Cooper v National Westminster Bank Plc

An agent who receives ambiguous instructions must consider whether it is reasonable to act on the chosen interpretation. Where the ambiguity is patent and clarification is practicable, acting without clarification may constitute a breach. Silence does not ordinarily amount to acceptance of a contractual offer, repudiation or altered contractual position. Any inference of acceptance depends on the particular relationship and circumstances. For non-delivery of a financial instrument, damages may be assessed by analogy with the Sale of Goods Act 1979, at the date when the instrument was cancelled or delivery was refused, where that date best reflects the loss.

The claimant instructed the defendant bank to issue a euro draft. The bank issued a replacement draft after the original was not returned, but retained the replacement at its branch instead of posting it to the claimant. Following solicitors’ correspondence, the bank cancelled the replacement draft and credited the claimant’s sterling account with the original debit, interest and an ex gratia sum.

The claimant sought compensation for the loss caused by non-delivery and the fall in the sterling value of the euro draft. The bank contended that the correspondence and subsequent conduct compromised the claim, or alternatively that the claimant had accepted the breach or was estopped from pursuing the claim. The central issues were whether the bank had acted reasonably on ambiguous instructions, whether silence constituted acceptance, and how damages and interest should be assessed.

1. Liability. NatWest was in breach of contract by failing to deliver the replacement draft within a reasonable time after receiving the claimant’s instructions. The claimant’s claim had not been compromised.
2. Ambiguous instructions. The July letter was insufficiently certain to constitute an offer of compromise. If treated as instructions, it was ambiguous. The relevant question was not merely whether the bank’s interpretation was reasonable, but whether it was reasonable to act on that interpretation in the circumstances. Given the patent ambiguity, the bank should have sought clarification. Cancelling the draft and crediting the account with a lesser sum, while aware of the exchange-rate profit, was unreasonable.
3. Acceptance by silence. The bank’s credit and letter amounted to an offer to compromise, but there was no express or inferred acceptance. Silence or inactivity ordinarily cannot establish acceptance. The exceptional reasoning in Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334 did not apply because the claimant had not solicited and received the very transaction for which he had paid. His previous delays also made silence equivocal. The same reasoning defeated the arguments based on acceptance of repudiation and estoppel.
4. Damages. Applying the principles underlying Sale of Goods Act 1979, section 51, the appropriate date was the date of cancellation. Cancellation was tantamount to refusal to deliver and the value of the draft was £148,992.18. After credit for £137,540 already paid, damages were £11,452.18.
5. Interest. Interest was awarded at 1% above the Bank of England base rate, excluding the claimant’s unexplained periods of delay between 26 April and 2 November 2004 and between 23 August 2005 and 31 October 2006.