Hughes v Pendragon Sabre Ltd (t/a Porsche Centre Bolton)

Where goods are to be manufactured or acquired only if a contingency occurs, their absence at the date of contracting does not prevent a sale agreement. A contract may be sufficiently certain where its terms provide a method for fixing the price and specification, and a reasonable delivery time can be implied. A signed standard-form order and deposit may therefore create a binding contract despite wording such as Subject to Price + Spec. A collateral assurance may vary the main contract where it was intended to have contractual effect and was supported by entry into that contract. For non-delivery, the statutory market-price measure applies only where an available market exists. If it does not, damages are assessed for direct and natural loss at the time and place of breach, using relevant evidence and subject to mitigation.

Mr Hughes paid Pendragon a £10,000 deposit and signed its vehicle order form for a limited-edition Porsche 911 GT3 RS4. The form referred to a vehicle subject to price and specification, while the attached terms dealt with later specification and payment of the importer’s recommended retail price. Pendragon’s salesperson also assured Mr Hughes that he would receive the first vehicle allocated to the dealership.

Pendragon obtained one vehicle but sold it to another customer. District Judge Knifton rejected the claim in the Preston County Court, holding that there was only an unenforceable agreement to agree and that loss could not be proved. The appeal concerned whether a binding sale agreement and collateral contract existed and, if so, the proper measure of damages where comparable vehicles were not available in an ordinary market.

Mr Justice Cranston gave the judgment. Macur LJ and Richards LJ agreed.

1. Appeal allowed. The parties had entered an agreement for the sale of a Porsche 911 GT3 RS4, subject to the contingency that Porsche would allocate one to Pendragon.
2. The absence of an existing vehicle was not fatal. Under the Sale of Goods Act 1979, future goods and goods whose acquisition depends on a contingency may be the subject of a sale agreement: sections 5(1)–(2). The absence of an agreed delivery date was also not fatal, since section 29(3) supplied a reasonable time. Section 8(1) permitted the price to be fixed by an agreed contractual method. The order terms identified the importer’s recommended retail price, adjusted for specification, and clause 4 provided a procedure for later specification.
3. The signed order form, deposit, contractual wording and surrounding dealings showed contractual intention. This was not merely an agreement to agree. The court applied the principle in Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 that a contract may exist despite apparent uncertainty where a means or standard for fixing the term can be found.
4. There was also a collateral contract that, if Porsche supplied a vehicle to Pendragon, it would be allocated to Mr Hughes. The assurance induced entry into the written contract and payment of the deposit and was intended to have contractual effect. It varied clause 2(b), which otherwise allowed Pendragon not to fulfil orders sequentially. Clause 18 did not prevent the collateral contract; collateral contracts may override exemption clauses framed in general terms, as illustrated by Couchman v Hill [1947] KB 554 and Mendelssohn v Normand Ltd [1970] 1 QB 177.
5. Pendragon breached the contracts by selling its allocated vehicle to another customer. The loss was the value of Mr Hughes’s lost chance of obtaining it. The market-price measure in section 51(3) applied only where an available market existed. There was no available market in this case, applying Charter v Sullivan [1957] 2 QB 117. Damages therefore fell under section 51(2) and the first limb of Hadley v Baxendale (1854) 9 Ex 341: direct and natural loss at the time and place of breach, assessed on relevant evidence and subject to mitigation.
6. The court assessed the contract price at £135,000 and the nearest equivalent vehicle’s cost at £170,000, awarding £35,000. The second limb of Hadley v Baxendale was irrelevant because there was no finding that investment was Mr Hughes’s intention or that Pendragon knew of it. The alleged equitable interest failed under Re Wait [1927] 1 Ch 606; equitable principles did not give a buyer an interest in future goods.

• Court of Appeal (Civil Division) [2016] EWCA Civ 18: allowed the appeal and awarded damages of £35,000.
• Preston County Court: District Judge Knifton rejected the contractual claim, holding that the deposit and order form created only an unenforceable agreement to agree and that loss had not been proved.