

followed and the rule that an agreement to negotiate in good faith is not

enforceable was established. Lord Ackner states that it is impractical and

incompatible with the ‘positions of a negotiating party’ as well as uncertain

because of the reasons given in Lord Denning’s dictum.

The rationale and validity of Lord Ackner’s quoted judgement will now

be examined. Firstly, it has been accepted within the common law that

contracting parties are constantly competing to act in a self-interested

manner and therefore possess both the freedom to contract and freedom from

contract.20 Lord Ackner recognises this aspect of the nature of negotiations

and his judgement can be seen to protect parties’ freedom from contract.

However, this assertion of what negotiation entails may be myopic, as it

assumes that negotiations are always adversarial. Academics have established


18. [1975] 1 WLR 297 (Denning MR).


20. Cohen, ‘Pre-contractual Duties: Two Freedoms and the Contract to Negotiate’ in J Beatson and D

Friedman (eds), Good Faith and Fault in Contract Law (OUP 1997). Cohen proposes two types of freedoms

to contract: the first has positive connotations where parties have the liberty to construct a contract based on

their own terms and the second has negative connotations, which is the freedom from contract where parties

are free from a contract that has been uncompleted.

Queen Mary Law Journal Elvina Han Ning Leong 13

that negotiations can also serve as a problem-solving21 technique where the

contracting parties ‘are not strangers, they have to be considerate’22 and

may wish to work together in a way that will be mutually beneficial.23 It

is argued, therefore, that contractual justice entails that parties should

decide the nature of their negotiations and the courts should uphold their

intentions,24 rather than a mere over protection of parties’ freedom from

contract.

Secondly, the uncertainty element of Lord Ackner’s judgement stems from two

issues: first, the courts cannot decide when a breach has occurred and even if

it is able to, the problem of determining appropriate reimbursement persists.25

Second, the meaning of negotiating in good faith is too uncertain. The first

problem was not a difficulty in Petromec, as LJ Longmore concluded that the

court could determine the detriment incurred by the claimant by evaluating

the cost of upgrade and if that could be achieved, the court could also could

determine ‘what the result of good faith negotiations is likely to have been’.26

This is evidence that uncertainty in a contract has been overcome in cases

where there has been an express intention to negotiate in good faith without

the court interfering with the construction of the terms. The second issue

could be a result of drawing an analogy between agreements to negotiate

and agreements to agree. The analogy is problematic as agreements to agree

require ‘further formalities’27 to be binding, whereas agreements to negotiate

21. Berg (n 6) 362.

22. Korde (n 3) 144.

23. PB Quagliato, ‘The Duty to Negotiate in Good Faith’ (2008) 50(5) Int JLM 213. It is proposed that the

‘primary idea about business’ is ‘cooperation in order to obtain mutual profits.’

24. Korde (n 3).

25. Walford (n 1).

26. Petromec (n 9) [117]-[118].

27. H Hoskins, ‘Contractual Obligations to Negotiate in Good Faith: Faithfulness to the Agreed Common

Purpose’ (2014) 130(1) LQR 131, 135.


may be enforceable if the parties intended for it to be so.28 Therefore, it is

argued that the analogy between agreements to agree and agreements to

negotiate are flawed29 as an overarching principle of unenforceability due to

uncertainty and it does not take into account whether or not the parties had

an intention to be bound. Thus, by distinguishing between the uncertainty

in the meaning and uncertainty in their intentions, it can be determined if

good faith should be enforced to uphold the intention of the parties.

Therefore, even though Walford seems to reject all the notions of negotiating

in good faith, there is evidence in subsequent cases that judges do not consider

the case binding on all contracts, especially if express terms to negotiate

in good faith are present. This is also proof that enforcing agreements to

negotiate is not impractical as it has been accomplished in cases such as

Petromec and Yam Seng. It cannot be said, however, that judges are willing

to commit to integrating a duty of good faith in negotiations in the English

law as there are other methods of resolving issues relating to a breach

of contract to negotiate in the fields of tort, negligence and fraud. This

was the rule in R v Immigration Officer at Prague Airport30 where Lord

Bingham’s dictum of using ‘piecemeal solutions in response to demonstrated

problems of unfairness’ was reiterated in the judgement.31 Therefore, despite

the seemingly overriding principle Lord Ackner had established, judges have

set a current precedent of subjective testing. Hence, to uphold the duty of

the court to enforce contracts which parties have willingly entered into, this

essay argued that the current tradition should be preserved for its flexibility

and ability to protect negotiating parties.

28. ibid.

29. ibid.

30. [2003] EWCA Civ 666 (Lord Hope of Craighead).

31. ibid.


Kevin Roche1st year LLB, Queen Mary, University of London

No one relies on the law of good faith negotiations

Lord Ackner, who gave the leading judgement in Walford v Miles, said that, as a matter of principle, an agreement to negotiate in good faith is not generally enforceable in English law as it is ‘unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that uncertainty lies.’ Is this still true? Should it be true?

