So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston

Viscount Simon L.C. My Lords, during
much of the argument I remained unconvinced that the
result reached in the courts below (various as is the reasoning
by which the different judges reached that result) could not be
sustained by taking the view that this was a contract for the
sale and purchase of a motor-car, subject to the condition
that the contract ceased to be binding if the finance for the
purchase could not be provided for the respondents within a
reasonable time, and in a reasonable manner, by the method
of hire-purchase through a third party. If this view of the
bargain were justified, then the appellants wrongfully repudi-
ated their prospective obligations out and out, without waiting
to see whether the condition was or was not complied with ;
in that situation the respondents could sue for damages for
anticipatory breach without the necessity of the condition
being fulfilled ; Frost v. Knight (1), where the engagement to
marry was conditional on the defendant's father first dying,
and where the repudiation of the promise occurred in the
father's lifetime, is a familiar example of the principle which
I should have been glad to apply.

(1) (1872) L. R. 7 Ex. 111.

SCAMMELL

(G.) AND

NEPHEW,
Lp.

v.
OusTON
(His CAND =e

JG.)

SCAMMELL
(G.) AND
NEPHEW,
Tp.
v.
OUSTON ~
(H. C. AND
eG.)

Viscount
Simon L.C.

HOUSE OF LORDS 2 [1941]

But, on further reflection, and in the light of the opinions
prepared by some of your Lordships which I have had the
advantage of reading, I do not think this view is tenable.
Apart from the objection that if the contract is treated as a
contract of sale in the terms suggested above, there is no
signature by the appellants, as the party to be charged, accept-
ing the condition, it appears to me that the crucial sentence
"This order is given on the understanding that the balance
"of purchase price can be had on hire-purchase terms over a
"period of two years '' is so vaguely expressed that it cannot,
standing by itself, be given a definite meaning—that is to
say, it requires further agreement to be reached between the
parties before there would be a complete consensus ad idem.
If so, there was no contract and therefore no breach.

I move that the appeal be allowed with costs here and
below.

Viscount MauGcHam. My Lords, I have had the advantage
of reading the opinion of my noble and learned friend, Lord
Russell of Killowen. I entirely agree with it and with his
statement of the relevant facts. No less, however, than four
judges have come to a different conclusion, and they think
that the respondents have succeeded in establishing a contract
in this case. I should always be slow to differ from views of
those for whom I entertain a very genuine respect, if I could
entertain any real doubt about the matter. JI am constrained
therefore to add some remarks of my own to explain why I
am led to an opinion which coincides with that of my noble
friend.

It is a regrettable fact that there are few, if any, topics on
which there seems to be a greater difference of judicial opinion
than those which relate to the question whether as the result
of informal letters or like documents a binding contract has
been arrived at. Many well known instances are to be found
in the books, the last being that of Hillas & Co. v.-Arcos, Ld. (x).
The reason for these different conclusions is that laymen
unassisted by persons with a legal training are not always

(I) (1932) 147 L. T. 503.

A. C. AND PRIVY COUNCIL.

accustomed to use words or phrases with a precise or definite
meaning. In order to constitute a valid contract the parties
must so express themselves that their meaning can be deter-
mined with a reasonable degree of certainty.| It is plain
that unless this can be done it would be impossible to hold
that the contracting parties had the same intention $| in other
words the consensus ad idem would be a matter of mere
conjecture, This general rule, however, applies somewhat
differently in different cases. In commercial documents
connected with dealings in a trade with which the parties are
perfectly familiar the court is very willing, if satisfied that
the parties thought that they made a binding contract, to
imply terms and in particular terms as to the method of
carrying out the contract which it would be impossible to
supply in other kinds of contract: see Hillas & Co. v.
Arcos, Ld. (1).

My Lords, it is beyond dispute that if an alleged contract is
partly oral and partly in writing it is necessary to take the
whole of the negotiations into consideration for the purpose
of seeing whether the parties are truly agreed on all material
points, for if they are not there is no binding contract/ Nor
is it right to construe a letter or other document forming a
part of the negotiations in such a case without regard to the
oral statements which also form a part of them. To construe
the language of such letter, so to speak, in vacuo might easily
result in giving to the words of it a meaning which as used by
the writer, in the circumstances of the case, he did not intend
the words to bear or one which the recipient of the letter did
not attribute to them. Accordingly, the words in the letter,
"This order is given on the understanding that the balance
'"'of purchase price can be had on hire-purchase terms over a
"period of two years,' must be read together with the parol
evidence of Mr. J. G. Ouston in order to give those words their
true meaning. So read, I cannot myself doubt, they are not
an attempt to impose a new condition, whether precedent or
subsequent, but are merely a reminder of the common intention
of the parties from the start, though perhaps—and even

(1) 147 L. T. 503, 511, 512, 514.

255

H. L. (E.)

SCAMMELL

(G.) AND

NEPHEW,
1Epoy,

v.
OusTON
(H. C. anp
Mic a):

Viscount
Maugham.

SCAMMELL
(G.) AND
NEPHEW,
Lp.
Vv.
OUSTON
(H. C. AND

fac.

Viscount
Maugham.

