May & Butcher Ltd v R [1934] 2 KB 17

Key points

  • Material terms of the contract must be agreed, if not the contract is void
  • An agreement to agree in the future price is too uncertain for contract to form – but note that such a term would be valid today if it falls under section 8(2) Sale of Goods Act 1979 or section 15 of the Supply of Goods Act 1982

Facts

  • C agreed to buy tentage left over from WW1 from the Disposal Board (D)
  • Under the contract, price ‘shall be agreed upon from time to time’ as tentage become available for disposal
  • It was also stated disputes will be submitted to arbitration in accordance with the Arbitration Act 1889
  • No price could be agreed upon and D wrote to C that it was no longer bound
  • C alleged that a reasonable price could either be implied under section 8 of the Sale of Goods Act 1893 or be decided by arbitration as per the arbitration clause

Held (House of Lords)

  • There was no contract between the parties as there was no agreed upon price

Lord Buckmaster

No contract arose as price was not fixed

  • It is well recognised principle that an agreement that leaves a critical part of the contract undetermined is no contract
  • It is not open to the parties to agree that they will in the future agree upon a matter which is vital to the arrangement

Section 8 SGA did not apply

  • Although s8 provides that a reasonable price to be imposed if price is not mentioned in agreement, the agreement is in fact not silent on the manner in which price was to be determined

Arbitration clause did not apply

  • The arbitration clause states that disputes arising from the agreement are to be resolved by arbitration, but there was no agreement in the first place