The law on ‘good faith’ is a mess – it is unclear and inconsistent. The

leading judgment on obligations to negotiate in good faith in English law

contracts is that of the House of Lords in Walford v Miles.1 The finding at

that time was that these agreements are unenforceable in English law. Since

this ruling in 1992 there have been developments in English law that have

called concerns regarding the enforceability of these types of contracts into

question.

This essay will deal with developments in the common law since Lord

Ackner’s ruling in Walford v Miles and argue that while there has been some

development relating to the enforceability of ‘good faith’ contracts in English

common law, the law has been consistent with respect to the unenforceability

of the doctrine of good faith. There are, however, exceptions of matters in

1. Edwin Peel, ‘”Locking Out” and “Locking in”: The Enforceability of Agreements to Negotiate’ (1992)

51(02) CLR 211; Stuart Rowson and Sarah Vickers, ‘UK - Obligations To Negotiate In Good Faith:

Where Does English Law Stand?’ (Linklaters, 15 January 2007) <http://www.linklaters.com/Insights/

Publication1403Newsletter/PublicationIssue20070115/Pages/PublicationIssueItem2013.aspx> accessed 25

October 2014.


which the conditions that the law has ruled in favour of the enforceability of

good faith contract has been so specific that these agreements to agree can

be distinguished from the more typical applications of good faith contracts.

In the case of Walford v Miles,2 the purchasers, Martin Walford, and his

brother, Charles Walford, entered into negotiations with Mr and Mrs Miles

concerning the sale of their business P.N.M. Laboratories Ltd. The Walford’s,

thinking that they had found a bargain with respect to the purchase of this

business, proceeded in negotiations with the Miles’ where an oral agreement

from the seller not to negotiate with any other party and a letter titled

‘subject to contract’ was produced. Ultimately, the Miles’ did not sell their

business to the Walford’s, and consequently, the Walford’s sued the Miles’

on the basis that they owed a duty to negotiate in good faith. The nature of

this claim was troublesome however, as it relied on an agreement that was

‘subject to contract,’ and subsequently, the agreement was found ‘plainly

unenforceable’.3 The reason for this unenforceability is due to the fact that

‘…there was neither a concluded agreement, nor an express agreement to

negotiate in good faith. All negotiations were ‘subject to contract’ and the

lock-out agreement itself was unenforceable because it lacked a time limit’4

and that a bare agreement to negotiate contains no legal content.

This is similar to the findings in Courtney and Fairburn Ltd V Tolaini

Brothers (Hotels) Ltd,5 where the courts could not ‘realistically be expected

to say when negotiations had broken down for a ‘proper reason’ as opposed

to good faith’. Furthermore, according to Lord Ackner, ‘the concept of a

2. [1992] 2 AC 128.

3. John D McCamus, The Law of Contracts: Essentials of Canadian Law, (Irwin Law Inc. 2005) 142.

4. Antonio Bueno and Deborah Tompkinson, ‘Enforcing Agreements: Part 2’ (2009) 159 NLJ 1547.

5. [1975] 1 WLR 297.

Queen Mary Law Journal Kevin Roche 17

duty to carry on negotiations in good faith is inherently repugnant to the

adversarial position of the parties when involved in negotiations’.6 Lord

Denning MR, in his judgement, argued:

If the law does not recognise a contract to enter into a contract (where there is a fundamental term yet to be agreed) it seems to me it cannot recognise a contract to negotiate. The reason is because it is too uncertain to have any binding force. No court could estimate the damages because no one can tell whether the negotiations would be successful or would fall through; or if successful, what the result would be. It seems to me that a contract to negotiate, like a contract to enter into a contract is not a contract known to the law.7

The unenforceability of good faith negotiations in contracts continues to

be found in recent cases. According to Teare J, in Shaker v Vistajet Group

Holdings SA:

The reason for such unenforceability is that there are no objective criteria by which the court can decide whether a party has acted unreasonably and that a duty to negotiate in good faith is unworkable because it is inherently inconsistent with the position of a negotiating party.8

From the cases listed above, it appears that a clear rule has presented itself

with respect to the courts approach towards good faith contracts.

The notion of uncertainty in the structure of the core principle of good faith

is perhaps, best articulated by Jane Stapleton, who discusses the issue from

a theoretical perspective. The issue of uncertainty, with respect to good faith

negotiating, is that from a legal perspective, there are issues that result from

what is considered reasonable behaviour and what is considered acting in

good faith. For Stapleton, it is considered reasonable conduct for one to act

in good faith, whereas, to act dishonestly, deliberately contradictory and/

6. Peel (n 1) 211-212.

7. Courtney and Fairbairn Ltd. V Tolaini Brothers (Hotels) Ltd, [1975] 1 W.L.R. 301 (Denning MR).

8. Shaker v Vistajet Group Holding SA [2012] EWHC 1329 (Comm) [7] (Teare J).


or exploitative will always be considered to be unreasonable. The issue with

the law appears ‘when we confront judicial statements that ‘effect must be

given to the reasonable expectations of honest people’.9 Herein the problems

arise, as the expectations people have towards concepts such as (1) honesty,

sincerity, and no deliberate exploitation, qualities one associates with good

faith, and the expectations one associates with (2) fair and reasonable

conduct vary greatly and are open to subjective interpretation.

