Notice exercising option to buy building plots to be sent ‘by registered or recorded delivery post’ to vendors or their solicitors–Requirement not mandatory–Ordinary post good enough in a case in which the notice is actually received
This was an
appeal by Yates Building Co Ltd, of Enfield, from the dismissal by Templeman J
in the Chancery Division on December 12 1973 of their claim for a declaration
that a contract for sale by the defendants, R J Pulleyn & Sons (York) Ltd,
of York, of plots of land at Haxby, Yorkshire, had been validly created by
exercise of an option contained in an agreement of September 21 1971 and ought
to be specifically performed.
Mr J Harman QC
and Mr R Reid (instructed by Beer & Partners) appeared for the appellants
and Mr A L Price QC and Mr D A Lowe (instructed by Kenneth Brown, Baker, Baker,
agents for Harrowells, of York) represented the respondents.
Giving
judgment, LORD DENNING said: At Haxby in Yorkshire there is an area of land
belonging to R J Pulleyn & Sons Ltd which in 1971 was laid out as a
building site with 153 building plots. The Yates Building Co Ltd were
interested in acquiring building plots. Negotiations took place by which they
were to take up the plots in four portions spread out over four years. In the
result four agreements were signed on September 21 1971. One agreement provided
for the first portion to be taken up for £18,900 paid down then and there. In
addition, on the same day three separate agreements were signed by which the
buyers were given options to take up the remaining three portions: one portion
for £18,900 between April 6 1972 and May 6 1972; another portion for £18,900
between April 6 1973 and May 6 1973; and the final portion for £18,900 between
April 6 1974 and May 6 1974. The date ‘April 6’ in each agreement was
significant. It suited the sellers for tax reasons to receive the money as an
annual profit against which they could set off their expenses. It also suited
the buyers, because they would only have to find the money in instalments. The
agreements did not, however, bind the buyers to purchase. Each of them gave the
buyers an option. The buyers exercised this option quite validly in 1972 and
1974. But the question is whether they exercised it validly in 1973. I will
read the option clause:
The option
hereby granted shall be exercisable by notice in writing given by or on behalf
of Yates to Pulleyns or to Pulleyns’ solicitors at any time between April 6
1973 and May 6 1973 such notice to be sent by registered or recorded delivery
post to the registered office of Pulleyns or the offices of their said
solicitors.
Now let me say
what happened. The buyers had until May 6 1973 to exercise the option. At a
time when there was still one week in hand, namely on Monday April 30 1973, the
London solicitors for the buyers wrote this letter to the York solicitors for
the sellers:
On behalf of
our clients, Yates Building Co Ltd, we are writing to formally exercise the
option under the agreement of September 21 1971 for the purchase of plots
15-18, 38-50, 52-83 and 55-63. A cheque for £1,890 for the deposit is enclosed.
That was
posted on Monday April 30 1973. But here is the point. It was sent by ordinary
post and not by registered or recorded delivery post. Nevertheless it got there
all right. It was well in time. It was opened by the York solicitors for the
sellers at some time on or before Friday May 4 1973. Then on that Friday they
wrote back saying:
We write to
acknowledge receipt today of your letter of April 30 1973 with its enclosure.
You will recall that clause 2 of the option agreement provides for notice to be
sent by a registered or recorded delivery post. Your letter was not so sent.
They returned
the cheque and said:
We also
enclose for your information a copy of your envelope enclosing the letter.
They enclosed
a photograph of the envelope. It showed that it was sent on April 30 1973 by
ordinary post and not by registered or recorded post. The sellers’ solicitors
posted that reply on Friday May 4 1973, so that it did not reach the buyers’
solicitors until Monday, May 7 1973. It was then too late for the matter to be
rectified, because the latest date for exercising the option was May 6 1973.
The buyers were very upset by this turn of events. This portion was an
integrated part of the whole housing estate. They had made roads and services
for the whole estate, including this portion. Yet the sellers claimed to
withhold this portion. The buyers brought proceedings for specific performance,
but the judge refused it. He held that this requirement that the letter had to
be sent by registered or recorded delivery post was a requirement which must be
complied with, and as it had not been complied with, there was no contract.
It seems to me
that this depends on the construction of the option clause. The option is an
offer: an irrevocable offer. When a person makes an offer, he does sometimes
prescribe the method by which it is to be accepted. If he prescribes it in
terms which are mandatory or obligatory, the acceptance is only good if it
complies with the stated requirements. Thus in the present case the notice of
acceptance must be in writing, and must be given to Pulleyns or
to Pulleyns’ solicitors, and must be given between April 6 1973 and May
6 1973. But the question is whether the words ‘such notice to be sent by
registered or recorded delivery post’ are mandatory or directory. That test is
used by lawyers in the construction of statutory instruments, but it can also
be used in the construction of other documents. The distinction is this: a
mandatory provision must be fulfilled exactly according to the letter, whereas
a directory provision is satisfied if it is in substance according to the
general intent (see Howard v Bodington (1877) 2 PD at 210-211).In
applying this rule of construction, you must look to the subject-matter,
consider the object to be fulfilled, and then see whether the provision must be
fulfilled strictly to the letter or whether the substance of it is enough. So
in the present case the question is whether the letter of acceptance must
be sent by registered or recorded delivery post, else it is bad; or whether it
is sufficient if it gets there in time, as, for instance, by ordinary post or
by special messenger. Orr LJ gave this instance in the course of the argument.
