Scammell (G.) & Nephew Ltd v Ouston (H. C. & J. G.)

JurisdictionUK Non-devolved
JudgeThe Lord Chancellor,Viscount Maugham,Lord Russell of Killowen,Lord Wright
Judgment Date16 December 1940
Judgment citation (vLex)[1940] UKHL J1216-2
Date16 December 1940
CourtHouse of Lords
G. Scammell and Nephew, Limited.
H. C. and J. G. Ouston.

[1940] UKHL J1216-2

Lord Chancellor

Viscount Maugham

Lord Russell of Killowen

Lord Wright

House of Lords

After hearing Counsel, as well on Thursday the 17th, as on Friday the 18th, Monday the 21st and Wednesday the 23d, days of October last, upon the Petition and Appeal of G. Scammell & Nephew, Limited, whose registered office is at 11 Fashion Street, Spitalfields, London, E.1, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 7th of December 1939, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of H. C. & J. G. Ouston, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 7th day of December 1939, complained of in the said Appeal, be, and the same is hereby, Reversed: And it is further Ordered, That the Judgment of the Honourable Mr. Justice Tucker, of the 27th day of July 1939, except so far as relates to the Defendants' Counterclaim, be, and the same is hereby, Discharged: And it is further Ordered, That the Respondents do pay, or cause to be paid to the said Appellants the Costs incurred by them in the Courts below, except the costs incurred by them in the King's Bench Division in respect of the said Counter-claim, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the King's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

The Lord Chancellor

My Lords,


During much of the argument I remained unconvinced that the result reached in the Courts below (various as is the reasoning by which the different judges reached that result) could not be sustained by taking the view that this was a contract for the sale and purchase of a motor-car, subject to the condition that the contract ceased to be binding if the finance for the purchase could not be provided for the Respondents within a reasonable time, and in a reasonable manner, by the method of hire-purchase through a third party. If this view of the bargain were justified, then the Appellants wrongfully repudiated their prospective obligations out and out, without waiting to see whether the condition was or was not complied with; in that situation the Respondents could sue for damages for anticipatory breach without the necessity of the condition being fulfilled. Frost v. Knight, L.R. 7 Ex. 114, where the engagement to marry was conditional on the defendant's father first dying, and where the repudiation of the promise occurred in the father's lifetime, is a familiar example of the principle which I should have been glad to apply.


But on further reflection, and in the light of the opinions prepared by some of Your Lordships which I have had the advantage of reading, I do not think this view is tenable. Apart from the objection that if the contract is treated as a contract of sale in the terms suggested above, there is no signature by the Appellants, as the party to be charged, accepting the condition, it appears to me that the crucial sentence "This order is given on the understanding that the balance of purchase price can be had on hire purchase terms over a period of two years" is so vaguely expressed that it cannot, standing by itself, be given a definite meaning—that is to say, it requires further agreement to be reached between the parties before there would be a complete consensus ad idem. If so, there was no contract and therefore no breach.


I move that the Appeal be allowed.

Viscount Maugham

My Lords,


I have had the advantage of reading the opinion of my noble and learned friend Lord Russell of Killowen. I entirely agree with it and with his statement of the relevant facts. No less however than four Judges have come to a different conclusion, and they think that the Respondents have succeeded in establishing a contract in this case. I should always be slow to differ from views of those for whom I entertain a very genuine respect, if I could entertain any real doubt about the matter. I am constrained therefore to add some remarks of my own to explain why I am led to an opinon which coincides with that of my noble friend.


It is a regrettable fact that there are few, if any, topics on which there seems to be a greater difference of judicial opinion than those which relate to the question whether as the result of informal letters or like documents a binding contract has been arrived at. Many well-known instances are to be found in the books, the last being that of Hillas & Co., Ltd., v. Arcos, Ltd. (1932), 147 L.T. 503. The reason for these different conclusions is that laymen unassisted by persons with a legal training are not always accustomed to use words or phrases with a precise or definite meaning. In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the Court is very willing, if satisfied that the parties thought that they made a binding contract, to imply terms, and in particular terms as to the method of carrying out the contract, which it would be impossible to supply in other kinds of contract. (See Hillas & Co., v. Arcos, Ltd., supra, at pp. 511, 512, 514.)


