Agreement in Contract: Mirror Image Rule
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The document discusses the legal principles surrounding the formation of contracts, including the processes of proposal, acceptance, and communication as outlined in various sections of the contract act. It highlights the mirror image rule, illustrated through the Butler v. Ex-Cell-O Corporation case, where a controversy over standard terms led to a ruling on the nature of acceptance and counter offers. Additionally, it critiques the mirror image rule for being rigid while suggesting a more flexible approach to contracts that considers the overall conduct of the parties involved.
Agreement in Contract: Mirror Image Rule
- 1. Preeti Kana Sikder Lecturer Department of Law & Justice Jahangirnagar University
- 2. Clearing the Ground Who decides whether or not the parties have reached agreement? How is it decided whether or not the parties have actually reached agreement?
- 3. Who decides that an agreement has been reached? The Objective Test (Subjective Approach)
- 4. Has an agreement been reached?
- 5. Formation of a Contract Proposal Promise Agreement
- 6. What is a Proposal? (Section 2 of the Contract Act) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.
- 7. Communication of Proposal ((Section 3)) The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
- 8. Communication of Proposal (Section 3) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.
- 9. Communication of Acceptance (Section 4) The communication of an acceptance is complete,– as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer.
- 10. Communication of Acceptance B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete,– as against A, when the letter is posted; as against B, when the letter is received by A.
- 11. What is a Promise? (Section 2) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise:
- 12. The General Rule The Court must be able to find the documents which passed between the parties a clear and unequivocal offer which is matched or ‘mirrored’ by an equally clear and unequivocal acceptance.
- 14. Butler v Ex-Cell-O Corp (England) Ltd (1979) Butler Machine Tool Co. made and sold machine tools. They sent a letter to Ex-Cell-O on May 23, 1969 offering Ex-Cell-O some new machinery for £75,535. With it, was Butler's standard contract terms which included a price variation clause, so if their manufacturing costs went up, that price rise would be passed on to Ex-Cell-O.
- 15. Butler v Ex-Cell-O Corp (England) Ltd (1979) Ex-Cell-O replied on May 27 and said they would order the machinery, but on Ex-Cell-O's own standard terms. Ex-Cell-O's standard terms did not have a price variation clause. Butler replied on June 5 on the tear-off slip from Ex-Cell-O's terms. At the bottom of this slip it read, "We accept your order on the terms and conditions stated therein" however Butler added a letter reasserting that the deal was being made under Butler's own terms, from the May 23 letter.
- 16. Butler v Ex-Cell-O Corp (England) Ltd (1979) A while later, nothing further had been said, and Butler delivered the machinery. They asked for £75,535, plus £2,892 according to their price variation clause. Ex-Cell-O refused to pay the extra. Butler sued Ex-Cell-O for £2,892 in damages.
- 17. What would be your decision as a judge?
- 18. Butler v Ex-Cell-O Corp (England) Ltd (1979) The lower court held that the seller's price variation clause continued through the whole dealing and so the sellers were entitled to rely upon it. The Court of Appeal held that they were not entitled to recover the sum claimed because a contract had been concluded on the buyer’s terms which did not include the price variation clause.
- 19. Counter Offer
- 20. Counter Offer A purported acceptance which does not accept all the terms of the original offer is not in fact a true acceptance at all but is a counter offer. A Counter Offer kills off the original offer and amounts to a new offer which in turn can be accepted by the other party.
- 21. “Battle of Forms Case” Popular Terminology
- 22. Advantages of Mirror Image Rule This rule provides a degree of certainty. This rule provides a standard which can be applied to every type of contract
- 23. Criticisms of Mirror Image Rule This rule has been criticised to be extensively rigid. This rule encourages business people to continue to exchange their standard terms of business in the hope of getting the ‘last shot’ in and places the party in receipt of the last communication in a difficult position.
- 24. Lord Denning (1899-1999), Twentieth Century’s greatest Judge In Butler’s case, he held the traditional approach to be ‘out of date’. He claimed that all contracts can not be analysed into the form of offer and acceptance. Rather better way is to look at all the documents and also the conduct of parties.
- 25. The approach adopted by Lord Denning seeks to construct a more flexible framework for the law of contract which can accommodate inconsistent terms and an apparent lack of consensus
- 26. Does Mirror Image Rule prevail in modern contract law? Longmore LJ observed in Tekdata Interconnections Ltd v Amphenol Ltd: “…it will always be difficult to displace the traditional analysis, in a battle of the forms case, unless it can be said that there was a clear course of dealing between the parties.’
- 27. Does Mirror Image Rule prevail in modern contract law? Only in very exceptional cases where the parties have an established course of dealing and that course of dealing is governed by certain terms, the courts may skip applying the traditional analysis. The traditional rule is not always rigidly applied by the judiciary either. Currently, a rather technical and schematic doctrine of contract is in vogue.
- 28. Thank you