HOUSE OF LORDS . [1941)

of that I am not certain—the reference to thé period of
two years was something which had not previously been
agreed.

We come then to the question as to the effect of the (so-
called) purchase being on "hire-purchase terms," and here we
are confronted with a strange and confusing circumstance.
The term ''hire-purchase"' for a good many years past has
been understood to mean a contract of hire by the owner of a
chattel conferring on the hirer an option to purchase on the
performance of certain conditions: Helby v. Matthews (1).
There is in these contracts—and this is ffom a business stand-
point a most important matter—no agreement to buy within the
Factors Act, 1889, or the Sale of Goods Act, 1893; there is
only an option and the hirer can confer on a purchaser from
him no better title than he himself has, except in the case of
sale in market overt. It is inaccurate and misleading to add
to an order for goods, as if given by a purchaser, a clause that
hire-purchase terms are to apply, without something to explain
the apparent contradiction. Moreover a hire-purchase agree-
ment may assume many forms and some of the variations in
those forms are of the most important character, e.g., those
which relate to termination of the agreement, warranty of
fitness, duties as to repair, interest, and so forth.

Bearing these facts in mind, what do the words as to "'hire-
"purchase terms'' mean in the present case? They may
indicate that the hire-purchase agreement was to be granted
by the appellants or on the other hand by some finance company
acting in collaboration with the appellants; they may con-
template that the appellants were to receive by instalments a
sum of 168/. spread over a period of two years upon delivering
the new van and receiving the old car, or, on the other hand,
that the appellants were to receive from a third party a lump
sum of 168/. and that the third party, presumably a finance
company, was to receive from the respondents a larger sum
than 168/. to include interest and profit spread over a period
of two years. Moreover, nothing is said (except as to the
two years period) as to the terms of the hire-purchase

(I) [1895] A. C. 471.

A.C. AND PRIVY COUNCIL.

agreement, for instance, as to the interest payable, and as to the
rights of the letter whoever he may be in the event of default
by the respondents in payment of the instalments at'the due
dates. As regards the last matters there was no evidence to
' suggest that there are any well known "usual terms " in such
a contract ; and I think it is common knowledge that in fact
many letters though by no means all of them insist on terms
which the legislature regards as so unfair and unconscion-
able that it was recently found necessary to deal with
the matter in the recent Act entitled the Hire-Purchase
Act, 1938.

These, my Lords, are very serious difficulties, and when we
find as we do in this curious case that the trial judge and the
three Lords Justices, and even the two counsel who addressed
your Lordships for the respondents, were unable to agree upon
the true construction of the alleged agreement, it seems to
me that it is impossible to conclude that a binding agreement
has been established by the respondents. I need not state the
different views entertained by the trial judge, and the Lords
Justices, and by counsel, for that will be done by my noble
friend Lord Russell.

The appeal must, I think, succeed, and the action for damages
must be dismissed with costs here and below.

LorpD RUSSELL OF KILLOWEN. My Lords, in my opinion
this appeal should be allowed. The action is brought to
recover damages for breach of a contract alleged to have been
made at certain interviews and by certain letters between the
parties and their representatives. In the forefront of their
defence the appellants pleaded that no agreement arose out
of those letters or interviews. That defence, if established,
is a complete answer to the action; and I feel no doubt that
it has been established.

Although the argument before this House took place on
four separate days, the point which ultimately emerges is
short, and depends upon the question whether any, and what,
certain meaning can be attributed to one sentence in a letter
from the respondents to the appellants: a question in the

257

Il, (ine)
1940
SCAMMELL
(G.) AND
NEPHEW,
Lp.

U.
OUSTON
(H. C. AND
Gea)
Viscount

Maugham, |

258

tel, 1E5 (83)
1940
SCAMMELL
(G.) AND
NEPHEW,
Lib),

U.
OUSTON
(H. C. and
eG).

Lord Russell
of Killowen,

\

HOUSE OF LORDS [1941]

solution of which I get no help from any of the authorities
which were cited during the debate.

The relevant facts can be briefly stated. The respondents
wished to acquire a new motor van, giving in part exchange a
Bedford van which they owned. On November 23, 1937,
an interview took place between a partner in the respondents'
firm, one John Ouston, and a Mr. Cook, who represented the
appellants, at which Mr. Cook recommended a Commer 15-cwt.
van as suitable for the respondents' requirements, and suggested
8ol. as the figure at which the Bedford van should be taken in
part exchange, a figure, however, which Mr. Ouston considered
too low. On the following day the appellants (by Mr. Cook)
wrote to the respondents a letter giving a quotation for the
proposed Commer van at 268/., and stating that they were
prepared to allow the sum of rool. for the Bedford van. On
December 6, 1937, an interview took place at which John
Ouston, his father and co-partner Harry Ouston, and Mr. Cook
were present. At that interview the offer contained in the
letter of November 24, 1937, was accepted by the respondents.
On December 7, 1937, the appellants (by Mr. Cook) wrote
to Mr. Ouston thanking him for the order placed with Mr. Cook,
on the previous evening, and asking him to let them have the
official order in order to complete their records. This request
was complied with by a letter from Mr. Harry Ouston dated
December 8, 1937, in the following terms : "We beg to acknow-
"ledge receipt of your acceptance of our order for: One
"Commer 15-cwt. chassis complete with body as per your
"specification sent us on 25th November, Number 5263. This
"order is given on the understanding that the balance of
"purchase price can be had on hire-purchase terms over a
"period of two years."

