Adams v Lindsell

       

Adams v Lindsell

 Adams v Lindsell (1818) 1 B & Ald 681, is an English contract case regarded as the first case towards the establishment of the "postal rule" for acceptance of an offer. Ordinarily, any form of acceptance must be communicated expressly to an offeror; however, it was found that where a letter of acceptance is posted, an offer is accepted "in course of post".

Facts

The case involved two parties in the sale of wool. On 2 September, the defendants wrote to the plaintiffs offering to sell them certain fleeces of wool and requiring an answer in the course of post. The defendants misdirected the letter so that the plaintiffs did not receive it until 5 September. The plaintiffs posted their acceptance on the same day but it was not received until 9 September. Meanwhile, on 8 September, the defendants, not having received an answer by 7 September as they had expected, sold the wool to someone else.
The defendants argued that there could not be a binding contract until the answer was actually received, and until then they were free to sell the wool to another buyer.

Judgment

Law J said that if that was true it would be impossible to complete any contract through the post; if the defendants were not bound by their offer until the answer was received, then the plaintiffs would not be bound until they had received word that the defendants had received their acceptance, and this could go on indefinitely. Instead it must be considered that the offerors were making the offer to the plaintiffs during every moment that the letter was in the post. Then when the Offeree has placed his acceptance in the post there is a fictional meeting of minds, which concludes the offer and gives effect to the acceptance.
The acceptance did not arrive in course of post strictly speaking (all parties understood in course of post to refer to 7 September). But because the delay was the default of the defendant it was taken that the acceptance did arrive in course of post.

Significance

This case in the first step towards establishing the postal acceptance rule (mailbox rule). It was not until 1892 in Henthorn v Fraser [1892] 2 Ch 27 that the court determined the precise timing of the acceptance, that is the moment the letter of acceptance is posted. (See also Entores Ltd v Miles Far East Corporation [1955] 2 QB 327).

Notes

1. Beale (2002) p.221
2. Beale (2002) p.222

   References

   Beale, Hugh; Arthur Hartkamp; Hein Kotz; Denis Tallon (2002). Cases, Materials and Texts on Contract Law. Hart Publishing.

Intention to Create Legal Realtions (Domestic Agreement)

Balfour v. Balfour – Case Brief Summary

 

Facts

Mr. Balfour (D) and Mrs. Balfour (P) lived in Ceylon and visited England on a vacation. The plaintiff remained in England for medical treatment and the defendant agreed to send her a specific amount of money each month until she could return. The defendant later asked to remain separated and Mrs. Balfour sued for restitution of her conjugal rights and for alimony equal to the amount her husband had agreed to send.
Mrs. Balfour obtained a decree nisi and five months later was granted an order for alimony. The lower court entered judgment in favor of the plaintiff and held that the defendant’s promise to send money was enforceable. The court held that Mrs. Balfour’s consent was sufficient consideration to render the contract enforceable and the defendant appealed.

Issues

1. Must both parties intend that an agreement be legally binding in order to be an enforceable contract?
2. Under what circumstances will a court decline to enforce an agreement between spouses?

Holding and Rule

1. Yes. Both parties must intend that an agreement be legally binding in order to be an enforceable contract.
2. The court will not enforce agreements between spouses that involve daily life.

Agreements between husband and wife over matters that affect their daily lives are not subject to contractual interpretation, even when consideration is present. Spouses normally intend that the terms of their agreements can be varied as situations develop. The court held that it was presumed that the parties made the agreement as husband and wife and did not intend that it could be sued upon. The court held that as a matter of public policy it could not resolve disputes between spouses.

Disposition

Judgment for plaintiff Mrs. Balfour reversed.

Note

Contracts related to the social aspect of marriage will not be enforced by the courts. Contracts between spouses related to business relationships can be enforced, however. Courts are willing to support negotiated divorce settlements and written statements of support.

Reference:
 http://www.lawnix.com/cases/balfour-balfour.html

The Principle of Offer and Acceptance (Unilateral Contract)

Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.).

- The Principle of Offer and Acceptance (Unilateral Contract)

Carbolic Smoke Ball Advertisement in the Newspaper

 

Facts

Carbolic Smoke Ball Co. (D) manufactured and sold The Carbolic Smoke Ball. The company placed ads in various newspapers offering a reward of 100 pounds to any person who used the smoke ball three times per day as directed and contracted influenza, colds, or any other disease. After seeing the ad Carlill (P) purchased a ball and used it as directed. Carlill contracted influenza and made a claim for the reward. Carbolic Smoke Ball refused to pay and Carlill sued for damages arising from breach of contract. Judgment for 100 pounds was entered for Carlill and Carbolic Smoke Ball appealed.

