In the case ofButler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979]1 WLR 401 (CA), Lord Denning advocatedan alternativeapproach to the traditional mirror-image rule forcontract formation.Discuss whether you consider the courts should adopt the traditional approach or that of Lord Denning when deciding whether a contract has been formed.

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Module title – Contract Law

Essay title - In the case of Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 (CA), Lord Denning advocated an alternative approach to the traditional mirror-image rule for contract formation. Discuss whether you consider the courts should adopt the traditional approach or that of Lord Denning when deciding whether a contract has been formed.

To answer the question I will divide the essay into three sections; the first focusing on the traditional approach and its merits and detractions, the second concentrating on the alternative approach and its positive and negative aspects before finally considering the wider picture and which approach I believe the courts should adopt.

The Traditional Approach

The traditional approach to deciding whether a contract has been formed is to look at offer and acceptance. An offer can be defined as an “expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed[1]” and acceptance as “a final and unqualified expression of assent to the terms of an offer[2].” The court will objectively analyse the negotiation that lead to the acceptance to assess if a contract had been made and if so what terms it was made upon. One key aspect of this traditional approach is the mirror-image rule, which allows for no modifications of an offer for acceptance to be complete. Any attempts to amend the offer (excluding noted exceptions to the rule, such as that empty term will be disregarded and that an additional term for the benefit of the offeror) will result in a counter-offer that cancels out the original offer; this was decided by Lord Langdale in Hyde v Wrench[3] and it remains good law to this day.

This method is favoured as it improves certainty for the parties to a contract, the knowledge that they will not be contractually bound until there is equivalent offer and acceptance, and also for the courts themselves as it provides set rules to follow. To some extent it also enshrines the idea of freedom of contract, as it allows parties to decide of their own free will what will be exchanged, although this is negated somewhat by the objective approach taken by the court in determining if a contract has been formed as this does not take into account the subjective intentions of either party[4]. Some criticism can be levelled however; in New Zealand Shipping Co Lord Wilberforce claimed that this approach was used “often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance[5]”. Additionally it can be described as ‘reasoning backwards’, in that the court can essentially decide what it wishes the outcome to be and then manipulate the negotiations to conform to the predetermined ideal of offer and acceptance[6].

The Alternative Approach

The alternative approach to contract formation was suggested by Lord Denning in the case of Port Sudan Cotton Co v Chettiar, in which he stated “I do not much like the analysis in the text-books for inquiring whether there was an offer and acceptance, or a counter-offer, and so forth. I prefer to examine the whole of the documents in the case.[7]” This was an obiter dicta comment however, and he went on to use the traditional method for the ratio decidendi. He first employed the approach in Gibson v Manchester City Council, with Denning dismissing the traditional form of contract analysis as antiquated and finding it more useful to identify a general agreement, “It is a mistake to think that all contracts can be analysed into the form of offer and acceptance. I know that in some of the textbooks it has been the custom to do so, but as I understand the law, there is no need to look for strict offer and acceptance. You should look at the correspondence as a whole[8].” The approach did not receive much support, as Dennings decision to uphold the contract in question received a dissenting judgment from Lane LJ. The Gibson case was later appealed to the House of Lords, who rejected Dennings approach entirely and created precedence for future cases to resume following the traditional method[9].
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Denning used his alternative approach only once more, in the case of Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd[10]. This dealt with a battle of the forms; the colloquial term for when both parties employ standard form contracts and then disagree about whose standard terms take precedence, over the price of machinery that had been subject to a price variation clause in Butler’s contracts. The Court of Appeal ruled unanimously in favour of the defendant, however neither of the other two judges (Lawton and Bridge LLJ) agreed with Dennings reasoning, preferring the traditional approach wherein ...

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