It is upon the true meaning and effect of this last sentence
that this case depends. But before considering its meaning
and effect, a further relevant fact must be added, namely,
that throughout the negotiation between the parties it was
made clear that the respondents wanted to purchase on hire-
purchase terms, and that there was never any question of an
out-and-out purchase by the respondents, Two questions and

A. C. AND PRIVY COUNCIL.

answers in Mr. John Ouston's evidence establish this beyond
doubt: "Q. Anyway, this is quite clear; that from the
"beginning of your discussions with Mr. Cook, you always
"told him quite definitely that you wanted to purchase on
"hire purchase terms? A. That is quite clear. Q. There
"was no question of an out-and-out purchase? A. No, there
"never was.'' In these circumstances the true construction
of the agreement alleged by the statement of claim to arise out
of the letters of December 7 and 8, 1937, and the interview
of December 6, 1937, is a matter open to endless doubt and
speculation. At least five different versions have been
presented for your Lordships' consideration.

The trial judge was of opinion that there existed a contract
for the sale by the appellants to the respondents of a Commer
van for the sum of 268/., to be paid and satisfied as to 1681.
in cash and as to the balance by the delivery to the appellants
of the Bedford van; that the concluding sentence of the
letter of December 8, 1937, "'was merely a condition precedent
"to the contract becoming an effective contract'; and that
"as in his opinion the appellants repudiated the contract on
"wrong grounds, they cannot rely upon the necessity for
"the respondents showing that that condition has been
"fulfilled."

The Court of Appeal took a different view. The Lords
Justices all treated the sentence in question as a term of the
contract between the parties, and not as a condition precedent

to that contract; but they differed (inter se) as to the con- -

struction of that contract.

Slesser L.J. thought that the alleged contract might be
carried out in any one of several specified ways but that it
lay on the respondents within a reasonable time, in a reasonable
way, to produce some method whereby they could under the
conditions of a hire-purchase agreement satisfy their under-
taking by one way or another through a hire-purchase agree-
ment to pay the appellants. Notwithstanding this lack
of certainty the Lord Justice considered that a complete
agreement had been concluded, on the ground that—as he
put it—''You may very well agree that a certain part of the

259

H. L. (E.)
1940

SCAMMELL
(G.) AND
NEPHEW,
Lp.
Uv.
OUSTON
(H. C. anD

Rey

Lord Russell
of Killowen.

260 HOUSE OF LORDS ' [1941]

H.L. (E.) "contract, such as the particular conditions on which the hire-
1940 'purchase agreement was to be made, was to be settled in

Scammett "Conjunction with a third party."

(28° MacKinnon L.J. took the view that by the alleged contract

Lo. the appellants undertook to procure a finance company to
v

Ouston purchase the van from them, and to hand over its possession
i pepe to the respondents under the terms of a hire-purchase agreement
Lond Ruse) PUrsuant to which the respondents would ultimately pay to the
of Killowen. finance company 268/., reduced to 168/. by the rool. for the

Bedford van, which sum would be paid to the finance company
by the appellants.

Goddard L.J. was of opinion that the alleged contract was a
contract by the appellants to put the respondents in possession
of the Commer van for a sum of 268/., rool. of which was to
be satisfied by the delivery of the Bedford van and 168J. of
which was to be satisfied by instalments over two years, being
24 monthly instalments, and that it was matter for the choice
of the appellants how the hire-purchase term of the alleged
contract was to be carried out.

At your Lordships' bar leading counsel for the respondents
(agreeing in substance with the trial judge) argued that there
was a simple contract of sale and purchase subject only to the
condition precedent, that the balance of the purchase price
could be had on reasonable hire-purchase terms. On the
other hand junior counsel contended for a contract which was
not a contract of sale and purchase at all, but a contract the
obligations under which he stated in elaborate detail, the
whole being subject to a condition subsequent defined in
negative form by reference to the concluding sentence of the
letter of December 8, 1937.

The existence of this fivefold choice is embarrassing but
eloquent. An alleged contract which appeals for its meaning
to so many skilled minds in so many different ways, is un-
doubtedly open to suspicion. For myself I feel no doubt
that no contract between the parties existed at all; not- i
withstanding that they may have thought otherwise.

The oral evidence establishes that the only acquisition by
the respondents which was contemplated by the parties, was an

A. C. AND PRIVY COUNCIL.

acquisition by some form of hire-purchase, which would
enable the respondents to spread their payment of 168/. overa
period of time. This could be brought about in various ways,
and by documents containing a multiplicity of different terms.
_ In my opinion the concluding sentence of the letter of December 8,
| | 1937, was not a condition precedent to any contract. It is
\ merely a recording in writing of what had been the common
intention of the parties in their discussions and negotiations,
with a stipulation, apparently for the first time, for a period of
two years. But, in view of the numerous forms of hire-
purchase transactions, and the multiplicity of terms and
details which they involve, the respondents are faced with what
appears to me to be a fatal alternative, namely, either (1.) this
term of the alleged contract is quite uncertain as to its meaning,
and prevents the existence of an enforceable contract, or (2.) the
term leaves essential contractual provisions for further
negotiation between the parties, with the same result.
Accordingly, in my opinion the action for damages for

breach of an alleged contract should have been dismissed, and

this appeal should succeed.