As Stapleton argues, the nature of variety within these concepts is due to

the fact that they are socially constructed, and there is not always a clear

consensus on what constitutes a notion such as dishonesty, and therefore, by

implication, individuals will differ in their perspectives on how this notion

applies itself to a set of facts. When Lord Ackner states; an agreement to

negotiate in good faith is not generally enforceable under English law as it is

‘…unworkable in practice as it is inherently inconsistent with the position of

a negotiating party. It is here that the uncertainty lies’,10 we find Stapleton’s

arguments provide clarity towards this issue.

From the legal perspective of good faith negotiating, the difficulties

between what constitutes as bona fide versus mala fide negotiations cannot

be easily distinguished. It is on this case that the courts find difficulty in

enforcing the principle. Dealing with the Walford v Miles case, McCamus

writes that:

[A] certain amount of posturing is to be expected in the context of contract negotiations. Accordingly, for the House of Lords at least, the line between good-faith and bad-faith negotiation is too difficult to discern. On the facts of the Walford case, their Lordships were of the view that the lack of a specified terms for the lockout meant that the agreement would only come

9. Jane Stapleton, ‘Good Faith in Private Law’ (1999) 52 CLP 1, 8.

10. Walford v Miles [1992] 2 AC 128 [138] (Lord Ackner).


to an end when good-faith negotiations had come to an end. Accordingly, the enforceability of the agreement rested on the enforceability of a duty to negotiate in good faith. As a result, the agreement failed for lack of certainty.11

In cases where the courts have found a basis for enforcing good faith

agreements, we find that the circumstances in which they are permitted

typically contain specific circumstances which warrant such agreements

enforceability. Consequently, for practitioners of law, it can be held that

relying on the principle of good faith, as a rule, is not sufficient as a guarantee

to render a contract enforceable.

In Petromec Inc Petro-Deep Societa Armamento Navi Appoggio SPA v

Petrobas Brasileiro SA,12 the courts showed that agreements to negotiate

in good faith can be enforced when they are part of a legally effective

agreement where the level of certainty is to such a degree as to make the

agreement workable.13 In this case, the clause to negotiate in good faith was

contained in a ‘Supervision Agreement’ that Longmore LJ found to be ‘not

a bare agreement to negotiate’. He continued:

It would be a strong thing to declare unenforceable a clause into which the parties have deliberately and expressly entered. I have already observed that it is of comparatively narrow scope. To decide that it has “no legal content” to use Lord Ackner’s phrase would be for the law deliberately to defeat the reasonable expectations of honest men… I would only say that I do not consider that Walford v Miles binds us to hold that the express obligation to negotiate as contained in clause 12.4 of the Supervision Agreement is completely without legal substance.14

When the subject of good faith negotiations are found to be sufficiently

11. McCamus (n 4) 143.

12. [2006] 1 Lloyd’s 121.

13. Bueno (n 5).

14. Petromec Inc Petro-Deep Societa Armamento Navi Appoggio SPA v Petrobas Brasileiro SA [2006] 1

Lloyd’s 121 [121] (Longmore LJ).


narrow, the courts have found reason to uphold contract negotiations on the

basis of good faith. However, as a general rule, this cannot always be relied

upon, as the following example demonstrates.

Yam Seng PTE Ltd v International Trade Corporation Ltd illustrated that

English courts have found reason to imply good faith into ‘commercial

contracts, such as franchise, joint venture and long term distribution

agreements where a ‘high degree of communication [and] co-operation’ is

required to make the relationship work’.15 In this case, Leggatt J found that

the contract between the parties lacked sufficient clarity and that the level

of dishonesty on the part of the International Trade Corporation was so that

there was a basis to enforce good faith negotiating into the contract as a

matter of principle, or, as a matter of what is reasonably expected of parties

entering into agreements with one another. On the principle of good faith,

Leggatt J says that ‘the fear that recognising a duty of good faith would

generate excessive uncertainty is unjustified… [and] I respectfully suggest

that the traditional English hostility towards a doctrine of good faith… is

misplaced’.16

The courts also found reason to enforce good faith negotiations in Emirates

Trading Agency LLC v Prime Mineral Exports Private Limited.17 Firstly,

that a time limit of four weeks for negotiations was contained in the contract.

Secondly, this time limit was enclosed with a dispute resolution clause which

permitted the Court to find a reason to uphold the agreement, namely,

that the purpose for this clause was to support a public interest to avoid

15. ’Good faith: what does it mean?’ (Travers Smith, July 2013) <http://www.traverssmith.com/

media/1333036/ good_faith___what_does_it_mean_july_2013.pdf> accessed 25 October 2014.

