Pickfords Ltd v Celestica Ltd

LADY JUSTICE ARDEN: Lord Justice Dyson will give the first judgment.

LORD JUSTICE DYSON: It is as if the facts of this case have been devised for an examination question on the law of contract for first year law students. They raise some basic questions in relation to offer and acceptance in the law of formation of contract. The appeal turns on the meaning and effect of three documents.

The claimant carries on business in the provision of business moving project and move management services. The defendant is an IT company and, at all times material to these proceedings, has carried on business from premises at Bradwell Wood, Stoke-on-Trent, Staffordshire. It wished to move some or all of its undertaking from Bradwell Wood to Telford in Shropshire.

The first of the three documents is a fax dated 13 September 2001 from Mr Dawson, the claimant's managing director, to Mr Spencer, a member of the defendant's engineering team. It reads as follows:

There followed provisions with regard to insurance, the charges for crate deliveries, crate collections and crate hire. It said:

During the following fortnight the claimant carried out a survey over a three-day period. This was the prelude to the claimant's document entitled "Proposal to Undertake the Move Managed Relocation" which was sent to the defendant on 27 September 2001. It is the second of the three documents. It is far more detailed than the fax of 13 September. The purpose of the survey, as explained by the proposal document, was:

To achieve that purpose, a survey was carried out to establish the requirements of the defendant, the access points to the building, the requirement for specialist packaging materials, any protective measures that might be necessary, any specialist IT equipment requirements, any security issues and any other details which might affect the move programme.

The following parts of this document are material. On the first page it states, inter alia:

The claimant's case was, and still is, that there was a contract and that it was contained in the proposal of the 27 September 2001 and the fax of 15 October 2001. The claimant carried out the work and provided the relocation services between 1 September 2001 and 29 January 2002. The claimant claims that it was entitled to the fixed sum of £98,760 plus VAT for this work. It is not in dispute that of this sum only £33,000 plus VAT has been paid.

The defendant raised a number of issues by its amended defence. Its case as to the contract was that it was contained in the faxes of 13 September and 15 October 2001 so that the claimant was not entitled to the fixed sum referred to in the proposal document of 27 September, but only to a sum calculated in accordance with the charging rates set out in the fax of 13 September 2001. On behalf of the claimant, Mr Cogley accepts that both the document of the 13th and of 27 September 2001 were offers that were capable of being accepted so as to give rise to a contract. I shall refer to the fax of 13 September as "the first offer" and the proposal of 27 September as "the second offer".

Before the recorder it was submitted on behalf of the claimant that the first offer was not capable of being accepted. The recorder rejected that submission. As I have said, that finding is not challenged on this appeal. The next submission dealt with by the recorder was that the second offer revoked the first offer. The recorder rejected that submission too, although he did not give any reasons for so doing. Finally, he turned to the question whether the fax of 15 October was an acceptance of the first or the second offer. His conclusions on that issue were as follows:

On behalf of the claimant, it is submitted by Mr Cogley that the recorder should have held that the second offer revoked the first offer. He submits that the terms of the second offer were clearly inconsistent with those of the first offer. In particular it contained details and provided a certainty which was lacking in the earlier document. It related to the same subject matter as the first offer, but was seeking to put an entirely different regime on the parties in respect of it. It sought to impose different contractual terms, in particular the claimant's standard terms and conditions of business which had not been incorporated in the first offer. Accordingly, Mr Cogley submits, the second offer superseded the first offer.

Mr Cogley next submits that the recorder was wrong to construe the fax of 15 October 2001 as an acceptance of the first offer. Properly and objectively construed, he submits, it was an acceptance of the second offer. He places particular emphasis on the fact that the fax was headed "CONFIRMATION". This, he said, reflected the passage in the second offer to which I have already referred. There was no corresponding mention of "confirmation" in the first offer. He explained the reference to the first offer in the fax of 15 October as being no more than a reference to the document that started the chain of negotiations.

I start therefore with the question whether the first offer was revoked. The fax of 13 September 2001 was an offer to do the work of relocation at a rate of £890 excluding VAT per vehicle load, plus various extras (for example for insurance and hire of crates). The document stated that it was estimated that the work required 96 vehicle loads which was the basis of the estimated budget figure of £100,000. But it did not offer to do the work for £100,000. It was not a fixed price offer: it was an offer to do the work for a fixed price per vehicle load.

The proposal of 27 September 2001 contained a great deal more detail than the first offer. One essential difference between the two offers was that the second was an offer to do the work for a fixed price of £98,760. But there were many other differences between the two documents. The second offer set out in far more detail than the first precisely what services were being offered, what was expected of the client (the defendant) and provisions with regard to health and safety. It also incorporated the claimant's standard terms and conditions, which the first offer did not.

It is trite law that an offer may be withdrawn at any time before it is accepted. The first offer had not been accepted before the second offer was made. The only fact relied on by the claimant as evidence of the withdrawal of the first offer is the sending of the second offer. At one stage I thought that this was not enough to constitute a revocation of the first offer. An offer may be withdrawn in a number of ways. The most obvious is an express withdrawal; that did not occur here. Another is where the offeror acts in a way that is inconsistent with the continuing existence of the offer and the offeree knows of that fact. Thus if A offers to sell goods to B, and before B accepts the offer A sells to C and the fact of the sale is communicated to B, then A's offer to sell to B is withdrawn.