Suppose there were a postal strike during the last week, and the buyer, to make
sure it was in time, sent the letter by special messenger, would this not be
sufficient? Looking at the object of
this provision, it seems to be this. It is inserted for the benefit of the
buyer so that he can be sure of his position. So long as he sends the letter by
registered or recorded delivery post, he has clear proof of postage and of the
time of posting. But if the buyer sends it by ordinary post, he will have no
sufficient proof of posting, or of the time of posting. In that case, if the
seller proves that he never received it, or received it too late, the buyer
fails. None of those reasons apply, however, when the seller does receive it in
time. So long as he gets the letter in time, he should be bound. So I would
hold, simply as a matter of interpretation, that if the letter did reach the
sellers in time, it was a valid exercise of the option.
There are only
a few cases on the point, and they support what I have just said. There is Tinn
v Hoffmann & Co (1873) 29 LT 271. There was an offer which contained
the words ‘waiting your reply by return of post.’ The court held that that did not mean a reply
had to be sent by letter by return of post. A reply by telegram, or by
verbal message, or by any means which arrived not later than a letter sent by
post would reach its destination would equally satisfy the requisition. The
next case is an old one from the United States, Eliason v Henshaw
(1819) 1 Wheaton 225, in which the offeror at Harper’s Ferry wrote to the
offeree at Mill Creek: ‘Please write by return of wagon whether you accept our
offer.’ The wagon was due to return to
Harper’s Ferry. The letter of acceptance was not sent by return of wagon to
Harper’s Ferry. It was sent by ordinary mail to Georgetown and took longer to
get there. The Supreme Court of the United States said:
The meaning
of the writers was obvious. They could easily calculate by the usual length of
time which was employed by this wagon, in travelling from Harper’s Ferry to
Mill Creek, and back again with a load of flour, about what time they should
receive the desired answer, and, therefore, it was entirely unimportant,
whether it was sent by that, or another wagon, or in any other manner, provided
it was sent to Harper’s Ferry, and was not delayed beyond the time which was
ordinarily employed by wagons engaged in hauling flour from the defendant’s
mill to Harper’s Ferry. . . . The place, therefore, to which the answer was to
be sent, constituted an essential part of the plaintiffs’ offer.
The Supreme
Court there looked to see what was the essential part of the offer, what was
important or not important. It said that the manner of sending was ‘entirely
unimportant,’ so long as it got to the proper place at the proper time. The
only remaining case is Manchester Diocesan Council of Education v Commercial
& General Investments [1970] 1 WLR 241, where this very point was
considered by Buckley J. He gave this guide to construction on p 246, letter c:
Where,
however, the offeror has prescribed a particular method of acceptance, but not
in terms insisting that only acceptance in that mode shall be binding, I am of
opinion that acceptance communicated to the offeror by any other mode which is
no less advantageous to him will conclude the contract.
It seems to me
that Buckley J was there adopting the same test as I have stated. If the
offeror uses terms insisting that only acceptance in a particular mode is
binding, it is mandatory. If he does not insist, and it is sufficient if he
adopts a mode which is no less advantageous, it is directory. At any rate,
adopting Buckley J’s test in this case, there were no words insisting that only
registered or recorded delivery post would do, and the sending by ordinary post
was no less advantageous to the sellers than sending by registered post, so
long as it got there in time. In my opinion this option was perfectly well
exercised and there was a binding contract accordingly. I would allow the
appeal.
ORR LJ: I
agree.
SCARMAN LJ: I
agree, subject, however, to one minor point. I am not convinced that the term
‘directory’ has any application to the field of contract. Contractual
provisions seem to me to be either obligatory or permissive, and the term
‘directory’–which is, of course, borrowed from the statute law–does not seem to
me to be helpful in this context. I agree with the Master of the Rolls that the
one question before the court is the interpretation of clause 2 of the option
agreement. I read that agreement as requiring the option to be exercised by a
notice in writing which is to be actually received by Pulleyns or Pulleyns’
solicitors. When later in the clause one comes to the words which have to be
construed in this case ‘such notice to be sent by registered or recorded
delivery post,’ I think they are a clear indication, and are intended as such
to the offeree, that if there is to be any issue as to whether or not the
notice has in fact been received, he had better use registered or recorded
delivery post if he wishes to put it beyond doubt. Of course, if there was any
such issue, the burden would be upon the party seeking to exercise the option
to prove that his notice had been received. The clause is a clear indication
that one would most easily and most efficaciously discharge that burden by
using registered or recorded delivery post. I wholly agree with the rest of the
judgment of the Master of the Rolls.
The appeal
was allowed with costs above and below. An order was made in the usual terms
for specific performance. The court refused leave to appeal to the House of
Lords, and refused a stay of execution pending an application to the House.
Lord Denning observing, ‘We never give that.’