16. Yam Seng PTE Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB) [152-153] (Leggatt J).

17. [2014] EWHC 2104 (Comm).


expensive arbitration and litigation costs. And finally, that the clause ‘did

not require any outcome from the ‘friendly discussions’’.18

In conclusion, the position of the English courts towards the unenforceability

of good faith in negotiations has appeared to have gradually declined, as

it has been observed in recent cases the courts have permitted it to be

enforced. However, when there are inconsistencies in the law, it is helpful

to find those cases which do no align with the traditional view of the courts

to not be seen as evidence of incompatibility with the law, but rather these

cases are best understood as demonstrative of the exception to the rule. In

Yam Seng v ITC, it was found that in relational contracts the English law

should recognise the duty of good faith, but does not always mean that it

will.19 In Shaker v Vistajet, it was found that a good faith clause is likely to

be unenforceable even if it is included in a professionally drafted commercial

contract.20 Taking all things into consideration, the English courts are

likely to continue following the Walford lead and conclude that the duty to

negotiate in good faith is unenforceable under English law.21

18. Neuberger and Young, ‘ “Friendly Discussions” Obligation is Enforceable Under English law’ (Bracewell

& Giuliani, 15 July 2014) < http://www.energylegal blog.com/archives/ 2014/07/15/5703> accessed 25

October 2014.

19. Mark Alsop, ‘Good faith implied as a term in a “relational” contract’ (Charles Russell, March 2013)

<http://www.charlesrussell.co.uk/UserFiles/file/pdf/ITV_articles/week_180_commercial_article.pdf>

accessed 26 October 2014.

20. Kevin Kilgour, ‘The status of express obligations to negotiate in good faith’ (Herbert Smith Freehills,

7 June 2012) <http://hsfnotes.com/litigation/2012/06/07/the-status-of-express-obligations-to-negotiate-in-

good-faith/> accessed 26 October 2014.

21. Rowson (n 2).


Malwina Wójcik1st year LLB, Queen Mary, University of London


According to English law, a contract comes into existence when one party

makes an offer and the other party accepts it. A valid acceptance must

match the terms of a contract in an exact way. This approach is known as

the mirror image rule. The ‘offer and acceptance’ model has many strengths,

but it does not fit easily into every case. Therefore, it is sometimes subject

to criticism for being too rigid or out of date. The words of Lord Denning

incorporated in the topic of this essay are an example of such a critical

approach.

The traditional approach of offer and acceptance in solving disputes in

contract law has been a long lasting authority for a few reasons. In many

cases the course of events fits perfectly into the offer and acceptance model.

In those contracts, the intention to create legal relations, which is vital for a

contract to exist, can be simply reduced to question and answer.1 The mirror

image approach in assessing the contract formation is analytically convenient

and contributes to a high degree of certainty within the judgments. It is

important especially in trade transactions, where uncertainty is obviously

undesired. However, there is also some degree of flexibility as the courts are

1. Sir William Anson, Principles of the English Law of Contract (2nd edn, Oxford University Press 1882) 15.


willing to enforce a contract where the intention to be bound is clearly seen.

There is no need for the acceptance to be expressed precisely by saying ‘I

agree’ or ‘I accept’, because ‘other words or special conduct can also be

seen as an acceptance.’2 In Harvela Investments Ltd v Royal Trust Co of

Canada,3 it was held that an invitation to tender contained an offer within

it because it indicated that the highest bid will be accepted. In Brogden

v Metropolitan Railway Company,4 it was established that an offer can be

accepted by conduct. The ‘offer and acceptance’ approach is also consistent

with international and European law. The Convention on the International

Sale of Goods 1980 recognises the model in Article 14, et seq, so do the

Unidroit Principles of International Commercial Contracts in Article 2.1.1

et seq. and Principles of European Contract Law in Article 2:201 et seq.

The standard model of ‘offer and acceptance’ is not free of limitations and

often becomes subject to criticism. There are a considerable number of

cases in which the existence of a contract cannot be easily and naturally

determined by presence of offer and acceptance. Mathias M Siems calls these

contracts ‘unevenly formed contracts’ because of their atypical method of

formation.5 Siems argues that in situations of ‘unevenly formed contracts’

the presence of consensus in idem is more important than the concept of

offer and acceptance.6

There are cases, to which Siems refers as ‘simple cases’,7 in which the strict

2. Mathias M Siems, ‘”Unevenly Formed Contracts”: Ignoring the “Mirror of Offer and Acceptance” ’(2004)

12 ERPL 5.

3. [1986] AC 207 (HL).

4. (1877) 2 App Cas 666 (HL).

5. Siems (n 2).

6. ibid 6.

7. ibid.

Queen Mary Law Journal Malwina Wójcik 25

application of the standard model of offer and mirroring acceptance is

impossible. Siems gives multilateral agreements as one of the examples.8 In

Clarke v Earl of Dunraven,9 the parties entered a yacht competition, both

agreeing to follow the sailing rules of the organizer. Satanita (the claimant’s

yacht), sank Valkyrie (the yacht of the defendant). If the offer and acceptance

model was to be followed strictly, the conclusion would be that each of the

parties had accepted an offer made by the yacht club by agreeing to its

regulations, but there was no contract between the participants themselves.

