G Scammell and Nephew Ltd v HC&JG Ouston
House of Lords
Citations: [1941] AC 251; [1941] 1 All ER 14.
Facts
The respondent ordered a motor van from the appellants. The parties agreed on a document which stipulated that the order was ‘given on the understanding that the balance of purchase price can be had on hire-purchase terms over a period of two years’. However, the rest of the agreement did not clarify what these hire-purchase terms were. A dispute arose over whether the agreement was too uncertain to be an enforceable contract.
Issue(s)
- Was the agreement sufficiently certain?
Decision
The House of Lords held that the agreement was too uncertain. There was no single set of ‘hire-purchase’ terms which the parties could be taken to be referring to. The rest of the contract did not clarify the matter. Lord Wright added that this indicated that the parties had yet to reach an agreement at all, and were still negotiating.
This Case is Authority For…
The parties must agree on all the essential terms before a contract is formed. As Lord Wright put it:
‘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…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…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.
Whether there is a contract is ascertained objectively. It does not matter whether the parties subjectively thought they had a contract.
Other
Lord Wright noted that if a party repudiates the contract for an unjustifiable reason, but incidentally had a good reason to repudiate at the time, they can rely on the good reason as a defence if sued for breach of contract.
