Bolton Partners v. Lambert

Bolton Partners v. Lambert

(1889) 41 Ch D 295

(ratification, retrospective effect)

FACTS:

An offer of purchase was made by the Defendant, A. J. Lambert, to P. A. Scratchley, who was acting as an agent of the Plaintiffs, Bolton Partners (Limited), but was not authorized to make any contract for sale on 8th of December, 1886. The offer was accepted by Scratchley on 9^th of December on behalf of the Plaintiffs with a direction that the company’s solicitor had been instructed to prepare the necessary documents. On the 13th of January, 1887, the defendant withdrew his offer on the ground that he had been misled by the statements that had been made to him as to the value of the property. After the withdrawal, the Plaintiffs, on 28th of January, ratified the acceptance of the offer by S.

ISSUES:

1. Whether there ever was a completed contract between the parties?
2. Whether the contract was obtained by misrepresentation on the part of those seeking to enforce it?
3. Whether the ratification was ultrà vires?

CONTENTIONS:

Defendant

1. There was no concluded contract but only negotiations. The letters relied on amounted only to a conditional offer as formal documents were yet to be prepared. Also, other terms were introduced by subsequent letters and hence Hussey v. Horne-Payne[1] is applicable.
2. If there is a contract, it was induced by the misrepresentations of the company’s agents.
3. After the Defendant had repudiated his offer it was too late for the company to ratify Scratchley’s acceptance and such ratification was ultra vires.

Plaintiff

1. As soon as an offer has been accepted the contract is complete.
2. The ratification by the board of directors on the 28th of January, was good, and related back to the date of the original contract; so that the repudiation by the Defendant on the 13th of January, 1887, was of no effect
3. There was no misrepresentation.

HELD:

Court of 1^st Instance (Kekewich, J.)

1. The two letters of the 8th and 13th of December contained a distinct offer by the Defendant and acceptance by Mr. Scratchley on behalf of the Plaintiffs and there was nothing in the previous or subsequent negotiations to the contrary.
2. On the evidence, that there had been no misrepresentation on the part of the Plaintiffs.
3. As per doctrine of ratification , the ratification would have retrospective effect and hence  it would not be ultra vires.

Court of Appeal

Cotton L.J.

1.  (w.r.t 1^st contention of the defendant) Mere expression of an intention to have further documents does not prevent there being a contract. There was a binding contract constituted by the two letters alone. Hussey v. Horne-Payne is not applicable as in that case it was not because the subsequent letters raised a doubt, that it was held that the two original letters did not form a completed agreement, but because the two original letters of themselves contained terms which raised the doubt.
2. (w.r.t 2^nd contention of the defendant) The rule of ratification is applicable as per which ratification is thrown back to the date of the act done, and that the agent is put in the same position as if he had had authority to do the act at the time the act was done by him.
3. On the evidence, that there had been no misrepresentation on the part of the Plaintiffs.

Lindley L. J. & Lopes, L.J.: They all concurred to Cotton L.J.’s observation.

 

LAW POINTS:

 Retrospective Effect of Ratification

Ratification is thrown back to the date of the act done, and that the agent is put in the same position as if he had had authority to do the act at the time the act was done by him.

Exceptions to Ratification

(1) Where a vested estate is divested;

(2) Where there has been forgery;

(3) Where the ratification is after the time when the act could be done.

Criticism

1. Gives an inappropriately full effect to the doctrine of relation back
2. The third party is in the power of the principal, not merely as to whether he had made a contract, but also as to whether he must already answer for breach of it.
3. When the third party discovers before any ratification that the agent is unauthorized, he should be able to escape from the transaction rather than have to wait, if only for a reasonable time, to see if he has a contract.
4. Only restricted to cases of lack of authority. If the original agreement is ineffective for any other reason (like, lack of deed), there is no contract to withdraw from and doctrine of relation back does not apply.

The rule of ratification unduly favours the principal because till ratification he was not bound, and he had an option to adopt or not to adopt what had been done.