The Court of Appeal held in favour of the defendant, that there was a

binding contract between the parties, but the offer and acceptance was not

clearly identified. Lord Herschell claimed that:

The effect of their entering for the race, and undertaking to be bound by these rules to the knowledge of each other, is sufficient, I think, where those rules indicate a liability on the part of the one to the other, to create a contractual obligation to discharge that liability.10

Therefore there is no need for the offer and acceptance to exist, the intention

to enter into a contract is enough to be bound in cases involving more than

two parties.

Siems also distinguishes between another type of ‘unevenly formed contracts’,

which he calls ‘hard cases’.11 In these, the existence of a contract itself

is put into doubt. As an example of these types of contracts that give

difficulties, he uses contracts by conduct.12 In New Zealand Shipping Co

Ltd v Satterthwaite & Co Ltd,13 the owner of the Eurymedon vessel that

8. ibid.

9. [1897] AC 59 (HL).

10. ibid 63.

11. Siems (n 2).

12. ibid 9.

13. [1975] AC 154.


transported a drilling machine to New Zealand, hired stevedores responsible

for loading and unloading the machine. The stevedores damaged the machine

while unloading it. The bill of lading for the shipment of the machine

stipulated that unless a claim was brought within one year, the carrier or

stevedore was not liable for loss or damage. The owners of the machine sued

the stevedores after one year, claiming that the stevedores were not bound

by the clause in the bill of lading because they were independent contractors

hired by the carriers. The Privy Council held that by signing the bill of

lading, the owner of the drilling machine made a unilateral offer that could

be accepted by anyone. The stevedores accepted the offer by loading the

machine. Although Lord Wilberforce eventually analysed the case using the

offer and acceptance model, he admitted that applying it presents ‘difficulty

in many situations of daily life’.14 He pointed out that:

English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration.15

Lord Wilberforce’s words signify that, although offer and acceptance is

a preferable model to adopt because it makes the judgment certain and

rational, applying it in some cases seems artificial and unrealistic. It often

makes the judges adopt ‘backward reasoning’ when they look for offer

and acceptance to justify their conclusion. This might prevent them from

thinking empirically and from achieving a balance between the intentions of

the parties, fairness and certainty.16

14. ibid 167.

15. ibid.

16. Mindy Chen-Wishart, Contract Law (4th edn, Oxford University Press 2012) 79.


A further ‘hard case’ example is Gibson v Manchester City Council17. The

defendants had a practice of selling council houses to the tenants. The

claimant, wanting to buy a house, applied for details. The defendants

replied that that they ‘may be prepared to sell the house to him’ and asked

him to complete the application. After the claimant did so, the council

administration changed and they did not wish to sell the house anymore.

A question arose as to whether there was a valid contract for sale between

the parties. Denning MR held that the contract existed, claiming: ‘it is a

mistake to think that all contracts can be analysed into the form of offer

and acceptance.’18 He argued that one ‘should look at the correspondence

as a whole and at the conduct of the parties and see therefore, whether the

parties have come to an agreement on everything that was material.’19 The

House of Lords reversed the judgment by applying the offer and acceptance

model. Lord Diplock saw ‘no reason for departing from the conventional

approach.’20 Moreover, he claimed that ‘it was by departing from this

conventional approach that the majority of the Court of Appeal was led

into error.’21

Another example of a ‘hard case’ is one called ‘the battle of forms’. The

modern business practice often involves the usage of standard terms and

conditions exclusive to each party. These conditions may differ in some more

or less crucial aspects. When the correspondence is exchanged between the

parties, the question arises: whose terms prevail? In Butler Machine Tool

Co Ltd v Ex-Cell-O Corp Ltd,22 the claimants sold a machine tool to the

17. [1978] 1 WLR 520 (CA), [1979] 1 WLR 294 (HL).

18. [1978] 1 WLR 520 (CA) 523.

19. ibid 523.

20. [1979] 1 WLR 294 (HL) 297.

21. ibid 297.

22. [1979] 1 WLR 401.


defendants. The standard terms and conditions of the claimants were to

‘prevail over any terms and conditions in the buyer’s order’, which included

a price variation clause. The defendants’ letter placing the order contained

different conditions and it did not include a price variation clause. In the

defendants’ letter there was a tear-off confirmation slip, which the claimants

signed and returned. A disagreement occurred between the parties as to

whether the price variation clause was a part of the contract. The Court of

Appeal held unanimously that it was not. However, the approach of the judges

in reaching this conclusion was very different. Lawton and Bridge LJ used

the ‘last shot’ approach, analysing the case in terms of offer and acceptance.

Applying the mirror rule, they saw the buyer’s letter as a counter-offer that

was accepted by the sellers when they signed and returned the tear-off slip.

Lord Denning agreed that the ‘decisive document’23 was the buyer’s letter

but he found the approach of Lawton and Bridge LJ ‘out-of-date’.24 Instead

of focusing on searching for the offer and acceptance, he suggested that

attention should be paid to the conduct and correspondence of the parties.

The most important issue in his opinion is to determine whether the parties

‘reached agreement on material points’.25 This could be true even if the

terms and conditions of both parties differed. If it is determined that the

parties reached an agreement, the second question the court should deal

with is identifying the terms of the contract. The conflicting terms may need

to be ‘scrapped and replaced by a reasonable implication’.26

The alternative solution of Lord Denning is undoubtedly more flexible and

practical than the traditional ‘offer and acceptance’ approach, especially in

23. ibid 405.