Lorp Wricut. My Lords, the decision' of this appeal
depends on the answer to the question whether there was a
concluded contract between the appellants and respondents.
The respondents were plaintiffs in the action and claimed
damages from the appellants for breach of contract. The
appellants, who had raised other objections, limited their
defence in this House to the one issue, "contract or no
"contract." Tucker J., the trial judge, and the Lords Justices
in the Court of Appeal have decided against the appellants,
but for reasons which present an embarrassing diversity.

In November, 1937, the respondents were desirous of
acquiring a new motor-van for their business of house
furnishers. As a result of interviews between their partners
and Mr. Cook, general sales manager of the appellants, the
appellants on November 24, 1937, sent to the respondents a
quotation of 2681. for a Commer 15-cwt. chassis complete as
per manufacturer's specification fitted with special Scammell

SCAMMELL

(G.) AND

NEPHEW,
Bp?

v.
OUSTON
(H. C. anD
JeGs)s

Lord Russell
of Killowen.

262

18g 18 (055)
1940
SCAMMELL
(G.) AND
NEPHEW,
Lp.

Uv.
OusToNn
(H. C. AND
Moves

Lord Wright.

HOUSE OF LORDS . [1941]

body constructed in the appellants' shops. Against the 2681.
they were prepared to allow the respondents rool. for their
1935 2-ton Bedford Luton van. A specification of the body
was enclosed. At a conversation between Mr. Cook and
Mr. H. C. Ouston, the latter placed the order with the appel-
lants. This was confirmed by letter of December 7, 1937,
which stated that the appellants could deliver the van before
February, 1938, and asked to have the respondents' official
order. On December 8, 1937, the respondents replied in the
following terras: ''We beg to acknowledge receipt of your
"acceptance of our order for one Commer 15-cwt. chassis
"complete with body as per your specification sent us on
"November 25, Number 5263. This order is given on the
"understanding that the balance of purchase price can be had
"on hire purchase terms over a period of two years."

At the oral conversations the respondents had clearly
insisted that a hire-purchase agreement was essential. No
terms, however, of such an agreement had been settled, nor
indeed had it been discussed with whom the agreement would
be made. Mr. H. C. Ouston, when asked in cross-examination
'""The hire-purchase agreement, of course, you did not expect,
"T suppose, to be with Messrs. Scammells, did you?"' replied,
"TI knew very well it would not have been. To the best of
"my knowledge, anyhow, I thought it would be, as it turned
"out to be, with United Dominions."' Mr. J. G. Ouston said
in evidence that he always told Mr. Cook quite definitely
that they wanted to purchase on hire-purchase terms and that
there never was any question of an out-and-out purchase.
The appellants were obviously content that the deal should be
on a hire-purchase basis, and proceeded with the completion
of the van. On January 27, 1938, they wrote to the respon-
dents that they had received advice from the United
Dominions Trust Co., Ld., of their acceptance of hire-purchase
in connection with the vehicle and would forward the
documents in due course. On February ro, 1938, they reported
that the van would be ready for collection in a few days,
"subject to mutual acceptance of the hire-purchase agreement."'
They added, " We make it a condition of the supply of vehicles

A.C. AND PRIVY COUNCIL.

"on hire-purchase terms that we approve terms of agreement
"before supply." The next development was an inspection
of the Bedford van by the appellants, which resulted in an
unfavourable report on its condition and also a report that it
was a 1934 vehicle and not a 1935 vehicle. The appellants
then wrote on February 14, 1938, that as the vehicle did not
fulfil the contract conditions the respondents had _ better
dispose of it locally. They added, ''We assume that the hire-
"purchase company will require a minimum of 25 per cent.
"deposit, which would call for 67/."' The respondents' solici-
tors wrote denying that the complaints alleged against the van
were justified and in their turn charged the appellants with
default in not delivering the Commer van in time. They
also threatened proceedings. The appellants replied reitera-
ting their objections and added that if the respondents would
deliver a 1935 Bedford van in approved condition they would
accept it. Otherwise they asked that the respondents would
complete the transaction, take delivery of the new machine,
~ and pay the sum of 268/. forit. They added that hire-purchase
terms could no doubt be arrdnged to suit the convenience of
the respondents, but that, of course, did not affect the business.
On February 26, 1938, the appellants wrote to the respondents
in the following terms: "In order to assist you in placing with
the hire-purchase company your new Commer lorry which we
"have ready to your order, we are attaching hereto a list
"showing the complete cost of this vehicle."" This, with extras,
came to 298/. 6s. 2d. The correspondence proceeded until on
May 18, 1938, the respondents issued their writ against the
appellants claiming damages for breach of contract to supply
a Commer 15-cwt. chassis complete with body and accept a
2-ton Bedford Luton van in part exchange therefor. This was
repeated in the statement of claim which added that the
price was 268/. The defence denied that there was any
contract, by para. 2 pleaded that by the express terms of the
letter of December 8, 1937, the alleged agreement was subject
to a condition as to hire-purchase terms as therein set out and
claimed that "Accordingly unless and until a hire-purchase
'agreement in terms mutually approved by the plaintiffs and

