May & Butcher wanted to buy surplus tentage from the Disposals Board. In June of 1921, the Board defined terms of agreement:
- the Board agrees to sell (and May & Butcher agree to purchase) all old tents
- the price and dates on which payment will be made shall be agreed on by the parties as the tents become available
- delivery shall be taken as agreed upon by the parties
- all disputes will be submitted to arbitration
May & Butcher made a deposit of £1,000 as security. On January 7, 1922, referred to verbal negotiations for an extension of the agreement and confirmed sale of the tentage which would be available up to March 31, 1923. The control of the Disposals Board changed at this time and the Board refused to deliver specifications to May & Butcher or to allow them to inspect the goods. As May & Butcher insisted on this, the Board no longer considered itself bound by the contract and May & Butcher sued for breach. May & Butcher were unsuccesful in the lower courts.
- Were the terms of the contract sufficiently defined to constitute a legal binding contract between the parties?
Lord Buckmaster, for a unanimous court, held that no contract existed since part of contract was undetermined, specifically the price. An agreement to enter into an agreement is not a contract. Section 8 of the Sale of Goods Act provides for a price to be fixed in the future, but section 9 holds that if the price cannot be fixed by a third party, no agreement is formed. Buckmaster holds that being unable to fix between the parties and having a third party being unable to fix the price are the same.
On arbitration, Buckmaster agrees that if there was an agreement, it would have to go to arbitration, but as the agreement has been found not to exist, there is nothing binding on the parties. As for the argument of May & Butcher that the deposit was to secure them delivery of further parcels of tentage as it became available, Buckmaster finds that the deposit was really to ensure performance under the contract, and as no agreement was formed, this argument fails
- A term yet to be determined means that there is no contract if it is an essential term; it is simply an agreement to agree and is not enforceable.
- The court cannot read terms into an incomplete contract.