Issue

• Does one who makes a unilateral offer for the sale of goods by means of an advertisement impliedly waive notification of acceptance, if his purpose is to sell as much product as possible?

Holding and Rule (Lindley)

• Yes. One who makes a unilateral offer for the sale of goods by means of an advertisement impliedly waives notification of acceptance if his purpose is to sell as much product as possible.

The court held that a person who makes an offer may decline to require notice of acceptance if he or she wishes. One who makes an offer dispenses with the requirement of notice of acceptance if the form of the offer shows that notice of acceptance is not required. To accept an offer, a person need only follow the indicated method of acceptance. If the offeror either expressly or impliedly intimates in his offer that it will be sufficient to act without giving notice of acceptance, performance is sufficient acceptance without notification.
The court held that an advertisement is considered to be an offer when it specifies the quantity of persons who are eligible to accept its terms. If such an advertisement requires performance, the offeree is not required to give notice of his performance.
The court addressed the issue of whether the ad was intended to be a promise or whether it was merely “puffing”. The court pointed to Carbolic Smoke Ball’s claim in the advertisement that it had deposited 1000 pounds with Alliance Bank, which the court decided was intended to demonstrate the company’s sincerity in paying the reward.

Concurring (Bowen)

Notification of acceptance is required under our law. The person who makes the offer may dispense with notice to himself if he thinks it desirable to do so. He may expressly or impliedly create any method of acceptance for his offer. An offeree need only follow the method indicated for acceptance. The requirement of notice of acceptance to the offeror must be determined by an objective reasonable person standard.
In the advertisement case, it seems to me that an inference may be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition notification is dispensed with. We must look to the essence of the transaction and what the offeror is bargaining for under the circumstances. Under these facts, the defendant impliedly indicated that it did not require notification of acceptance of the offer.

Disposition

Appeal dismissed.

  Reference

http://www.leeds.ac.uk/law/hamlyn/carlill.htm

http://www.lawnix.com/cases/carlill-carbolic-smoke-ball.html 

Salomon v A Salomon & Co Ltd

   

Salomon v A Salomon & Co Ltd

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay up outstanding debts.

Facts

 

Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. His sons wanted to become business partners, so he turned the business into a limited company. The company purchased Salomon's business for £39,000, which was an excessive price for its value. His wife and five eldest children became subscribers and two eldest sons also directors (but as nominee for Salomon, making it a one-man business). Mr Salomon took 20,001 of the company's 20,007 shares. Transfer of the business took place on June 1, 1892. The company also gave Mr Salomon £10,000 in debentures (i.e., Salomon gave the company a £10,000 loan, secured by a floating charge over the assets of the company). On the security of his debentures, Mr Salomon received an advance of £5,000 from Edmund Broderip.

Soon after Mr Salomon incorporated his business a decline in boot sales, exacerbated by a series of strikes which led the Government, Salomon's main customer, to split its contracts among more firms to avoid the risk of its few suppliers being crippled by strikes. Salomon's business failed, defaulting on its interest payments on the debentures (half held by Broderip). Broderip sued to enforce his security in October 1893. The company was put into liquidation. Broderip was repaid his £5,000. This left £1,055 company assets remaining, of which Salomon claimed under his retained debentures. This would leave nothing for the unsecured creditors, of which £7,773 was owing. When the company failed, the company's liquidator contended that the floating charge should not be honoured, and Salomon should be made responsible for the company's debts. Salomon sued.

Issues

The liquidator, on behalf of the company, counter-claimed wanting the amounts paid to Salomon paid back, and his debentures cancelled. He argued that Salomon had breached his fiduciary duty for selling his business for an excessive price. He also argued the formation of the company in this was fraud against its unsecured creditors.

Judgment

High Court

At first instance, the case entitled Broderip v Salomon^[1] Vaughan Williams J said Mr Broderip's claim was valid. It was undisputed that the 200 shares were fully paid up. He said the company had a right of indemnity against Mr Salomon. He said the signatories of the memorandum were mere dummies, the company was just Mr Salomon in another form, an alias, his agent. Therefore it was entitled to indemnity from the principal. The liquidator amended the counter claim, and an award was made for indemnity.