24. ibid 404.

25. ibid.

26. ibid 405.


the modern trading conditions. The negotiations between the parties often

take on a complex form and cannot be easily reduced to offer and acceptance.

Moreover, the application of the traditional mirroring model may often lead

to a conclusion that there was no contract at all, which would be contrary

to parties’ beliefs and expectations. However, Lord Denning’s approach has

a significant disadvantage – it tends to create uncertainty. Determining, for

example, what are the ‘material terms’ seems to be highly subjective. The

judges are rather reluctant to take responsibility for a conclusion based solely

on their subjective opinion. This was illustrated Tekdata Interconnections

Ltd v Amphenol Ltd,27 another ‘battle of forms’ case. The Judge in the

first instance followed Lord Denning’s reasoning in Butler in an attempt

to ‘displace traditional offer and acceptance analysis by reference to the

conduct of parties over a long-term relationship’.28 Longmore LJ gave the

leading judgment in the Court of Appeal, admitting that the traditional

approach may not be applicable when ‘the documents passing between the

parties and their conduct show that their common intention was that some

other terms and intentions prevail’.29 However, he stated that this is not

the case in Tekdata. He decided to apply the offer and acceptance model,

reversing the previous judgment.

Article II-4.211 of European Draft Common Frame of Reference stipulates

that the rules relating to offer and acceptance ‘apply with appropriate

adaptations even though the process of conclusion of a contract cannot

be analysed into offer and acceptance.’ The courts are generally willing to

apply the ‘offer and acceptance’ model because it gives certainty, even if the

facts must be sometimes artificially forced to fit into the model. Although

27. [2009] EWCA Civ 1209.

28. Phillip Morgan, ‘Battle of the Forms: Restating the Orthodox” (2010) 69 CLJ 230.

29. [2009] EWCA Civ 1209 [11].


judges sometimes criticize the traditional approach for being artificial and

out of date, they still seem to be careful in applying an alternative one. Lord

Wilberforce in Eurymedon lists inconveniences of the offer and acceptance

model, but he still decides to apply it. Lord Denning’s alternative approach

in Gibson was not followed by the House of Lords. In Butler, his argument

led to the application of ‘the last shot’. In Tekdata, the Court of Appeal

reversed the judgment of first instance that was following Lord Denning’s

approach. The proper conclusion might be that the most important thing in

determining whether a contract exists is discovering the consensus in idem.

How it is going to be achieved? It can be achieved by searching for the offer

and acceptance or by the examination of correspondence as well as conduct

between the parties, as Lord Denning proposed. Needless to say, this seems

to be a question of minor importance.


Saleh Zaheer1st year LLB, Queen Mary, University of London


To determine whether an agreement exists between two parties, the courts

adopt the traditional approach of offer and acceptance. This essay addresses

the offer and acceptance model by critically analysing it to consider the

benefits and drawbacks of it as compared to an alternative approach of

simply seeking an agreement. As a contract is an agreement (even though

not all agreements are contracts); an offer is an indication by one party,

the offeror, to another, the offeree, of the offeror’s willingness to contract

on the specified terms without further negotiation, so that it requires

only acceptance by the offeree for a binding agreement to be formed. The

‘expression’ referred to in the definition may take shape in various forms

such as letter, fax, email, post and even conduct, as long as it communicates

the basis on which the offeror is prepared to contract. A contract is said to

come into existence when acceptance of an offer (agreement to the terms in

it) has been communicated to the offeror by the offeree. An acceptance is

a final expression of assent to the terms of the offer and must be made in

response to that offer. The operation of the mirror-image rule requires that

the acceptance mirrors the terms of the offer. This has given rise to some

practical difficulties in the ‘battle of (standard) forms’, and I shall discuss in

the latter sections of the essay if such an approach can be improved.


To constitute an offer, the proposition needs to be firm enough to be capable

of acceptance and there needs to be sufficient evidence that the offeror is

ready at that stage to accept liability, should the other accept his proposition.

In Gibson v Manchester City Council1 the contract was not binding because

the Council had made no offer capable of acceptance. The statement in

the city treasurer’s letter was that the Council ‘may be prepared to sell’

inviting Mr Gibson ‘to make a formal application to buy did not constitute

an offer to sell, but only an invitation to treat. Therefore, to constitute an

offer capable of acceptance an offer must be distinguished from all other

statements (invitations to treat) made in the course of negotiations towards

a contract. An invitation to treat falls short of being an offer capable of

binding acceptance; instead it is an invitation to the other party to make

an offer, which the former party is free to accept or reject. In contrast, Lord

Denning, in Storer v Manchester City Council2 held that a binding contract

had been concluded by offer and acceptance. The offer was contained in the

letter dated March 9th in which the town clerk said: ‘I enclose the agreement

for sale. If you will sign the agreement and return it to me I will send you the

agreement signed on behalf of the corporation in exchange.’ The acceptance

was made and the contract concluded when Mr Storer signed and returned

it on March 20th. Although in both Storer and Gibson the Council changed

political control and discontinued the sale of council houses, the essential

difference was the wording in the application forms. In Storer it successfully

amounted to an offer capable of acceptance, whereas in Gibson it did not. In

regards to advertisements, tenders, auctions and display of goods in a shop,

the general rule is that they are invitations to treat and not offers.