263

H. L. (E.)

SCAMMELL

(G.) AND

NEPHEW,
ep:

Uv.
OUSTON
(H. C. anp
J-Gae

Lord Wright,

264 HOUSE OF LORDS a [1941]

H.L.(E.) "the defendants was effected neither party was bound. No
1940 "such hire-purchase agreement was ever effected." It was
Scammert also pleaded that the said condition was too vague to be
eters capable of any effect in law, and that therefore the agreement
'Lp. was void for uncertainty. The defence further relied on
Gatton ee: 4 of the Sale of Goods Act, 1893, and set up that the complaint
Seni in regard to the condition and age of the Bedford van constituted
ec aent breaches of condition excusing the appellants from performance.
— These latter defences were abandoned before the learned
judge and need not be further considered. There was also a
counterclaim not now material.
At the trial Tucker J. found that the appellants' letter of
February 14, 1938, was a complete repudiation of any contract,
and awarded damages in favour of the respondents against the
appellants for breach of contract, having decided against their
contention that there was no contract. He said that Mr.
"Beyfus had argued on behalf of the respondents that the
contract was that the respondents should provide 168/. for
the balance of the price, and that it was immaterial to the
appellants where the respondents got the money from and
what arrangements they made with the finance company.
He further stated that Mr. Beyfus had also argued that the
stipulation as to hire-purchase was merely a condition precedent
to the contract becoming an effective contract. The learned
judge held that Mr. Beyfus was right in his argument, by which
I think he meant the second of these arguments, and held that
the appellants by wrongly repudiating the contract had
relieved the respondents from showing that the condition
precedent had taken effect or that the purchase price on hire-
purchase terms over a period of years had, in fact, been
obtained or could have been obtained. He held that s. 4
of the Sale of Goods Act had been complied with.
In the Court of Appeal Slesser L.J. affirmed the judgment. ;
The ground on which he held that there was a concluded {
agreement was that though there were many methods of hire- "
purchase finance that might be adopted, what was meant
was in his opinion that the purchasers must in a reasonable
time, in a reasonable way, satisfying the words ''hire purchase

A. C. AND PRIVY COUNCIL.

"agreement," produce some method whereby they could
satisfy their undertaking by one way or another through a
hire-purchase agreement to pay the sellers. The particular
conditions under which the hire-purchase agreement was to
be made were, he said, to be settled in conjunction with a
third party. Like Tucker J. he placed the obligation to procure
the hire-purchase agreement on the respondents but held that
the repudiation by the appellants relieved the respondents
from showing fulfilment of the condition.

MacKinnon L.J. on the other hand placed the obligation
as regards the hire-purchase agreement on the appellants. In
his opinion the parties knew perfectly well the sort of agreement
with the finance company that both contemplated. ''It is
"quite true," he said, "that the form of agreement might have
"been in one or other of two or three forms. The essential
"stipulation implied was that it should be in a reasonable
"form. Either one of two variable forms, if in a reasonable
"form, would have sufficed for the satisfaction of the defend-
"ants' obligation." He held that it was not a contract
for the sale of goods but a contract to procure the finance
company to purchase for the appellants a car and let it on
hire-purchase terms to the respondents. He found among the
papers the draft of an agreement that he regarded as carrying
out the transaction. It was, however, not of that type at all.
The appellants were, according to that draft, to be the letters
and the respondents the hirers. The United Dominions
Trust Co., Ld., were to finance the transaction by discounting
24 promissory notes made by the respondents payable to the
appellants and by them to be endorsed to the Trust Company
for a total sum of 194/., representing the balance of the purchase
price of 168/., with bank charges added. The draft hiring
agreement itself contained eleven clauses, dealing with the
hirers' obligation to repair, to insure, and giving the letters
a right of retaking the van in the event of the hirers' default,
and finally giving the hirer when all payments were discharged
and terms fulfilled the option to purchase the van for one
shilling. The draft agreement, to which the appellants,
respondents and the Trust Company were to be parties, was

KC. 194i: 3 zt

265

H. L. (E.)
1940

SCAMMELL

(G.) AND

NEPHEW,
Lp.

Uv.
OusToN
(H. C. AND
J. G.).

Lord Wright.

2606

HeL..(E.)
1940

SCAMMELL

(G.) AND

NEPHEW,
Lp.

U.
OUSTON
(H. C. AND
Ga):

Lord Wright.

