Grainger & Son v Gough – Case Summary

Grainger & Son v Gough (Surveyor of Taxes)

House of Lords

Citations: [1896] AC 325.


The Grainger & Son was a wine merchant. They had business ties with Roederer, a French wine manufacturer. Grainger would advertise Roederer’s wines through circulars, receive orders from customers and forward them to Roederer. If Roederer approved the sale, he would then ship them under FOB contracts to the customer. The Grainger received a commission for such orders, and paid income tax on these commissions.

Grainger got into a dispute with the Commissioners of Taxes as to whether they fell within a particular tax category under the (now repealed) Income Tax Act 1842. This turned on where Roederer exercised or carried on trade or business in the UK and whether Grainger were Roederer’s agents in this regard.

  1. Did Roederer carry out trade or business in the UK?
  2. Was Grainger Roederer’s agent in relation to any UK trade?

The House of Lords held in favour of Grainger. Roederer did not carry out trade in the UK. This was because all the contracts were formed in France when Roederer decided to accept the order.

This Case is Authority For…

Placing an order with a merchant does not create a binding contract. Rather, it is merely an offer. Advertising by the merchant, such as by catalogue, circular or pamphlet, is merely an invitation to treat.


The Lords did not need to decide whether Grainger was an agent. However, they implied that they were not. Lord Herschell noted that Grainger merely advertised for Roederer and transmitted orders to him: they had no authority to bind him to a contract.

Lord Morris dissented on the contractual issue. He argued that the evidence showed that Grainger were agents with ostensible authority to bind Roederer to a contract. By this logic, the contracts were formed in the UK. He would have held Grainger liable to pay the tax.