1. [1979] 1 All ER 972.

2. [1974] 1 WLR 1403 CA.

Queen Mary Law Journal Saleh Zaheer 33

To identify a valid acceptance, the mirror image rule is adopted, which

specifies that an acceptance must be unconditional and correspond with

the exact terms proposed by the offeror. In Hyde v Wrench,3 A (defendant)

offered to sell land to B (plaintiff) for £1,000. B replied, offering £950.

Clearly, that was not an acceptance, but a counter-offer. A rejected the

counter-offer, whereupon B purported to accept the original offer of £1,000.

A denied that any contract had been made and the court agreed. It was

not open to B to revive A’s offer unless A was willing to revert to those

terms. Additionally, expanding on the constitution of offer and acceptance,

the courts take an objective approach on the basis of the impression given

by the parties’ words and actions rather than looking at what each party

subjectively intended.

One of the arguments for the offer and acceptance model based on the cases

we have looked at so far is that the model increases certainty for both parties

as they know that they will not be bound until there is a corresponding offer

and acceptance. Parties can rely on the case-law which gives guidance on

when an offer constitutes an effective offer capable of acceptance rather than

an invitation to treat (Gibson v Manchester CC, Storer v Manchester CC),

and when an acceptance constitutes an effective acceptance rather than a

counter offer (Hyde v Wrench). However, this approach has been criticized

as artificial and inflexible and may well ignore the reality of the situation

by dictating that no agreement has been reached for technical reasons. As a

result, there has been a history of instances of the courts ‘forcing the facts to

fit uneasily into the marked slots of offer, acceptance and consideration’.4 It

appears that a contract may be found to exist despite the fact that it cannot

3. (1840) 3 Beav 334.

4. New Zealand Shipping Co, Ltd v AM Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154 (Lord

Wilberforce).


be analysed precisely into an offer and corresponding acceptance where the

terms have been fully agreed and executed by the parties. In Trentham

Ltd v Archital Luxfer,5 Trentham alleged that the defendant’s work was

defective and that they were therefore in breach of binding subcontracts

between them. The defendants denied that any binding subcontracts had

ever come into existence. Steyn LJ concluded that although the subcontract

cannot be analysed precisely in terms of offer and acceptance, there were

contemporary exchanges and the carrying out of what was agreed in those

exchanges supported the view that there was a course of dealing, which on

Trentham’s side created a right to performance of the work by Archital. On

Archital’s side it created a right to be paid on an agreed basis. Thus, it was

held that binding subcontracts had been concluded for the window works.

In reality, critics of the offer and acceptance model argue that the courts

‘reason backwards’ and first decide whether there has been an agreement

and then force the facts into and offer and acceptance structure.

An alternative approach stems from this; that a more liberal model should

be adopted, which provides flexibility in situations where there have been

complex and prolonged negotiations over the terms, but it is not possible

to identify a matching offer and acceptance. One should then look at the

correspondence as a whole and at the conduct of the parties and see there

from whether the parties have come to an agreement on everything that

was material. If by their correspondence and their conduct you can see

an agreement on all material terms, which was intended to be binding,

then English Law should recognise that there is a binding contract, even

though all the formalities have not gone through. Under the current law, it

is of common occurrence that two sets of terms exchanged by the parties

5. [1993] 1 Lloyd’s Rep 25 (CA).


conflict with each other (the battle of the forms) on crucial matters such

as delivery obligations, price calculations, and liability for defective, late or

complete non-performance of the contract. Thus, according to the ordinary

rules of offer and acceptance, the failure of the parties’ exchange to produce

consensus on the terms can mean that there is no contract, ie, no meeting

of the minds. Yet very often the parties will proceed to performance and the

supply of goods, services and even payment, at least in part. Only if dispute

breaks out does it become critical to know whether there is a contract and

what its terms may be.

So, can the mirror image approach be improved? Yes it can. How it can,

is shown through Butler Machine Tool Co Ltd v Ex-Cell-O Corporation

(England) Ltd,6 where the question was whether a contract had been

formed and on what terms the contract had been concluded. Two different

approaches were adopted to come to the same conclusion. Under the

traditional analysis, Lawton LJ and Bridge LJ held that the buyers’ order

was a counter-offer, which the sellers had accepted by completing and

returning the acknowledgement form thus concluding on the buyer’s terms.

However, Lord Denning reached his conclusion employing a more liberal

approach, which involved separating the question of formation of a contract

from the determination of its content. He considered that a contract was

formed where the parties agreed on the material points, even if there were

conflicting terms in their forms. He then turned to the question of content

and whose terms would govern. He stated that where the buyer orders the

goods purporting to accept the offer on an order form with his own different

terms and conditions on the back, then if the difference is so material that it

would affect the price, the buyer ought not to be allowed to take advantage

6. [1979] 1 WLR 401 (CA).


of the difference, unless he draws it specifically to the attention of the seller.

