Company A v Company B
(House of Lords, 5 July 1932)

Factual and Procedural Background

Company A, a domestic timber-importing business, claimed damages from Company B for breach of an alleged option contract for the sale of 100,000 standards of soft-wood timber for the 1931 season. The option was said to arise under Clause 9 of a written “Heads of Agreement” dated 21 May 1930, supplemented by Company A’s notice of 22 December 1930 purporting to exercise the option.

Company A issued its writ on 30 January 1931. At trial in the Commercial List before Judge Roche and a special jury, the sole factual issue was whether the entire agreement had been cancelled in July 1930. The jury rejected the cancellation defence. Damages were later assessed by Judge MacKinnon at £30,000.

Company B appealed. The Court of Appeal (Judge Scrutton, Judge Greer and Judge Romer) held that Clause 9 was too uncertain to amount to a contract and that Company B was entitled to raise that point, setting aside the judgment and entering judgment for Company B.

Company A appealed to the House of Lords. After hearings on 3, 5 and 6 May 1932, the House delivered its decision on 5 July 1932.

Legal Issues Presented

1. Whether Clause 9 of the 21 May 1930 document, read with the letter of 22 December 1930, created a binding and enforceable contract for the sale of 100,000 standards of timber, or was merely an unenforceable “agreement to agree.”
2. If the contract was valid, whether Company B could nonetheless raise the “no-contract” defence at the damages stage despite not pleading it earlier.
3. Whether the assessment of £30,000 in damages by Judge MacKinnon was made on a correct legal basis.

Arguments of the Parties

Appellant's Arguments

• Clause 9, construed in its commercial setting and alongside earlier clauses, supplied a sufficiently certain description of the goods (“soft-wood goods of fair specification”) and incorporated shipment and pricing machinery from the earlier clauses, rendering the contract complete.
• The phrase “whatever the conditions are” referred to external market circumstances, not to further contractual negotiations; once the option was exercised, a contract crystallised.
• Even if detail were missing, English law would imply reasonable terms so that id certum est quod certum reddi potest.
• The damages calculation was sound; any evidential gaps stemmed from Company B’s failure to disclose its 1931 stock data.

Respondent's Arguments

• Clause 9 lacked an adequate description of the goods and left kinds, qualities, sizes, shipment dates and ports entirely open.
• The wording contemplated a future agreement (“option of entering into a contract … such contract to stipulate”), so there was no concluded bargain.
• The absence of shipment terms rendered the alleged contract void for uncertainty.
• If a contract existed, only nominal damages were recoverable because comparable reductions could have been obtained elsewhere and the evidence of loss was insufficient.

Table of Precedents Cited

Court's Reasoning and Analysis

Delivering the leading speech, Judge Tomlin observed that courts must, so far as consistent with principle, uphold commercial bargains rather than destroy them.

1. Description of Goods. Implying the words “soft-wood goods of fair specification” into Clause 9, the House held that “fair specification” meant a distribution of kinds, qualities and sizes in reasonable proportion to Company B’s 1931 output—an objective standard the court could ascertain.
2. No Agreement to Agree. The phrase “option of entering into a contract” was treated as informal language signifying that, once exercised, the option matured into a complete contract; “whatever the conditions are” referred to external market conditions, not to future negotiation.
3. Shipment Terms. Clause 6 (shipping dates according to readiness of goods) was read into Clause 9, supplying delivery machinery. Alternatively, section 29(2) of the Sale of Goods Act 1893 would imply reasonable delivery times.
4. Price Mechanism. Clause 9 fixed price at 5 % below the official list “at any time ruling during 1931,” a sufficiently definite mechanism given industry practice of issuing such lists.
5. Pleading Point. Although procedurally open to Company B, the “no-contract” argument failed on the merits; the House nonetheless noted that proper amendments to pleadings should ordinarily be insisted upon.
6. Damages. Judge MacKinnon’s £30,000 award was upheld; evidential deficiencies resulted from Company B’s own non-disclosure, and the judge had applied appropriate discounts for market contingencies.

Holding and Implications

ORDER: The appeal was ALLOWED; the order of the Court of Appeal was REVERSED and the judgment of Judge MacKinnon for £30,000 with costs was RESTORED.

Company B was ordered to pay Company A’s costs in the Court of Appeal and in the House of Lords. The cause was remitted to the King’s Bench Division for any further acts consistent with the judgment.

The decision reinforces the principle that English courts will strive to uphold commercial bargains, implying reasonable terms where necessary, and confirms that an option provision can constitute a complete contract once exercised, even when some details are left to be worked out in the ordinary course of trade.