Court of Appeal

The Court of Appeal^[2] confirmed Vaughan Williams J's decision against Mr Salomon, though on the grounds that Mr. Salomon had abused the privileges of incorporation and limited liability, which Parliament had intended only to confer on "independent bona fide shareholders, who had a mind and will of their own and were not mere puppets". Lindley LJ (an expert on partnership law) held that the company was a trustee for Mr Salomon, and as such was bound to indemnify the company's debts.^[3]

“

Lindley LJ was the leading expert on partnerships and company law. The incorporation of the company cannot be disputed (see s. 18 of the Companies Act 1862). Whether by any proceeding in the nature of a scire facias the Court could set aside the certificate of incorporation is a question which has never been considered, and on which I express no opinion; but, be that as it may, in such an action as this the validity of the certificate cannot be impeached. The company must, therefore, be regarded as a corporation, but as a corporation created for an illegitimate purpose. Moreover, there having always been seven members, although six of them hold only one 1l. share each, Mr. Aron Salomon cannot be reached under s. 48, to which I have already alluded. As the company must be recognised as a corporation, I feel a difficulty in saying that the company did not carry on business as a principal, and that the debts and liabilities contracted in its name are not enforceable against it in its corporate capacity. But it does not follow that the order made by Vaughan Williams J. is wrong. A person may carry on business as a principal and incur debts and liabilities as such, and yet be entitled to be indemnified against those debts and liabilities by the person for whose benefit he carries on the business. The company in this case has been regarded by Vaughan Williams J. as the agent of Aron Salomon. I should rather liken the company to a trustee for him - a trustee improperly brought into existence by him to enable him to do what the statute prohibits. It is manifest that the other members of the company have practically no interest in it, and their names have merely been used by Mr. Aron Salomon to enable him to form a company, and to use its name in order to screen himself from liability.  This view of the case is quite consistent with In re George Newman & Co.[4] In a strict legal sense the business may have to be regarded as the business of the company; but if any jury were asked, Whose business was it? they would say Aron Salomon's, and they would be right, if they meant that the beneficial interest in the business was his. I do not go so far as to say that the creditors of the company could sue him. In my opinion, they can only reach him through the company. Moreover, Mr. Aron Salomon's liability to indemnify the company in this case is, in my view, the legal consequence of the formation of the company in order to attain a result not permitted by law. The liability does not arise simply from the fact that he holds nearly all the shares in the company. A man may do that and yet be under no such liability as Mr. Aron Salomon has come under. His liability rests on the purpose for which he formed the company, on the way he formed it, and on the use which he made of it. There are many small companies which will be quite unaffected by this decision. But there may possibly be some which, like this, are mere devices to enable a man to carry on trade with limited liability, to incur debts in the name of a registered company, and to sweep off the company's assets by means of debentures which he has caused to be issued to himself in order to defeat the claims of those who have been incautious enough to trade with the company without perceiving the trap which he has laid for them. It is idle to say that persons dealing with companies are protected by s. 43 of the Companies Act, 1862, which requires mortgages of limited companies to be registered, and entitles creditors to inspect the register. It is only when a creditor begins to fear he may not be paid that he thinks of looking at the register; and until a person is a creditor he has no right of inspection. As a matter of fact, persons do not ask to see mortgage registers before they deal with limited companies; and this is perfectly well known to every one acquainted with the actual working of the Companies Acts and the habits of business men. Mr. Aron Salomon and his advisers, who were evidently very shrewd people, were fully alive to this circumstance. If the legislature thinks it right to extend the principle of limited liability to sole traders it will no doubt do so, with such safeguards, if any, as it may think necessary. But until the law is changed such attempts as these ought to be defeated whenever they are brought to light They do infinite mischief; they bring into disrepute one of the most useful statutes of modern times, by perverting its legitimate use, and by making it an instrument for cheating honest creditors. Mr. Aron Salomon's scheme is a device to defraud creditors. Lopes LJ and Kay LJ variously described the company as a myth and a fiction and said that the incorporation of the business by Mr Salomon had been a mere scheme to enable him to carry on as before but with limited liability. Huse of Lords

 he House of Lords unanimously overturned this decision, rejecting the arguments from agency and fraud. They held that there was nothing in the Act about whether the subscribers (i.e., the shareholders) should be independent of the majority shareholder. The company was duly constituted in law and it was not the function of judges to read into the statute limitations they themselves considered expedient. Lord Halsbury LC stated that the statute "enacts nothing as to the extent or degree of interest which may be held by each of the seven [shareholders] or as to the proportion of interest or influence possessed by one or the majority over the others." His judgement continued.<sup>[5]

 culled from wikipedia. I am hope it will be of immutable help.</sup>