United Kingdom House of Lords Decisions

Lord Chancellor (Halsbury)—In this case I am of opinion that the judgment of the Court of Appeal was right and ought to be affirmed. I very much doubt whether in dealing with this contract one can get very much light from other cases deciding other questions of contract. I do not think that the question here depends upon how much you can imply, because that part of the contract on which I rely and on which the Court of Appeal relied is that which is express. The circumstances of the case are such that I think that we are entitled to look at the nature of the contract in order to render its language intelligible. It is sufficiently clear that a certain offer was made by a rival association to do what was called “capture” the tobacco trade, and the traders in tobacco were called upon by the two rival associations to make terms with them. One association offered them that for a named period—viz., for four years—they would give one-fifth of the profits and distribute £50,000 as a bonus, upon which the rival company telegraphed to these customers advising them not to sign the Imperial Tobacco Company's agreement, saying that they would receive the appellants' circular in the morning. The circular followed which formed the offer afterwards accepted. The appellants offered a bonus distribution of “our entire net profits and £200,000 a year for the next four years.” How is it possible, in view of that, to talk about there being no bargain in respect of the matter? It appears to me that it is a definite offer, and that the distribution was to be made by the company for the period of four years. The acceptance seems to me to be equally free from doubt. It is to be observed that their acceptance was prepared for the signature of the intended customers by those who themselves made the offer, so that it is their own letter which they got the customer to sign. How does the letter read? “Dear Sirs,—I beg to inform you that I have not signed the agreement with the Imperial Tobacco Company, and in consideration of participating in your bonus distribution of the entire profits on goods sold by you in the United Kingdom and £200,000 per year for the next four years I agree not to sign it or any similar agreement with the Imperial Tobacco Company or any other company containing any condition which would prevent me from buying, displaying, selling, or distributing your goods or the goods of any other manufacturer, and I also undertake to continue to buy, display, and sell your goods,—(Signed) E. Nelson, 100 Queen Street, Cardiff.” It seems to me that when once the bargain was made between the parties, whatever else might happen, there was undoubtedly not an implied, but an express, contract to distribute for four years £200,000. I cannot entertain a doubt that the meaning of the contract was that it was to last for four years. The counter claim is equally good. The customer says:—“I have signed this. I have performed my part of the contract. Perform yours.” It may be that he cannot compel them to carry on their business or prevent them from selling it, as they did. But having done so, they are bound to pay damages consequent upon their putting an end to the agreement which by express bargain was to continue for four years. They are bound to compensate the person claiming his proportionate share of the £200,000 to be annually distributed if they put it out of their power to carry on the business in such a way as to defeat the agreement. Under these circumstances I consider this document without any reference to other documents, because I am very jealous against trying to interpret one contract by another which may be made under different circumstances. Looking at this contract alone, I cannot entertain a doubt that there has been a breach of contract, and therefore I move your Lordships that this appeal be dismissed with costs.

Lord Macnaghten—I am of the same opinion. The circumstances of the case are so remarkable that at first I had a doubt whether the contract could be construed as a serious business document at all; there appeared to be such an element of speculation about it. But, upon further consideration, I am convinced that it was intended as a serious offer, and was taken seriously by those who responded to it.

Lord James of Hereford and Lord Lindley concurred.