Scottish Court of Session Decisions

At advising on 27th January 1949,—

LORD PRESIDENT (Cooper).—The pursuers and the defenders were respectively tenants of two shops at 66 and 66A Renfield Street, Glasgow, both of which were the property of Wypers (Glasgow), Limited. In February 1947 Wypers (Glasgow), Limited, were desirous of selling to the defenders. Before the sale was effected an arrangement was negotiated between the pursuers and the defenders that, in the event of the transaction going through, the pursuers would buy 66 Renfield Street from the defenders. On 14th February a firm of solicitors on behalf of the pursuers addressed to a director of the defenders a holograph offer, No. 9/1 of process, confirming that, in the event of the defenders purchasing the two shops for £16,000, the pursuers would purchase from them No. 66 Renfield Street for £7500, this shop to bear a rateable proportion of the burdens affecting the two shops, and the term of entry to be Whitsunday 1947, when the price would be payable. On the following day the defenders wrote to the solicitors the letter No. 9/2 of process, which is neither holograph nor tested, echoing the language of the pursuers' offer and containing these words:—

"We accept your offer … to purchase, subject to contract, the shop … at a price of £7500."

They added that they were having a plan prepared and would advise their solicitors. On 20th February the defenders intimated by telephone to the pursuers' solicitors that Wypers (Glasgow), Limited, had accepted the offer of £16,000 for the two shops, that the missives had been forwarded to the defenders' solicitors so that formal missives giving effect to the bargain between the pursuers and the defenders might be prepared, and that architects had been instructed to prepare the necessary plans. The formal offer to sell by Wypers (Glasgow), Limited, was embodied in detailed missives dated 24th March, and was accepted on 25th March. On the same day the defenders' solicitors wrote to the pursuers' solicitors intimating that the defenders did not intend to proceed with the "suggested" sale of 66 Renfield Street to the pursuers, who have now brought an action for specific implement of the contract contained in the letters Nos. 9/1 and 9/2 of process.

The learned Sheriff-substitute has held that these letters contained a completed bargain, albeit an imperfectly authenticated one, and has allowed a proof on rei interventus. It was faintly maintained for the defenders and appellants that the averments of rei interventus were irrelevant, but, so far as that aspect of the case is concerned, I have no doubt that inquiry would be necessary. The real issue, and it is not an easy one, is whether the letters disclose a concluded agreement, and what effect is to be given to the words "subject to contract."

We were referred to a large number of English decisions dealing with sales and other contracts expressed to have been made "subject to contract," "subject to formal contract," or in other equivalent terms, and our attention was directed to the difficulty which Professor Gloag seemingly felt—Contract, (2nd ed.) p. 44—in reconciling these decisions with Erskine v. Glendinning . I have not derived much assistance from this line of approach. Many of the English decisions belong to the law and practice of vendor and purchaser with which we have no concern. It appears that according to that law and practice the phrases in question have acquired by long usage a technical meaning, approaching in definiteness the meaning attached in mercantile parlance to "c.i.f." or "f.o.b."—Chillingworth v. Esche, at p. 114; Keppel v. Wheeler, at p. 592. That is certainly not true of Scots law and practice; for it is nearly eighty years since such an expression was judicially considered in this Court, and there is no evidence in our conveyancing works or style books to suggest that these formulas are normally employed in Scotland or that they have acquired with us any special meaning or efficacy. Moreover the English decisions do not speak with one voice—Pollock on Contract, (11th ed.) p. 31 ff. Even if it be the case (as the Sheriff-substitute thought) that in England it would now be held that the introduction of the phrase "subject to contract" or one of its variants automatically excludes concluded agreement, I know of no such rule in Scots law. Further, I see no necessary conflict between the trend of the recent English cases and Erskine v. Glendinning . In the latter case an offer to take a lease was accepted "subject to lease drawn out in due form." In holding that there was a concluded bargain Lord President Inglis said with reference to this qualification:

"It did not require the offerer to consent to that, or the acceptor to stipulate for it. The landlord was entitled to require that his tenant should enter into a formal lease whenever asked, embodying the terms of their contract."

In other words, an acceptance cannot be read as subject to a suspensive condition merely because the acceptor puts into words what the law would imply as the method in which an agreement, ex hypothesi complete, would be carried into legal effect. It follows from that ratio not only that Erskine v. Glendinning was, in my humble opinion, rightly decided, but that it is distinguishable and does not, as the Sheriff-substitute suggests, rule the present case.

The only rules of Scots law which it appears to me to be possible to extract from past decisions and general principles are that it is perfectly possible for the parties to an apparent contract to provide that there shall be locus pœnitentiœ until the terms of their agreement have been reduced to a formal contract; but that the bare fact that the parties to a completed agreement stipulate that it shall be embodied in a formal contract does not necessarily import that they are still in the stage of negotiation. In each instance it is a matter of the construction of the correspondence in the light of the facts, proved or averred, on which side of the border line the case lies. I refer in support of these rules to the weighty pronouncements of Lord Wensleydale in Chinnock v. Marchionness of Ely, of Lord Chancellor Cairns in Rossiter v. Miller, at pp. 1137 ff, and of Lord Chancellor Finlay in Gordon's Executors.

