May & Butcher Ltd v R [1934]
Court: House of Lords
Facts: May & Butcher Ltd entered into an agreement with the Disposal Board to purchase surplus tentage from World War I. The contract stipulated that the price for the tentage would be agreed upon from time to time as the tentage became available. Additionally, any disputes were to be resolved through arbitration according to the Arbitration Act 1889. When no price could be agreed upon, the Disposal Board notified May & Butcher Ltd that it was no longer bound by the contract. May & Butcher Ltd argued that a reasonable price could be implied under Section 8 of the Sale of Goods Act 1893 or determined by arbitration.
Issue: Whether a valid contract existed despite the lack of a fixed price and whether a reasonable price could be implied or determined by arbitration.
Held: The House of Lords held that no contract existed between the parties due to the absence of an agreed-upon price. Lord Buckmaster emphasized that an agreement to agree on a future price is too uncertain to form a binding contract. Section 8 of the Sale of Goods Act 1893 did not apply, as the agreement specified the method of determining the price but failed to finalize it. The arbitration clause was also inapplicable, as there was no contract to arbitrate.
Key Judicial Statement: Lord Buckmaster: An agreement that leaves a critical term, such as the price, undetermined cannot constitute a valid contract. It is not permissible to have an agreement to agree on such a vital matter in the future. Section 8 of the Sale of Goods Act does not apply where the agreement addresses the manner of price determination but fails to fix it. The arbitration clause cannot apply because there was no initial agreement.
💡 Leveluplaw: case highlights that for a contract to be valid, essential terms such as price must be agreed upon. An agreement to agree on price in the future is too uncertain to form a binding contract. This principle underscores the importance of certainty in contract formation, although modern statutes like Section 8(2) of the Sale of Goods Act 1979 and Section 15 of the Supply of Goods Act 1982 now provide exceptions.