HOUSE OF LORDS 5 [1941}

never signed. It was not in evidence and, with great respect,
I do not think that the Lord Justice was entitled to refer to
it. But I have thought it necessary to look at it in order to
understand the opinion of the Lord Justice. If such an agree-
ment was necessary to complete the bargain involved in the
letter of December 8, 1937, it clearly in my opinion could not
have been arrived at until the parties had settled many doubtful
points on which they might have differed, and as to which the
court would not be able or entitled to say what was reasonable
as between them.

Goddard L.J. seems to agree with MacKinnon L.J. that it
was for the appellants to procure the agreement with the
finance company but he agreed only in that respect. They
were, it seems, in his opinion, to submit to the respondents a
hire-purchase agreement which gave the respondents two years'
credit for the 1687. ''It seems to me," he said, "that it is a
"matter of entire indifference to the plaintiffs whether or not
"the defendants procured a finance company to buy direct
"from them and let to the plaintiffs or whether the defendants
"procured a finance company to discount bills given under a
"contract by which the defendants themselves entered into
"direct relations with the plaintiffs. Those are matters which
"the defendants could choose for themselves. But the
"plaintiffs would have to take the vehicle, and have to enter
"into the agreement, provided an agreement was submitted
"to them which gave them two years' credit for the 168/."'
As to matters like rate of interest and bank charges, terms of
hiring and other essentials affecting the respondents' obligations
and rights, the respondents, if I understand the view of the
Lord Justice, would have no say at all.

To complete a statement of the variant readings submitted
for your Lordships to choose the one which may seem to
represent the true meaning of the parties, it is necessary very
briefly.to summarize the contentions of Mr. Beyfus and his
junior, Mr. Raeburn, before this House. The former put his
contentions. in the alternative. First he argued that the
phrase in the letter of December 8, 1937, meant that the bargain
was subject to a condition precedent that a certain state of

RH en SENG

ee ee

Jneatansincalienmas Betts re

| A.C. AND PRIVY COUNCIL.

affairs for the benefit of the respondents should exist between
the date of the contract and.the date of delivery of the vehicle,
namely, the availability of a fund on hire-purchase terms, and
that the appellants having repudiated the contract, the
respondents were absolved from proving that the condition
had been fulfilled. He meant, I think, by the condition
precedent a stipulation in the contract, not an extrinsic
condition without the fulfilment of which there could be no
contract. His alternative submission was based on the view
that "can '' was equivalent to "shall." On this alternative
he read the term as meaning that the appellants were either
personally to enter into a hire-purchase agreement or procure
another person to enter into a hire-purchase agreement over a
period of two years, containing reasonable terms having
regard to the usual practice of hire-purchase finance. The
personality of the hirer, he said, was left to the option of the
appellants. He further submitted that if the courts could
not give a defined meaning to the condition, they should
disregard it. Mr. Raeburn argued that the agreement was
defeasible if the respondents could not obtain suitable financial
assistance on hire-purchase terms, subject, however, to this,
that the appellants could compel the respondents to take
delivery if they could show the availability of hire-purchase
finance. Thus, he contended, the agreement was binding
unless it was shown that reasonable businesslike hire-purchase
facilities were not available. All that hire-purchase here
meant, he contended, was a system under which the vehicle
was hired with an option to purchase. Agreement between
the parties as to terms was immaterial.

Such are the conflicting views which are placed before your
Lordships as requiring a decision in favour of the respondents.
But in my opinion the correct view is that put forward by
Mr. Miller on behalf of the appellants, namely, that there
never was a concluded contract between the parties. It is
true that when the appellants broke off the affair they gave
reasons for doing so which they could not justify. But when
they were sued for breach of contract they were entitled to
resist the claim on any good ground that was available, regardless

3 Le

267

Hi. L. (E.)
1940
SCAMMELL
(G.) AND
NEPHEW,
Lp.

v
OuSTON
(H. C. AND
TaG:):

Lord Wright.

268

H. L. (E.)

1940

SCAMMELL
(G.) AND
NEPHEW,
Epi
Uv.
OUSTON
(H. C. ann
J. G).

Lord Wright.

HOUSE OF LORDS a (1941)

of reasons which they had previously given. As Lord Sumner
pointed out in British & Benningtons, Ld. v. N. W. Cachar
Tea Co. (1), if a party repudiated a contract giving no
reasons at all, all reasons and all defences in the action, partial
or complete, would be open to him. Equally would this be so,
I think, if he gave reasons which he could not substantiate.
If there never was a contract, they could not be made liable
for breach of contract. There are in my opinion two grounds
on which the court ought to hold that there was never a
contract. "The first is that the language used was so obscure
and so incapable of any definite or precise meaning that the
court is unable to attribute to the parties any particular
contractual intention. The object of the court is to do
justice between the parties, and the court will do its best,
if satisfied that there was an ascertainable and determinate
intention to contract, to give effect to that intention, looking
at substance and not mere form. It will not be deterred by
mere difficulties of interpretation. Difficulty is not synonymous
with ambiguity so long as any definite meaning can be
extracted. But the test of intention is to be found in the words
used. If" these words, considered however broadly and
untechnically and with due regard to all the just implications,
fail to evince any definite meaning on which the court can
safely act, the court has no choice but to say that there is no
contract. Such a position is not often found. But IJ think
that it is found in this case. My reason for so thinking is not
only based on the actual vagueness and unintelligibility of the
words used, but is confirmed by the startling diversity of
explanations, tendered by those who think there was a bargain,
of what the bargain was. I do not think it would be right to
hold the appellants to any particular version. It was all left
too vague. There are many cases in the books of what are
called illusory contracts, that is, where the parties may have
thought they were making a contract but failed to arrive at
a definite bargain. It is a necessary requirement that an
agreement in order to be binding must be sufficiently definite
to enable the court to give it a practical meaning. Its terms

(1) [1923] A. C. 48, 71.

