Legal Case Summary
May and Butcher Ltd v The King [1929] UKHL 2; [1934] 2 KB 17
Contractual certainty – price left for future agreement – arbitration clause – alleged option to purchase
Facts
After the First World War, the Government’s Disposals Board sold surplus goods, including materials used in the construction and equipment of tents. May and Butcher Ltd had dealt with the Board since 1920. Their arrangements contemplated purchases of this “tentage”, with the prices to be agreed as quantities became available.
A letter of 7 January 1922 extended the arrangement to tentage becoming available up to 31 March 1923. The company agreed that its £1,000 deposit should remain as security for performance. The incorporated terms left prices to subsequent agreement and contained a clause submitting disputes arising out of, or referring to, the agreement to arbitration.
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Around that time, Sir Maurice Levy replaced the previous controller. Instead of supplying specifications, he allowed the company to inspect the goods before making offers. The parties could not agree acceptable purchase terms, and the Board declined to deliver further goods under the arrangement. May and Butcher brought proceedings against the Crown and, after losing below, appealed to the House of Lords.
Issues
The company advanced three routes to an enforceable right. First, could a reasonable price be supplied where the parties had failed to agree one? Second, could the arbitration clause be used to fix the price? Third, even without a completed sale contract, did the deposit secure an option or a right to receive offers of future parcels?
Decision
The House of Lords dismissed the appeal on 22 February 1929. Lord Buckmaster, Viscount Dunedin and Lord Warrington of Clyffe agreed that there was no concluded contract for the disputed supplies. The essential price term remained dependent on a further agreement which the parties had not reached. The arbitration and option arguments also failed.
Why a reasonable price could not be substituted
Section 8 of the Sale of Goods Act 1893 allowed a reasonable price where the price was not otherwise determined. But the parties had expressly chosen future agreement as the means of fixing their prices. Lord Warrington explained that imposing a reasonable price would contradict that choice, rather than fill a gap about which they had been silent.
Lord Buckmaster also drew an analogy with section 9, concerning an agreed valuation by a third party which was not made. His point was that the stipulated means of fixing the price mattered. The case did not involve a third party actually appointed to value these goods.
Why arbitration and the deposit did not complete the bargain
The general arbitration clause covered disputes arising from a completed agreement. It did not authorise an arbitrator to create the missing price agreement. Viscount Dunedin distinguished a failure to agree from a dispute under an existing bargain. He recognised that an express arrangement for a specified arbitrator or arbitration mechanism to determine the price could have provided the necessary certainty; these parties had made no such arrangement.
The £1,000 deposit was security for performing the bargain once completed. It was not consideration for an independently enforceable option to buy later parcels on unspecified terms. The company therefore had no separate right to insist on further offers after negotiations failed.
The distinction illustrated
A contract can leave a matter to be determined later through an agreed mechanism. That differs from leaving an essential term dependent on both parties reaching a fresh agreement. Here, neither the reasonable-price rule, the general arbitration clause nor the deposit supplied the agreement on price which the parties themselves had required.
Judgment: May and Butcher Ltd v The King [1929] UKHL 2.