Now in this case the so-called contract of sale of 66 Renfield Street was a very unusual one, for at the date when it was made the sellers had not acquired the subject of sale, and could not know with certainty on what terms, if at all, they would be able to acquire it. It was not till five days after the exchange of the letters 9/1 and 9/2 that they intimated by telephone that their offer for the two shops had been accepted; and when they did so they added that their solicitors had been instructed to prepare formal missives to give effect to their bargain with the pursuers, and that architects had been instructed to prepare plans. This lends a good deal of colour to the words "subject to contract" in 9/2 of process. In the missives adjusted a month later with Wypers (Glasgow), Limited, a number of matters are dealt with which did not appear in 9/1 or 9/2—reservation of the basement; a right in common with the proprietors of the basement to one half the width of Renfield Street and the pavement ex adverso the shops; a reservation to the sellers of prismatic lights in the pavement; and the constitution of servitude rights to trade signs above the shops. These are not matters which would be covered by the "usual and necessary clauses" of a disposition of a shop. Against such a background it is not prima facie unlikely that the anticipatory bargain for the subsale of one of the shops should have been treated as only provisional until the full terms of the bargain with the principal seller could be known and until the subcontract could be reduced to formal shape. When in light of these considerations we examine the acceptance No. 9/2, we find (a) that, though it covers adequately the cardinal points of the intended bargain, it is not exhaustive of details; (b) that, though it is sent in reply to a binding holograph offer, it is not itself probative; and (c) that it expressly bears to be conditional—the words "subject to" being suggestive of suspense of commitment. I recognise that grammatically the qualification "subject to contract" is not inserted at the correct place; but, unless the words are to be given no meaning or effect whatever, I can only read them as a qualification of the acceptance.

In these circumstances, though the matter is narrow, I am disposed to think that there was no final assent or concluded agreement on 15th February, and therefore that the appeal succeeds.

LORD CARMONT .—In my opinion there was no contract concluded by the letters passing between the parties to this case in regard to the sale to the pursuers of the shop occupied by them.

The defenders' acceptance of the pursuers' offer was made "subject to contract," which words prima facie qualify the acceptance and operate to prevent the tentative arrangement from being treated as a concluded bargain.

The question before us is a mere question of construction upon which no light is to be derived from decisions as to the interpretation of other documents in different terms. According to our law there must be an absolute and unequivocal acceptance of the offer, in order to make a contract complete. I do not find in any Scottish case ground for thinking that the words "subject to contract" must be read as merely importing a stipulation for a formal document embodying the terms already completely agreed to by the parties. Erskine v. Glendinning dealt with a case in which a landlord accepting an offer for a lease added the words "subject to lease drawn out in due form." This decision does not, in my opinion, help the pursuers in the present case. There seems to me to be a great difference between saying "subject to contract," and subject to your signing the formal document embodying the agreed on and usual terms applicable to the premises. Had the present defenders added the words "subject to your accepting the usual disposition" there would have been colour for the pursuers' application of the decision in Erskine v. Glendinning . But the words used in the present case make the arrangement subject to a "contract," and not merely subject to the usual method of putting a contract into effect.

The English cases regarding the phrase "subject to contract" do not afford much assistance to a Scottish Court. Notwithstanding certain dicta there does not appear to be any definite legal meaning attached to the phrase "subject to contract," but the general trend of the case law seems to favour the contention of the defenders in the present case. Moreover, I find no conflict between Erskine v. Glendinning and the general trend of English authority dealing with the words "subject to contract." The words themselves point to there being in the mind of the negotiator something indicating that it is the "contract," as distinct from a mere formality, that had to be waited for before a completed transaction between the parties came into being.

Taking the case, therefore as a matter of interpretation of the language used by the defenders, the pursuers have failed to present a relevant case to set up the bargain they seek to enforce. The interlocutor of the Sheriff-substitute should therefore be recalled, and the defenders assoilzied.

LORD RUSSELL .—I have had an opportunity of considering the opinion delivered by your Lordship in the chair. I am in full agreement with it, and have nothing to add.

LORD KEITH .—But for the words "subject to contract" there is no doubt that the letters of 14th and 15th February 1947 would have formed complete, although improbative, missives of sale constituting an agreement on which rei interventuscould be founded. The offer contains all the essentials necessary, if accepted, to instruct a sale of heritable property. The subjects are identified. The price and term of entry are stated. A basis is fixed for the allocation of the ground burdens which in this, though not in other cases, was probably necessary. These particulars of offer were accepted in terms, and ordinarily, if the letters were probative or had been followed by rei interventus, this would have been enough to have concluded the bargain. An obligation on the seller to give a valid title and convey the subjects free of incumbrances would have been implied. In cases where circumstances required it, it would, no doubt, be proper to introduce into the missives other stipulations to meet the special circumstances. But to insist on introducing special stipulations after the contract was concluded would be inadmissible and give rise to remedies for breach of contract. And if because of special circumstances a seller found himself unable to implement the missives of sale according to their express or implied obligations, the purchaser would normally have the right to resile and claim damages, unless he was prepared to accept, or could induce the seller to grant, a conveyance with abatement of price.

The present case seems to be a case in which there were such special circumstances as might well have induced the seller to introduce special stipulations into the missives for consideration and acceptance by a prospective purchaser, and this consideration gives special force to the argument that the words "subject to contract" were intended to suspend concluded agreement until some subsequent minute or agreement of sale was adjusted. I should hesitate to say that such words must in all cases be suspensive of agreement. If everything that was normally required by the circumstances had been agreed, I should be slow to hold that a loophole could thus be given to either party to escape from the conclusion that a completed bargain had been made. But in the present case an opposite conclusion can, in my opinion, be supported. These very words are discussed by so eminent an authority as the late Mr Burns, in connexion with missives of sale of heritage (Green's Encyclopædia, vol. xiii, par. 368), and under reference to Scots authority, in terms that show that in the eye of a Scots conveyancer such words cannot safely be regarded as mere surplusage except possibly where the parties take the trouble to adopt the missives as holograph. In the present case only one of the missives has been adopted as holograph, and the one which has not been so adopted is the one that contains the words "subject to contract." This, in my opinion, gives added force to the contention that the words were suspensive of obligation, and, if so, there was no basis on which rei interventus could operate.