Brogden v Metropolitan Railway [1877] 2 App Cas 666

KEY POINTS

• In order for a valid contract to be formed, there must be an offer, acceptance, and consideration.

• Acceptance of an offer can be implied through the conduct of the parties, even in the absence of a formal written acceptance.

• The conduct of the parties can be sufficient to establish the existence of a contract.

FACTS

• The defendant, Mr. Brogden, had a long-standing informal arrangement with the complainant, Metropolitan Railway Company, to supply coal to them. However, this arrangement was never formalised in writing.

• One day, the parties decided to document their arrangement. Metropolitan’s agents drew up a draft agreement and sent them to Brogden who filled in some parts which were left blank and wrote “approved” on the draft. After Brogden sent it back, Metropolitan’s agents filed the document and did nothing more.

• Afterwards, they proceeded to act as though the agreement was in force. The defendant accepted the regular supply of coal from Mr. Brogden, and he accepted payment from the defendant without raising any objections to the terms of the draft agreement.

• However, the defendant did not sign the formal contract, and neither party took any further steps to execute it. The arrangement continued for several years until a significant dispute arose, and the defendant sought to rely on the fact that the contract was not signed.

JUDGMENT

• The House of Lords ruled in favour of Metropolitan Railway Co, confirming that a contract was formed through the parties' actions, and Brogden had unmistakably violated its terms, making him responsible for the breach.

COMMENTARY

• This case highlights the principle of acceptance by conduct in contract law.

• The defendant's acceptance was evident from their continued acceptance of coal deliveries and payment to Mr. Brogden without any objections to the terms contained in the draft agreement. By acting as if the contract was in effect, the defendant demonstrated their intention to be bound by its terms.

ORIGINAL ANALYSIS

• Plaintiff had been supplied by Defendant with coal for a while and they decided to draw up a contract: Plaintiff’s agent drew up a draft agreement and delivered it to Defendant. Defendant filled in parts left blank e.g. who was to arbitrate etc. and returned the document to Plaintiff who filed it and did nothing more.

• Defendant delivered coal and Plaintiff paid for it within the terms of the document and when disputes arose, both parties’ correspondence mentioned a “contract”.

• Defendant later claimed that he wasn’t bound by the document since it was not a contract.

• HL held that the Defendant’s amended agreement document was a counter offer and the conduct of Plaintiff and reliance on he terms was an acceptance.

Lord Hatherly

• Says that contract came into force when the new invoice was paid at the new price set out in the document.

Lord Blackburn

• Asserts that when “both parties have acted upon that draft and treated it as binding, they will be bound by it.”

• The acceptance has to be communicated or shown through conduct: it cannot be merely “in your own mind”