What is the position where A makes an offer to B and then makes a later offer to B? By making the later offer, does A withdraw the earlier one? That is the first question that arises in this case. No authority has been cited to us in which this question has been considered. In my judgment it must depend on the nature of the two offers and the circumstances in which they are made. Take a simple case where A asks B, a decorator, to quote for the painting of his house. Suppose, further, that B quotes A a figure of £200 per day, plus materials. Before deciding whether to instruct B to proceed, A decides to ask B to provide a fixed price quotation. B provides a fixed price quotation of £1500. In those circumstances B's later quotation does not, without more, amount to a withdrawal of the first offer. It is produced at the request of A so that A can decide which of the two quotations to accept. That is the basis upon which the second quotation is sought and provided.

In such a case, in my judgment, something more than the mere submission of the second quotation is required to indicate that A has withdrawn the first offer. The two offers are inconsistent with each other only in the sense that they cannot both be accepted. But the question is not whether both offers can be accepted, but whether the making of the second offer clearly indicates an intention on the part of the offeror to withdraw the first offer.

That simple case is, however, very different from what happened here. It is true that there are no findings of fact as to the circumstances which gave rise to the second offer. The substantial differences between the two offers in this case went far beyond a mere difference in price which could have been explained as consistent with two alternative offers both being on the table for the defendant to choose which to accept. In the absence of any findings of fact as to the circumstances which gave rise to the second offer, I would hold that the second offer did supersede and revoke the first offer.

But, regardless of whether the first offer was revoked by the second, the question remains which offer was accepted by the fax of 15 October 2001. This can only be resolved by examining the three documents objectively and applying the usual rules of construction.

In my view, the answer is clear. By its fax of 15 October 2001, the defendant accepted the first and not the second offer. The fax of 15 October purported to accept the first offer. The "Quotation" raised by the order was the document expressly referred to in the body of the fax; that is the claimant's fax of 13 September 2001. There is no reference in the fax of 15 October to the second offer.

I do not regard the use of the word "CONFIRMATION" in the fax as a reference to the provision in the second offer which refers to "confirmation" of the contract agreed. Mr Cogley puts far too much weight on the presence of this word in the fax. It is fanciful to suppose that the word was consciously and deliberately used to reflect the passage in the middle of the second offer to which I have already referred. "Confirmation" is an ordinary word which is often used when an order is placed in acceptance of an offer. In my judgment it has no particular significance. Similarly, the use of the word "quotation" in the fax of 15 October does not clearly point to the words in the second offer:

The use of the words "CONFIRMATION" and "quotation" are entirely consistent with the fax being what it purported to be, namely, an acceptance of the first offer. Moreover, I cannot accept Mr Cogley's submission that acceptance of the first offer is explicable as being a reference to the first document in the series of negotiations. I do not consider that the reference to the first offer was made for that nugatory purpose.

The other point which it seems to me shows clearly that the fax of 15 October 2001 was an acceptance of the first offer, is the inclusion of the words:

The second offer was a fixed price offer and the defendant must reasonably have understood that. The reference to £100,000 is clearly a reference back to the budget estimate of £100,000 contained in the first offer. The defendant wanted to be assured that the budget estimate figure was in fact the ceiling.

In my judgment, therefore, by the fax of 15 October 2001 the defendant did not accept the second offer but did purport to accept the first offer. Since the first offer had been revoked, the purported acceptance could not give rise to a contract. It was in law a counter-offer to accept the services offered by the claimant on the terms of the first offer, subject to the cap of £100,000. Since the work was carried out, this counter offer must have been accepted by the claimant's conduct in carrying out the work.

I recognise that this analysis is different from that advanced by the parties, but the issue raised is one of interpretation and the court must decide that issue correctly regardless of the position taken by the parties. I should add that, even if the first offer had not been revoked, the acceptance would have been a counter-offer since the introduction of the words "not to exceed 100K" added a material new term. That counter-offer would, for the same reasons as I have already given, have been accepted by the claimant's conduct in proceeding to carry out the work.

All routes, therefore, lead to the same conclusion that there was a contract here and that it incorporated the terms of the first and not the second offer with the additional term referred to in the acceptance of 15 October 2001.

I would, therefore, dismiss this appeal.

LADY JUSTICE ARDEN: I agree. I have no doubt that on the facts of this case the second proposal of 27 September 2001 impliedly revoked the earlier offer of 13 September 2001 by fax.

There is one additional point which I would like to mention. In paragraph 9 of the judgment the judge says:

The position on the evidence was that Mr Jones, an employee of the defendant who had the responsibility for giving instructions for the acceptance of the estimates received from Pickfords, did not personally receive the second proposal of 27 September 2001. It may be that this is one of the matter which led the judge to his conclusion in paragraph 9 of his judgment. In so far as the judge held that withdrawal of the offer made by the fax dated 13 September 2001 had not been effectively communicated, I prefer the appellant's submission that there was no requirement in law for the withdrawal of an offer to be communicated to Mr Jones. The revocation of an offer must be communicated to the offeree, but where the offeree is an organisation, it is sufficient if the organisation receives notice of the withdrawal: see generally Chitty on Contracts Volume 1 28 ed, 1999, para 2-083. In this case there is no question but that it did so.

The question of precisely when an organisation receives notice of withdrawal in the case of a notice sent by the post does not arise and has not been argued. Therefore I need not express a view thereon.

Accordingly, I, too, would dismiss the appeal.