My Lords, it is beyond dispute that if an alleged contract is partly verbal and partly in writing it is necessary to take the whole of the negotiations into consideration for the purpose of seeing whether the parties are truly agreed on all material points, for if they are not there is no binding contract. Nor is it right to construe a letter or other document forming part of the negotiations in such a case without regard to the verbal statements which also form a part of them. To construe the language of such letter, so to speak, in vacuo might easily result in giving to the words of it a meaning which as used by the writer, in the circumstances of the case, he did not intend the words to bear or one which the recipient of the letter did not attribute to them. Accordingly the words in the letter, "This order is given on the understanding that the balance of purchase price can be had on hire purchase terms over a period of two years," must be read together with the parol evidence of Mr. J. G. Ouston in order to give those words their true meaning. So read I cannot myself doubt that they are not an attempt to impose a new condition, whether precedent or subsequent, but are merely a reminder of the common intention of the parties from the start, though perhaps—and even of that I am not certain—the reference to the period of two years was something which had not previously been agreed.


We come then to the question as to the effect of the (so-called) purchase being on "hire-purchase terms," and here we are confronted with a strange and contusing circumstance. The term "hire-purchase" for a good many years past has been understood to mean a contract of hire by the owner of a chattel conferring on the hirer an option to purchase on the performance of certain conditions ( Helby v. Matthews, 1895 A.C. 471). There is in these contracts—and this is from a business standpoint a most important matter—no agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893; there is only an option, and the hirer can confer on a purchaser from him no better title than he himself has, except in the case of sale in market overt. It is inaccurate and misleading to add to an order for goods, as if given by a purchaser, a clause that hire-purchase terms are to apply, without something to explain the apparent contradiction. Moreover a hire-purchase agreement may assume many forms and some of the variations in those forms are of the most important character, e.g. those which relate to termination of the agreement, warranty of fitness, duties as to repair, interest, and so forth.


Bearing these facts in mind what do the words as to "hire-purchase terms" mean in the present case? They may indicate that the hire-purchase agreement was to be granted by the Appellants or on the other hand by some finance company acting in collaboration with the Appellants; they may contemplate that the Appellants were to receive by instalments a sum of £168 spread over a period of two years upon delivering the new van and receiving the old car, or on the other hand that the Appellants were to receive from a third party a lump sum of £168 and that the third party, presumably a finance company, was to receive from the Respondents a larger sum than £168 to include interest and profit spread over a period of two years. Moreover nothing is said (except as to the two years period) as to the terms of the hire-purchase agreement, for instance, as to the interest payable, and as to the rights of the letter whoever he may be in the event of default...

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228 cases
5 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2011, December 2011
    • 1 December 2011
    ...As argued by counsel, the starting point is that stated by the House of Lords in G Scammell and Nephew Limited v H C and J G OustonELR[1941] AC 251, to the effect that it is only where the words of the contract failed to evince any definite meaning on which the court could safely act, that ......
  • Certainty of Terms
    • Canada
    • Irwin Books The Law of Contracts. Third Edition Formation
    • 4 August 2020 undetermined matter. In all such cases, the parties may intend to enter into binding contractual 1 Scammell and Nephew Ltd v Ouston , [1941] AC 251 [ Scammell and Nephew ]. 97 THE LAW OF CONTR ACTS 98 arrangements and believe that they have successfully done so. Rigid application of the ......
    • Singapore
    • Singapore Academy of Law Journal No. 2008, December 2008
    • 1 December 2008
    ...and of applying it … so long as the language used by the parties, to use Lord Wright’s words in Scammell (G) and Nephew Ltd v Ouston[1941] AC 251 is not ‘so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contra......
  • Certainty of Terms
    • Canada
    • Irwin Books Archive The Law of Contracts. Second Edition Formation
    • 29 August 2012
    ...will apply to an undetermined matter. In all such cases, the parties may intend to en-1 Scammell and Nephew Ltd. v. Ouston , [1941] A.C. 251 [ Scammell and Nephew ]. 92 Certainty of Terms 93 ter into binding contractual arrangements and believe that they have successfully done so. Rigid app......
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