| Citation | (1840) 49 ER 132 |
| Date of judgement | 8th December 1840 |
| Court | Rolls Court |
| Plaintiff | Hyde |
| Defendant | Wrench |
| Judges | Lord Langdale |
Introduction
The case of Hyde v. Wrench is a landmark case in the history of contract laws. It deals with specific performance of the original offer in the situations where an original offer is rejected by counter-offer. The court provides a relief to the plaintiff which is called Specific Performance in circumstances where there is a breach of contract by the defendant and places an obligation on the defendant to perform the contract according to the terms mentioned in it. This case puts an end to all the ambiguity and confusion in relation to validity of an original offer in cases when a counter-offer is involved.
The term “proposal” (offer) and “acceptance” is given under the Indian Contract Act as follows:-
- 2(a)- 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.
- 2(b)- 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.
This principle is laid down in the Indian Contract Act, 1872., under Section 7 “In order to convert a proposal into a promise, the acceptance must-
- Be absolute and unqualified;
Therefore, an offer or proposal is killed when the offeree gives a counter-offer instead of acceptance. Counter-offer arises when there is failure in consensus-ad-idem i.e. meeting of minds of the defendant and plaintiff.
Facts:
Wrench, the defendant, desired to dispose off his property situated in Luddenham. He offered to sell it to Hyde, the plaintiff for a sum of £1200 via his agent, but the plaintiff declined this offer via his agent. The defendant made another offer on 6th June 1840, to the plaintiff for selling his property for £1000. He also mentioned that he won’t be altering the offer and if £1000 were not lodged in the bank by Michaelmas up till when the property is free of taxes, etc. he would consider another applicant.
The plaintiff rejected the above-mentioned offer and proposed to purchase the property for £950. Wrench wrote to the plaintiff “I have written to my tenant for an answer to certain enquiries and, the instant I receive his reply, will communicate with you and endeavour to conclude the prospective purchase of my farm, I assure you I am not treating with any other person about the said purchase.”
On 27th June, the defendant again wrote to the plaintiff that he will not be selling his estate for less than £1000. The plaintiff then agreed to buying the property for £1000. He wrote “I beg to acknowledge the receipt of your letter of the 27th instant, informing me that you are not disposed to accept the sum of £950 for your farm at Luddenham. This being the case, I at once agree to the terms on which you offered the farm, viz., £1000 through your tenant Mr. Kent by your letter of the 6th instant. I shall be obliged by instructing your solicitor to communicate with me without delay, as to the title, for the reason which I mentioned to you.”
But the defendant refused to sell his property to the plaintiff (Hyde). So, Hyde filled a suit against him pleading for specific performance of the contract, since according to the plaintiff the offer for sale by the defendant was not withdrawn before its acceptance.
Thereafter, the defendant filled a general demurrer in response to the suit filed by the plaintiff alleging specific performance.
Issues:
The primary issue was whether the defendant was bound to perform the original offer despite the plaintiff’s counter-offer/proposal in furtherance of the original offer.
• Whether the defendant is under an obligation to perform the original offer or the original offer will get terminated in the case of a counter offer.
• Whether there exists a valid contract between the defendant and the plaintiff.
• Whether the defendant (Wrench) committed breach of contract by not selling the property to the plaintiff (Hyde).
Arguments:
The attorneys of the plaintiff Mr. Pemberton and Mr. Freeling argued that since the defendant’s offer hadn’t been withdrawn before the acceptance/authorization of the plaintiff. The argued that as long as the offer is not withdrawn, the plaintiff still has the authority to accept the same.
The defendant proposed to sell his property for £1000, and if this offer would have been accepted instantly then there would definitely be a legally enforceable contract. However, when the plaintiff offered to buy the property for £950, he made a counter offer, subsequently rejecting the original offer of the defendant.
Rule:
Under contract law, it’s an established principle that a contract can be valid when the acceptance is absolute and unqualified. If the offeree accepts the offer without any conditions or unequivocally, then a legally binding agreement is formed. If any changes are made to the original offer during acceptance, the original offer comes to an end and a new offer is initiated. Hence, if the offeree tries to negotiate with the offeror after an offer is made, then the offeror is no longer bound to perform the duties and obligations of the original offer. This type of offer is called counter-offer, in such cases the initial offer is killed and the offeree cannot turn back and accept it, which then results in no obligations on the part of the offeror.
Judgement:
After hearing arguments from both sides, the court gave its judgement. On the behalf of the defendant, Mr. Kindersely and Mr. Keenee contended that the acceptance must be unequivocal in order to constitute a valid contract. They contended as follows “to constitute a valid agreement there must be a simple acceptance of the terms proposed. The plaintiff, instead of accepting the alleged proposal for sale for £1000 on 6th June, 1840 rejected it and made a counter proposal, this put an end to the defendants offer and left the plaintiff’s proposal under discussion, that has never been accepted and the plaintiff, could not without the concurrence of the defendant, revive the defendant’s original proposal.”
Whereas, on the behalf of the plaintiff Mr. Pemberton and Mr. Freeling contested that as the defendant’s offer was not withdrawn before the acceptance of the plaintiff, therefore the plaintiff was competent to accept the offer as long as it existed and was not revoked by the defendant. According to them, as long as an offer is not revoked by the offeror, its open for acceptance by the offeree.
Lord Langdale then held that “Under the circumstances in this bill, I think there exists no valid binding contract between the parties for purchase of the property. The defendant offered to sell the property for £1000, and if that had been unconditionally accepted, there would undoubtedly be a perfectly binding contract, instead of that the plaintiff made an offer of his own to purchase the property for £950 and he thereby rejected the offer previously made by the defendant. I think it was not afterwards competent for him to receive the proposal of the defendant, by tendering an acceptance of it, and therefore, there exists no obligation of any sort between the parties, the demurrer must be allowed.”
Hence, the claims made by the plaintiff were dismissed by the court and the judgement was in the favour of the defendant. It was held that, the defendant was under no obligation to perform the contract since there exists no binding contract between the parties i.e. Hyde and Wrench.
Conclusion:
Thus, with the landmark case of Hyde Vs. Wrench we can conclude that a counter-offer given by the offeree can kill, destroy or supersede the original offer of the offeror. In order to construct a valid contract, the acceptance must be valid, which means the acceptance must be unconditional i.e. absolute and qualified. A counter-offer acts just like a new offer.
This principle is laid down in the Indian Contract Act, 1872., under Section 7 “In order to convert a proposal into a promise, the acceptance must-
1) Be absolute and unqualified;
2) Be expressed in the same usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but, if he fails to do so, he accepts the acceptance.”
If we analyse the above given case of Hyde Vs. Wrench, we can see that the offer existed till the plaintiff (Hyde) did not decline the original offer and presented a new one i.e., a counter-offer. As soon as the plaintiff offered to but the property for £950 instead of £1000, he cancelled the original offer by the defendant (Wrench), which meant that he could not go back and accept that offer. The court offered that there was no valid contract since there was no acceptance. Therefore, Lord Langdale ruled that a counter-offer cancels the original offer.
It is seen that the judgement of the case of Hyde Vs. Wrench is still considered a good judgement and has been used as a precedent in various cases in both India and England.
References:
https://judicateme.com/wp-content/uploads/2020/06/Hyde-v.-wrench.pdf
This article was written by Mehek Sharma of Lords Universal College, Intern at Legal Vidhiya.
