United Kingdom House of Lords Decisions

LORD NORMAND .—The first question in this appeal is whether there was a contract between the parties or whether there was no consensus in idem. If it were to be held that there was a contract, the second question, what is its meaning and effect, would then arise. But it is not possible to arrive at a conclusion on the first question without considering the meaning of the two letters which are said to constitute the contract, and the two questions very much run together. [His Lordship gave the summary quoted supra, and proceeded]—

The respondents were not represented at the hearing of the appeal. For the appellant it was argued that there was a concluded contract and that the Lord Ordinary's construction of it was the right construction. It was also maintained that in any event the construction arrived at by the majority in the First Division ought not to be accepted. In effect, the argument was in support of the Lord Ordinary's judgment upon the effect of the letters of 2nd and 3rd March 1948, and, alternatively, in support of Lord Carmont's view.

The questions thus raised depend entirely on the effect of the two letters. There is no record for a case that the alleged contract is to be interpreted by the subsequent actings of the parties, and, though there are in the books a few cases which are exceptions to the general rule against the admission of evidence of the conduct of the parties as an aid in construing a contract, these exceptional cases are far removed from the present case.

The respondents' letter of 2nd March appears to me to be free from all ambiguity. It is an offer to supply the necessary mechanical plant, with an undertaking that the plant would consist initially of specified machines. Then there is the important stipulation that all charges will be in accordance with normal S. R. & O. rules and conditions. When the S. R. & O. (No. 1277 of 1941, as amended by No. 915 of 1947) was referred to, it was found that it provided a schedule of charges for the hire of various items of plant and that one of the conditions is that these charges do not cover charges for drivers or operators. The second paragraph of the letter intimates that the plant would be available for the appellant's use within the week. So far there is nothing but the offer of plant on hire for use by the appellant, a locatio rei in the older terminology, to be paid for in accordance with charges which apply only to the hire of machines or plant, with an undertaking as to the time when the res will be available for use. The final assurance that "you will have every co-operation from ourselves to ensure a speedy and satisfactory conclusion of the work involved" is an additional obligation, but it must surely be read as an assurance relative to the contract whose nature has been already expressed and not as having the effect of setting up a different kind of contract. It can and ought naturally to be read as assuring the appellant that the respondents will co-operate in selecting the right kind of plant for the work on which it was to be used from time to time and supplying it in good order and fit for the work to be done. Now, the letter of 3rd March is, when it is studied, equally unambiguous and it is a purported acceptance of a contract to remove the silt, a locatio operis, a different kind of contract from that in the offer, and with different incidents. I agree with Lord Carmont that no contract existed between the parties. The respondents offered one sort of contract and the appellant accepted another kind of contract. I am unable to read into the letters the implications which the majority of the First Division read into them, or by a benignant construction to read the letter of 3rd March as an acceptance of the offer made in the letter of 2nd March. Drivers were sent by the respondents with the machines to operate them. But I can find in the letter of 2nd March no offer of an undertaking to supply drivers and there is no provision in the alleged contract for payment by the appellant for the services of drivers. I think this is an instance of conduct by the parties inconsistent with the contract alleged by them.

Counsel attempted to support the Lord Ordinary's construction by the case of Sutton & Co. v. Ciceri & Co .The question there was not whether there was a contract. There was without doubt a contract of carriage, and the only question was whether a part of the merchandise carried was within the contract. There was an obvious ambiguity in the offer made by the carrier. The other party wrote a letter expressly calling attention to this, stating what he understood was meant and asking whether his understanding was correct. The offerer, although he replied to other questions in the letter, did not refer to this question at all. Goods were accepted for carriage which were within the contract on the meaning put forward by the accepter. In these circumstances it was held that the contract must be taken to have the meaning he had put upon it. That case is distinguishable from this and does not help the appellant. In the present case the question is whether there was a contract; there is no ambiguity in the letter of 2nd March, and the letter of 3rd March does not ask for the clearing up of an ambiguity. It purports to be an acceptance, and it is only by a careful reading that a layman would discover that it was an acceptance of what had not been offered.

I have no doubt that, when the parties to a litigation put forward what they say is a concluded contract and ask the Court to construe it, it is competent for the Court to find that there was in fact no contract and nothing to be construed, and I respectfully agree with the Lord Chancellor Loreburn's opinion on this point, as expressed in Houldsworth v. Gordon Gumming .

I would therefore allow the appeal and dismiss the action.

LORD REID .—This case turns on the construction of two letters: the offer of the respondents of 2nd March 1948, and the appellant's reply of 3rd March. Certain averments of earlier verbal negotiations were held by the Lord Ordinary to be irrelevant, and I do not find anything which would require or justify a departure from the ordinary rule that the subsequent actings of parties cannot be used to determine the true construction of what the parties have written. So the meaning of the letters must be determined from a consideration of their terms, read in light of the circumstances known to both parties at the time. Both parties have throughout contended that these letters constitute a contract between them. No other case is made by either party on record. The main issue between the parties has been what are the terms of this contract. But in the Inner House Lord Carmont, who dissented, held that no contract could be found to have existed between the parties, and before this House counsel for the appellant supported this view as an alternative to his main argument.

It is necessary, therefore, to consider whether it is open to a Court to decide that there was no consensus in idem and therefore no contract when neither party has any plea to that effect. In my opinion, it must be open to a Court so to decide. No doubt, if an agreement could be spelled out from the documents, the Court in such circumstances would be inclined to do that and proceed to determine what were its terms. But, if it clearly appears to the Court that the true construction of the documents is such as to show that there was no agreement, then it is plainly an impossible task for the Court to find the terms of an agreement which never existed. If authority be necessary for this I find it in the speech of Lord Loreburn, L.C., in Houldsworth v. Gordon Cumming, where he said:

"It is not enough for the parties to agree in saying there was a concluded contract if there was none, and then to ask a judicial decision as to what the contract in fact was. That would be the same thing as asking us to make the bargain, whereas our sole function is to interpret it."

I must therefore consider whether any agreement can be found in the terms of these two letters. [His Lordship considered the terms of the letters, and expressed his opinion that there was no agreement and no contract.]

If your Lordships are of opinion that no contract was made by the letters of 2nd and 3rd March, I do not think that there is any other course open but to dismiss the action. That will leave it open to the respondents to claim remuneration for their work on some other ground than the contract which they have averred.

LORD TUCKER .—I agree.

LORD COHEN .—I also agree.