Gibson v Manchester City Council

A contract allegedly made through sequential correspondence must ordinarily be identified by construing the communications for a contractual offer and an acceptance. A court should not instead infer agreement from the correspondence and conduct viewed generally.

Language stating that a prospective vendor may be prepared to sell, followed by an invitation to make a formal application, is not an offer capable of acceptance. An applicant’s subsequent communications cannot create a contract unless the prospective vendor accepts an offer made by the applicant.

Special conditions from a standard-form agreement cannot be imported into an alleged contract for the sale of land where the documents neither refer to those conditions nor establish that the purchaser knew of and assented to them.

A council tenant sought specific performance of an alleged contract to purchase the freehold of his home. The corporation had stated that it might be prepared to sell at a specified price and invited him to submit a formal application. He completed the application and later asked the corporation to proceed with the purchase. The council’s policy changed before a formal agreement was executed.

The Manchester County Court found an offer and acceptance and ordered specific performance. A majority of the Court of Appeal dismissed the corporation’s appeal, while Geoffrey Lane LJ dissented. The central question before the House of Lords was whether the correspondence disclosed a legally enforceable contract for the sale of land.

1. The appeal was allowed unanimously. Lord Diplock delivered the leading speech. Lord Fraser of Tullybelton agreed with Lord Diplock and Lord Russell of Killowen; Lord Keith of Kinkel agreed entirely with Lord Diplock. Lord Edmund-Davies and Lord Russell each gave reasons for allowing the appeal.

2. Per Lord Diplock, a contract alleged to have been made by successive communications in an exchange of correspondence should ordinarily be analysed by asking whether the documents, properly construed, contain a contractual offer and an acceptance. Although exceptional contracts may resist that analysis, this case did not. The Court of Appeal majority erred by departing from the conventional approach and seeking agreement in the correspondence and conduct as a whole.

3. The corporation’s letter was not an offer to sell. Its statement that it may be prepared to sell was provisional, and it invited the tenant to make a formal application rather than to accept an offer. The separate warning that the letter was not a firm mortgage offer could not convert its plainly provisional statement about a sale into a firm offer. Lord Russell reached the same conclusion on the language of the letter. Lord Edmund-Davies also agreed that there was, at most, an invitation to apply.

4. Without an offer by the corporation, the tenant’s application and later letter could not constitute an acceptance. Lord Diplock considered it unnecessary to decide whether those documents amounted to an offer by the tenant because the corporation had never accepted them. Lord Edmund-Davies additionally concluded that they disclosed only an application to buy at an unstated price and an application for a loan.

5. Per Lord Edmund-Davies, the tenant’s request concerning repairs or a price reduction was exploratory rather than a counter-offer. This followed Stevenson v McLean (1880) 5 QBD 346 and was unlike Hyde v Wrench (1840) 3 Beav 334. The point did not affect the result because no offer had been made.

6. The standard-form restrictions used in completed council-house sales could not be imported into the alleged agreement. The correspondence did not refer to them, and the tenant neither knew of nor assented to them. They were not terms implied by law into an open contract. Their introduction would also present a writing problem under section 40 of the Law of Property Act 1925.

7. The Court of Appeal’s order was discharged except as to costs. The cause was remitted to the Manchester County Court to proceed consistently with the House’s judgment.

1. House of Lords: Allowed the corporation’s appeal unanimously. Discharged the Court of Appeal’s order except as to costs and remitted the cause to the Manchester County Court.

2. Court of Appeal: Dismissed the corporation’s appeal by a majority comprising Lord Denning MR and Ormrod LJ. Geoffrey Lane LJ dissented.

3. Manchester County Court: Judge Bailey found a legally enforceable contract and ordered specific performance of an open contract for the sale of the freehold.