A. C. AND PRIVY COUNCIL.

__ must be so definite, or capable of being made definite without
further agreement of the parties, that the promises and
performances to be rendered by each party are reasonably
certain. In my opinion that requirement was not satisfied
in this case.

But I think the other reason, which is that the parties never
in intention nor even in appearance reached an agreement, is a
still sounder reason against enforcing the claim. In truth,
in my opinion, their agreement was inchoate and never got
_ beyond negotiations. They did, indeed, accept the position
that there should be some form of hire-purchase agreement,
but they never went on to complete their agreement by settling
between them what the terms of the hire-purchase agreement
were to be. The furthest point they reached was an under-
standing or agreement to agree upon hire-purchase terms.
But as Lord Dunedin said in May & Butcher v. The King (1),
reported in a note to Foley v. Classique Coaches, Ld. (2), "To be
"a good contract there must be a concluded bargain and
"a concluded contract is one which settles everything
"that is necessary to be settled and leaves nothing to be
"settled by agreement between the parties. Of course it
"may leave something which has still to be determined but
"then that determination must be a determination which does
"not depend upon the agreement between the parties."
MacKinnon L.J. thought that in this case the agreement of
the parties was complete and nothing was left for them to
agree. Whatever was lacking in their agreement could and
should, he thought, be supplied by the court by invoking the
standard of reasonableness, on the principles laid down by
this House in Hillas & Co. v. Arcos, a decision which has not
found a place in the Law Reports, even in a Note, but is
reported in 147 L. T. 503, and in 36 Com. Cas. 353 and 38 Com.
Cas. 23. The Lord Justice's view, as I bave already indicated,
was, if I have understood correctly, that there was a contract
for a hire-purchase agreement and that no further agreement
of the parties was necessary because the court could determine
for the parties what was a reasonable hire-purchase agreement

(1) [1934] 2 K. B. 17, 21m, (2) Ibid, 1,

269

H. L. (E.)

SCAMMELL
(G.) AND
NEPHEW,
Lp,
v.
OUSTON
(H. C, AND

jereyy

Lord Wright.

270

H. Le. (2)
1940
SCAMMELL
(G.) AND
NEPHEW,
Lp.

Uv.
OuSsTON
(H. C. anp
Gs).

Lord Wright.

'

' HOUSE OF LORDS [1941]

and thus the contract would be complete. I am unable to
concur in this conclusion. In the first place the appellants
at least in their letter of February 10, 1938, expressly stated
that the transaction was subject to mutual acceptance of the
hire-purchase agreement. This was not demurred to by the
respondents. The letter was written before any difficulty
had arisen about the condition or description of the Bedford
van. It seems to me that this attitude was sensible both _
from the point of view of business and of law. It is here . :

necessary to remember what a hire-purchase agreement is.
It is not a contract of sale, but of bailment. The owner of
the chattel lets it out on hire on a periodic rent on the terms
that on completion of the agreed number of payments, and on
due compliance with the various terms of the agreement, the
hirer is to have the option to buy the chattel on payment of
one shilling or some nominal sum. The condition that the
hirer is not to become owner automatically on completion of
the agreed payments but merely has an option to purchase
was adopted to avoid difficulties under the Factors Act or
the Bills of Sale Act, as explained by this House in Helby v.
Matthews (1), and McEntire v. Crossley Brothers, Ld. (2). While
the bailment continues the property remains in the letter. Such
a transaction, though not a contract of sale, is used in practice
to carry out a sale transaction, with the advantage to the
buyer of credit facilities. Though the property in the
chattel does not pass while the agreement is current, the hirer
gets the use of it. What would be the price if it were a con-
tract of sale has to be increased by whatever sum is necessary
for interest and bank charges until the periodic instalments
have been discharged. Terms must accordingly be arranged
in respect of the period of the bailment as to user, repairs, ;
insurance, rights of retaking possession on the hirer's default
and various other matters. A hire-purchase agreement is
therefore in practice a complex arrangement. Thus when in
the letter of December 8, 1937, the condition of hire-purchase '
was introduced into what had seemed on the letters to be

proceeding as a contract of sale, there was a complete change

(1) [1895] A. C. 471. (2) [1895] A. C. 457.

