Felthouse v. Bindley

Author: Anisha Tak, Rajiv Gandhi National University of Law, Punjab

Court– Court of Common Pleas

Case Number– 35 of 1862

Appellant– Paul Felthouse

Respondent– William Bindley

Citation– [1862] EWHC CP J35

Judges– Honourable Willes J., Byles J. and Keating J.

Introduction

Felthouse v. Bindley is a landmark judgment that dealt with the question of acceptance under the English Contract Law. The judgment highlighted the essential components of acceptance made to an offer. It was upheld that the communication of the acceptance to an offer is required to be made to the offeror himself. The intention to accept the offer in the mind of the offeree is not equivalent to an acceptance. Communication of an acceptance to a third person is of no benefit. The offeror cannot bind the offeree contractually if he does not reply to the offer within the time specified by the offeror thus, treating his silence equivalent to an acceptance. The rule that the offeror cannot impose a charge on the offeree to deny the offer was also supported. This judgment holds great significance in the Indian Contract Act as it is employed to study the concept of acceptance under section 2(b) of the Indian Contract Act, 1872 in a detailed manner.

Facts

A verbal agreement was made between John Felthouse and his uncle Paul Felthouse that he would sell his horse to his uncle. However, there was some misunderstanding between them about the price of the horse. John Felthouse wrote a letter to his uncle on January 1, 1861, stating that the price he put for the horse was 30 guineas while the price considered by his uncle was £ 30. On January 2, 1861, Paul Felthouse replied that though John Felthouse quoted the price as 30 guineas, he did not offer him more than £ 30. So, to solve the mistake, he would offer half of the difference between their misunderstood prices in addition to £ 30. Thus, he stated in the letter that he would offer him £ 30 15s. for the horse and if he would not get any reply for the same then, he would consider that John Felthouse has accepted to sell the horse at £ 30 15s.

John Felthouse did not send any reply to this letter. He later asked his auctioneer, William Bindley to sell his farming stock and explicitly instructed him not to sell the horse because it was already sold to his uncle. However, Bindley claimed to have mistakenly sold the horse on February 25, 1861, with the other stock. He wrote to Paul Felthouse that he was given the instructions that the horse must not be sold but he forgot about the same. On February 27, 1861, Felthouse wrote to his uncle that he directed his auctioneer for not selling the horse because he reserved the same for his uncle. Later, Paul Felthouse brought an action against Bindley for the conversion of the horse.

Issues

The issues raised here are -:

a. What will amount to an acceptance that will form a valid and binding contract?

b. What is the value of an acceptance that is not communicated to the offeror himself or is communicated to a third person?

c. Can silence by the offeree towards the proposal be regarded as a valid acceptance when the offeror specifies to consider the same as an acceptance?

d. Can an offeror inflict a burden on the offeree for the refusal of the stated offer?

Laws Involved

The principle of acceptance to an offer that can give rise to a valid and binding contract is involved in the present case. Under English Contract Law, an offer is considered to be accepted when the offeree communicates his assent to the offeror. The acceptance is required to be signified by the offeree and to the one who made the offer. The acceptance communicated to a third person will not qualify as an acceptance of the proposal. Even if the offeree has an intention to accept the proposal but has not communicated the same to the offeror then it would not constitute an acceptance. Another essential element of acceptance is that the offeror cannot inflict a burden on the offeree that he is required to refuse the proposal or else, it would be considered equivalent to the acceptance. The offeror cannot impose an obligation on the offeree that his silence to the offer would account for acceptance of the offer.

Judgment

The court held that initially, there was no clear agreement formed between John Felthouse and Paul Felthouse. There was a misunderstanding between both parties about the price of the horse in question. Paul Felthouse wrote to his nephew that he was ready to offer £30 15s. to resolve the misunderstanding. No reply was sent for the same by his nephew. Bargain of the horse could not be considered to be completed. Felthouse did not communicate his acceptance of the offer to his uncle though he intended to accept the same. No action was taken by him which could bind him under the contract.

The offer remained open till February 25, 1861, and nothing could be established in the present case which could indicate that the interest in the property was vested into the plaintiff till the horse was sold. The subsequent acceptance after the horse was sold by John Felthouse cannot be considered admissible in the court. The letter of the auctioneer to the plaintiff does not have any value for holding the defendant liable. The acceptance to the offer was not made and the horse and the rights associated with it were not passed to the plaintiff. Therefore, the horse was not the property of the plaintiff at the time of its sale and he cannot claim any rights on it. Thus, the plaintiff cannot recover anything from the defendant and the action for conversion taken by him against the defendant is not maintainable.

Analysis of the Judgment

Honourable Court of Common Pleas upheld the view that acceptance is an essential component for the formation of a valid and binding contract. The letter of Felthouse in which he offered £30 15s. and imposed a duty on his nephew to reply to the offer which was never answered by him till the horse was sold. The intention of the nephew to sell the horse to his uncle at the offered price cannot constitute acceptance till the same is communicated to him. The communication of the acceptance of the offer to the auctioneer is ineffective as it is required that the acceptance must be communicated to the offeror himself for the formation of a contract.

The court referred to the judgment of Dobell v. Hutchinson and stated that it was not necessary to accept the offer in writing. However, no acceptance of the offer was made and the horse was also not delivered which was capable of forming a contract. The horse was sold on February 25, 1861, and nothing was there to show that a binding contract was formed between Felthouse and his nephew. Since no assent was signified by Felthouse to his uncle, the fact that the plaintiff inflicted a burden on his nephew to reply to the letter or else his silence would be considered equivalent to acceptance has no merit. The plaintiff had no such right to impose a charge on John Felthouse to reply to the letter to show his acceptance or repudiation of the offer. The bargain of the sale of the horse was not completed therefore, the plaintiff was not in a position to complain against the sale of the horse.

The letter by nephew on February 27, 1861, to his uncle was important as it signified that he intended to accept the offer according to the terms and conditions of his uncle but the horse was already sold on February 25, 1861, and till that time the nephew was not bound under any contract because no acceptance was made. Thus, this letter to the plaintiff after the sale of the horse could not be held admissible as a piece of evidence against the defendant and did not confer any right or authority to the plaintiff on the horse. Nothing is there which could support that the plaintiff was having any right on the property when it was sold. Since he was not having rights vested into the property, his action against the defendant for conversion could not be maintained.

Therefore, the court validated that an acceptance of an offer must be communicated to the offeree. The intention to accept or the communication of acceptance to a third person will not amount to an acceptance of the proposal. The principle that the offeror does not have a right to impose an obligation on the offeree to repudiate the offer was also upheld. The court also supported that the offeror cannot make a stipulation that the silence towards the offer by the offeree would be accounted as an acceptance of the proposal if no reply to the offer is received within the time specified by him.