In this case, the conclusion reached was on the buyer’s terms.

A critique of the traditional ‘last shot’ rule is that it ‘encourages inappropriate

attempts to be the firer of that shot,’7 defeating the general policy goal of

enabling business parties to conclude their contracts with the minimum

necessary legal complication and formality. It ‘does not work well in practice’,8

in many cases; it does not fit into the administrative systems of the parties,

nor is it a usual way of doing business. Not only is this burdensome and

difficult to administer, but it becomes very noticeable to the seller. The

seller is then likely to reject the buyer’s acknowledgement and a detailed

negotiation as to whose conditions are to govern the contract will probably

ensue. This defeats the purpose of doing business on standard conditions

(speed and efficiency in dealing with a large number of transactions) and

the purchasing departments of both the buyer and the seller will probably

be unable to cope with the workload imposed if there are many special

negotiations. So, in regard to answering how contract formation should be

determined, a technique designed to prevent victory going to the last shot

fired is the use of the so-called, overriding clauses in standard forms.

The overriding clause declares in effect that the set of terms in which it

appears prevails over any other terms which may be included in the other

side’s response.9 The courts have, however, tended to hold that such clauses

fail to prevent any response from being a counter-offer with a knock-out

effect on the overriding clause along with the rest of the terms in which it

7. Scottish Law Commission, Review of the Contract: Discussion Paper on Formation of Contract (Scot Law

Com DP 154, 2012) 74.

8. Richard Christou, Drafting Commercial Agreements (5th edn, Sweet & Maxwell 2013) 115.

9. See Butler Machine Tool Co Ltd [1979] 1 WLR 401; Uniroyal Ltd v Miller & Co Ltd 1985 SLT 101 (OH).

Note, however, Roofcare v Gillies 1984 SLT (Sh Ct) 8.


appeared. Professor Angelo Forte of the Aberdeen Law School has argued

strongly for many years that the courts should give greater recognition to

such overriding clauses.10 The basis in principle for this argument is that an

offeror may provide in the offer what is needed for acceptance; so that if the

offer states that it will be accepted by the return of the offeree’s standard

form, even if that form contains different terms, then that will be enough to

form a contract. It may be thought that this approach might simply mean

that the first shot would always win the battle rather than the last, which

may be no more satisfactory, an outcome to the problem. Nor does it really

explain why the offeror’s form should be the sole basis for the terms of the

resultant contract. Further, the effect where each side uses an overriding

clause in its standard terms, which has not yet been discussed in either the

Scottish or English courts, is problematic. Just because a party happens to

be the offeror does not seem to be a good reason for preferring that party’s

overriding clause to the offeree’s.

The traditional approach in England remains different from Lord Denning’s

approach to the formation of the contract –like the formulations in the

US UCC,11 the Vienna Convention, the UNIDROIT PICC,12 the PECL13

and the DCFR,14 the law should provide a regime to deal specifically with

the battle of the forms, holding the balance between the parties a little

better and to achieve this, take the analysis of the situation outside the

10. The most recent statement of Professor Forte’s arguments is in his article “The battle of forms” in Hector

MacQueen and Reinhard Zimmermann (eds), European Contract Law: Scots and South African Perspectives

(Edinburgh University Press 2006) 98.

11. US Uniform Commercial Code 2002, s 2-207 (UCC).

12. International Institute for the Unification of Private Law (UNIDROIT), Principles of International

Commercial Contracts 2010 (PICC).

13. Commission on European Contract Law, Principles of European Contract Law 2002 (PECL).

14. Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference

(DCFR), C von Bar et al eds, Outline Edition (2009).


law of offer and acceptance. What matters are agreements, not offer and

acceptance? In conclusion, the traditional offer and acceptance model

has a flaw because it is inflexible, artificial and the objective approach

overrides the parties’ true consent. However, this does not mean that the

model is completely flawed and should be replaced with a broad brush

approach. The benefits of precedents and ease of application under the more

methodical traditional approach must be weighed against the uncertainty

and artificiality necessary in practice to force the facts into the necessary

categories of offer and acceptance. Perhaps a rule-based approach, with

all its disadvantages, is appropriate and more workable in practice if more

exceptions are allowed to deal with difficult cases (Clarke v Dunraven),15

where there necessarily have not been a ‘meeting of the minds.’ Thus, the

mirror image approach should be used as a tool in aiding identification

of offer and acceptance rather than a requirement. We have to protect

the ideology of the freedom of contract because a contract is only binding

when the parties have consensually exchanged offer and acceptance rather

than under the liberal approach encouraging the courts to glean from the

circumstances that there has been an agreement. Thereby, the traditional

objective model of offer and acceptance should at least be the starting point

in determining contract formation as it provides an inroad in the parties’

freedom of contract.

15. [1897] AC 59.

queen mary law journal · carlill v carbolic smoke ball co8 is a leading case which illustrates the...

Documents