ROSE AND FRANK CO V. CROMPTON AND BROTHER LTD( 1925) AC 445 

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FACTS OF THE CASE

An American company and English company entered into a sole agency agreement in 1913 for the trade of paper goods in the USA. The written agreement contained a clause stipulating that it was not a formal nor legal agreement, and an “ honourable pledge ” between business mates. Subsequently, the American company placed orders for paper which were accepted by the British company. Before the orders were fulfilled, British company terminated the agency agreement and refused to shoot the goods, claiming that the 1913 agreement was not fairly binding and that, consequently the orders did not produce legal obligations. 

ISSUES 

The questions arose as

( 1) whether the sole agency agreement of 1913 constituted a fairly binding contract, and

( 2) whether the orders constituted an enforceable contracts of sale.

JUDGEMENT 

DECISION OF TRIAL COURT

 At the trial court, Justice Bailhache determined that there was a list contract between the parties. Rose and Frank were successful in the trial court and the decision was granted in their favour. 

DECISION OF COURT OF APPEAL 

On appeal, Lord judges Atkin, Bankes and Scrutten all were of the opinion that there was no intention to be fairly bound. Lord Justice Atkin, in the Court of Appeal, held that the agreement fluently expressed that the parties did not intend to enter into legal relations; there was nothing ‘ absurd ’ in their position. “ To produce a contract, there has to be a common intention between the parties to enter into legal scores, which must be mutually communicated either expressly or impliedly. It may be negatived impliedly by the nature of the agreed pledge or pledges, as in the case of offer and acceptance or of some agreements made in the course of family life between members of a family as in the case of Balfour v Balfour.The intention between the parties can be negatived either impliedly or expressly. The clause in question in clear terms expresses the collabrative intention of the parties is not to enter into legal scores. It might add that a common case of an effect being given in law to the express intention of the parties not to be bound in law is to be set up in cases where parties agree to all the necessary terms of an agreement for purchase and trade, but it’s subject to a contract being drawn up by them. The words of the agreement in other felicitations will be apt and sufficient to constitute an open contract, but if the parties agree to make it plain that they do not want to be bound except by some posterior document, they remain footloose though no further concession be contemplated.Either of the parties is free to abandon the agreement and to refuse to assent to any legal obligation; when the parties are bound they are bound by virtue only of the posterior document.

 DECISION OF HOUSE OF LORDS

 Regarding the 1913 agreement, the Court gave an overriding effect to the provision in the agreement that expressly handed that it’s solely an “ honourable pledge ”, which demonstrates that the parties did not intend the arrangement as a fairly-binding contract. The Court explained that the argument that the clause confining the legal enforceability of a contract apply solely when the document is irrefragable of legal force. In the present case, the document and circumstances did not intend to produce any legal interest, and the clause expressly prohibits the legal enforceability of the agreement. Regarding the alternate point, the Court held that the data of the given arrangement do not constitute a legal contract. It does not forestall the orders and acceptances from constituting fairly binding contract

CONCLUSION

In conclusion, Rose andFrankCo.v. Crompton & SistersLtd.( 1925) was a significant case in English contract law. The House of Lords held that the English court had governance to hear the disagreement between the parties, despite the presence of an arbitration clause in the contract. The court set up that the arbitration clause demanded sufficient certainty and was not binding on the parties. The case established the principle that an agreement to agree without certainty is not fairly enforceable. It also contributed to the development of the doctrine of separability of arbitration clauses, recognizing that an arbitration clause can survive indeed if the main contract is set up to be unenforceable. The decision had a continuing impact on contract law and arbitration practice, furnishing clarity on the conditions for valid arbitration agreements.

REFERENCE

https://www.lawteacher.net/c

https://thelegallock.com/

Written by  Varuna, Dr.B.R.Ambedkar National Law University, Sonipat, An Intern under legal Vidhiya

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