A.C. AND PRIVY COUNCIL.

in the character of the transaction and a complex arrangement
had necessarily to be substituted for a simple agreement to
sell. It was not even clear who were to be parties to the hire-
_ purchase agreement or what their respective roles were to be.
The respondents it is clear were necessary parties. The
appellants also were necessary parties because it was their
chattel which was being dealt with. The finance company
was also a necessary party. But there were at least two
possible ways of carrying out the deal. The hire-purchase
agreement might be in such terms that the appellants were the
letters and the respondents the hirers, and the purchase price
was to be discharged by periodic instalments in the form of
negotiable instruments, payable to the appellants, thus
enabling the appellants to discount the bills with the finance
company, who on the security of the bills drawn by the
respondents and endorsed by the appellants, would pay the
appellants the purchase price at once, keeping as their eventual
profit the extra amount which was added to the price for
interest and bank charges. Such an arrangement must
obviously involve the making of a special tripartite agreement.
Another possible method would be for the appellants to
agree with the respondents to sell the van to the finance
company on the stipulation that the latter should agree to
let the van to the respondents under a hire-purchase agreement.
Clearly in that case also a special tripartite agreement would
be necessary. There was, perhaps, a third possible mode
under which the appellants sold the van for cash (at least as
regards the balance, for the transaction was, in part, barter)
to the respondents, who, having become purchasers, then
transferred the van to the finance company on a hire-purchase
agreement in consideration of the company advancing. the
price. Even in such a case the appellants would, I think,
in practice be a necessary party because the finance company
would require the undertaking of the appellants to transfer
the van direct to them and the respondents' concurrence in
that undertaking. Otherwise the finance company would be
paying cash without at once obtaining their security in the
form of the van. Thus a tripartite agreement would be

271

Eee. h (Es)
1940
SCAMMELL,
(G.) AND
NEPHEW
Lp.

Vv.
OusTON
(H. C. AND
jaG.)

Lord Wright.

272

leks 1Lp. (025)
1940
SCAMMELL
. (G.) anD
NEPHEW,
Lp.

Us
OvusTON
(H. C. AND
J. G.).

Lord Wright.

HOUSE OF LORDS > [1941 }

necessary. But I need not consider that case because it
was clearly not contemplated by the parties. The corres-
pondence shows that the terms of the hire-purchase agreement
were to be matters of joint concern to the three parties who
were to agree upon them. What is clear is that while a hire-
purchase agreement was being demanded, its exact form and
its exact terms were left for future agreement. The true
view may be that the letter of December 8, 1937, amounts to
nothing more than an announcement that the deal is only to
proceed upon a hire-purchase basis, the parties anticipating
that the terms of such an agreement would be settled between
them in due course.

What I have said will sufficiently explain why I do not feel
able to agree with MacKinnon L.J. that there was a complete
and enforceable agreement concluded between the parties.
He cited Hillas & Co. v. Arcos (1) in support of his view, but that
was a quite different case. There was in that case a contract
for the supply of Russian timber in 1930, which also gave an
option to the buyers to purchase a further supply of 100,000
standards in the ensuing year. The option clause was
extremely bare and meagre, but it was held as a matter of
construction that the 100,000 standards were to be soft wood
goods of fair specification for delivery during 1931. It was
decided by this House, reversing the judgment of the Court
of Appeal and restoring the judgment of MacKinnon J., as
he then was, that no further agreement was necessary or
contemplated. The court could not, indeed, make a contract
for the parties or go outside the words they had used except
in so far as there were appropriate implications of law, as, for
instance, the implication of what was just and reasonable where
the contractual intention was clear but the contract was silent
in some detail which the court could thus fill in. Thus the
condition of "'fair specification over the season '"' 1931 enabled
the court with the help of expert evidence to identify what was
a fair and reasonable specification and a fair and reasonable
distribution by way of instalment deliveries of the contract
quantity. Certain other matters were similarly dealt with.

(t) 147 L. T. 503 ; 36 Com, Cas, 353 ; 38 Com. Cas, 23.

A. €.. AND PRIVY COUNCIL.

In the same way the court has in proper circumstances found
itself able to determine what is a reasonable price when the
price is not specified in the contract as was done in Foley's
case (1), rightly, as I think, distinguishing May & Butcher's
case (2), or to determine what is a reasonable time, or what are
reasonable instalments. Many other examples of this principle
might be given. And in addition the court may import
terms on the proof of custom or by implication. But it isin my
opinion a very different matter to make an entire contract
for the parties as the court would be doing if the course
suggested by MacKinnon L.J. was adopted. That is simply
making a contract for the parties. The analogy he cited of a
c.i.f. contract is in my opinion no true analogy. These initial
letters have a definite and complete meaning under the law
merchant, just as much as the meaning of a bill of exchange,
or the general effect of a marine insurance contract, is deter-
mined by the law merchant. The law has not defined and
cannot of itself define what are the normal and reasonable
terms of a hire-purchase agreement. Though the general
character of such an agreement is familiar, it is necessary for
the parties in each case to agree upon the particular terms.
It may, perhaps, be that this might be done in particular
circumstances by general words of reference. For instance,
if it were stipulated that there should be "a usual'' hire-
purchase agreement, the court might be able if supplied with
appropriate evidence to define what are the terms of such an
agreement. But there was nothing of the sort in this case.

I think this appeal should be allowed because I am of opinion
'upon either of the main grounds which I have explained, or on
both of them, that there was no concluded contract between
the appellants and respondents.

Appeal allowed.