Hillas & Co. were merchants purchasing timber from Arcos. They reached an agreement to purchase 22,000 standards of timber, under the specific condition that they should also have the option of entering into a contract with Arcos to purchase 100,000 standards the following year with a 5% reduction on price. Arcos refused to sell them the 100,000 standards the following year. Hillas was successful at trial, which Arcos appealed.
- Was the term negotiating the future sale a condition of the contract?
- Can you make a contract to enter into another contract?
Appeal allowed; no contract existed for the following year.
Scrutton held that the text of the agreement was deeply indeterminate; the clause for the purchase of the 100,000 standards had no specification of the timber (just "fair specification") and that without this it is hard to find a contract, or even if a contract existed, how the court would be able to assess damages. While recognizing that this sort of contract was common business practice, he felt bound by the principle in May & Butcher Ltd. v R, and thus the contract was unenforceable. He felt this was a reflection of 19th century contract law and that more flexibility was needed in the modern era.
Greer, "with great regret", came to the same conclusion. The role of contract law is not to enforce trustworthiness - thus he felt the problem was not with the law, but with the people making the contracts.
- Upheld the rule in May & Butcher Ltd. v R.
- It is not the role of the courts is to intervene and create a contract where agreements exist.
This case was appealed to the House of Lords.