Stevenson, Jaques, & Co v McLean [1880] 5 QBD 346

Stevenson, Jaques, & Co v McLean is an important English contract law decision concerning the communication of acceptance and revocation through telegrams. The case clarified the distinction between a counter-offer and a mere inquiry for information. It also established that revocation of an offer is ineffective unless it is communicated to the offeree before acceptance takes place.

Facts of Stevenson, Jaques, & Co v McLean

The plaintiffs, Stevenson, Jaques, & Co, were iron merchants engaged in purchasing iron and reselling it to third parties. The defendant, McLean, held warrants representing quantities of iron available for sale.

On Saturday, 27 September, the defendant sent a telegram to the plaintiffs offering to sell iron at “40s., nett cash, open till Monday”. The offer therefore remained capable of acceptance until Monday unless properly revoked before acceptance.

On Monday morning, the plaintiffs sent a telegram asking whether the defendant would accept payment over a two-month period, or alternatively what the longest credit period he would permit would be. This communication did not expressly reject the original terms offered by the defendant.

The defendant did not respond to this inquiry. Instead, later that same day, he sold all the warrants to another buyer. At 1.25 pm on Monday, the defendant sent a telegram to the plaintiffs informing them that all the warrants had been sold.

Before receiving the defendant’s telegram, the plaintiffs sent another telegram at 1.34 pm clearly accepting the original offer. At the time of sending their acceptance, the plaintiffs had no knowledge that the defendant had sold the iron to another purchaser.

Following the defendant’s refusal to deliver the iron warrants, the plaintiffs brought an action alleging breach of contract due to non-delivery.

The dispute in Stevenson, Jaques, & Co v McLean therefore centred on whether a valid and binding contract had been formed between the parties.

Issues Raised

The court considered several legal issues arising from the communications exchanged between the parties.

The first issue was whether the plaintiffs’ telegram asking about payment terms amounted to a counter-offer. If the communication was interpreted as a counter-offer, the original offer made by the defendant would have been extinguished and incapable of later acceptance.

The second issue concerned the defendant’s right to revoke the offer before acceptance. The court had to determine whether the defendant could withdraw the offer even though he had stated that it would remain open until Monday.

The third issue was whether the defendant’s telegram informing the plaintiffs that the warrants had been sold effectively revoked the offer despite the fact that the plaintiffs had not yet received the communication when they accepted the offer.

The court also had to consider the effect of prior authorities, including Hyde v Wrench and Cooke v Oxley, in determining the legal position of the parties.

Arguments

The plaintiffs argued that their first telegram was merely a request for further information regarding the payment arrangements. According to them, the communication did not reject the original offer and therefore could not be treated as a counter-offer.

They further contended that the original offer remained open until Monday because no effective revocation had been communicated before they accepted it. Since they accepted the offer before receiving the defendant’s telegram stating that the warrants had been sold, the plaintiffs argued that a valid contract had come into existence.

The defendant argued that the plaintiffs’ telegram proposing payment over two months altered the original terms of the offer and therefore amounted to a counter-offer. On this basis, the defendant maintained that the original offer had been terminated.

The defendant also relied upon the principle that an offeror may revoke an offer at any time before acceptance. It was argued that the defendant had validly revoked the offer by selling the warrants to another purchaser and sending a telegram communicating that fact.

The arguments in Stevenson, Jaques, & Co v McLean therefore focused on the legal effect of the telegrams exchanged between the parties and the timing of communication.

Stevenson, Jaques, & Co v McLean Judgment

Lush J delivered judgment in favour of the plaintiffs.

The court held that the plaintiffs’ telegram sent on Monday morning did not amount to a counter-offer or rejection of the original offer. Instead, it was merely an inquiry asking whether different payment terms might be acceptable.

The court distinguished the present case from Hyde v Wrench, where there had been a clear counter-offer rejecting the original proposal. In the present matter, the plaintiffs had not rejected the defendant’s original terms but had simply sought additional information.

The court further held that although the defendant was free to revoke the offer before acceptance, the revocation would only become effective once it had been communicated to the plaintiffs.

At the time the plaintiffs accepted the offer, they had not yet received the defendant’s telegram informing them that the warrants had been sold. Consequently, the original offer remained valid and capable of acceptance.

The acceptance telegram sent by the plaintiffs therefore created a binding contract between the parties. The defendant was accordingly held liable for breach of contract for failing to deliver the iron warrants.

Lush J ordered the defendant to pay £1900 to the plaintiffs, subject to any later reduction by subsequent ruling.

Reasoning by the Court in Stevenson, Jaques, & Co v McLean

The court closely examined the wording used in the plaintiffs’ telegram. Lush J concluded that the language used by the plaintiffs did not indicate rejection of the original offer. Instead, the communication merely sought clarification about the possibility of modified payment arrangements.

The court considered the commercial circumstances surrounding the transaction, including the fluctuating nature of the iron market. In that context, the plaintiffs’ inquiry was treated as a normal commercial question rather than a rejection of the existing offer.

Lush J explained that a counter-offer must clearly demonstrate unwillingness to proceed on the original terms unless alternative terms are accepted. Since the plaintiffs had not expressed such unwillingness, the original offer remained unaffected.

The court contrasted the facts with Hyde v Wrench, where the offeree had proposed entirely new terms, thereby terminating the original offer. In the present case, the communication was viewed differently because it merely requested information.

The court also clarified the law relating to revocation of offers. It accepted that a promise to keep an offer open is generally not binding unless supported by consideration. However, revocation itself is ineffective until actually communicated to the offeree.

In reaching this conclusion, Lush J relied upon earlier authorities including Tayloe v Merchant’s Fire Insurance Co and Byrne & Co v Leon Van Tienhoven & Co. The court rejected the defendant’s interpretation of Cooke v Oxley and reaffirmed the principle that communication is essential for revocation to take effect.

Since the plaintiffs accepted the offer before receiving notice of revocation, a valid contract had been formed.

Stevenson, Jaques, & Co v McLean Case Summary

Stevenson, Jaques, & Co v McLean remains an important authority on the law of offer and acceptance. The case established that a mere inquiry requesting clarification or asking whether terms can be modified does not amount to a counter-offer capable of extinguishing the original offer.

The decision also confirmed that revocation of an offer is ineffective until communicated to the offeree. An offeror may revoke an offer before acceptance, but the revocation must be received by the offeree before acceptance takes place.

The judgment clarified the distinction between a counter-offer and a request for information and reinforced the importance of communication in contractual negotiations. For this reason, the case continues to hold significance in English contract law concerning the formation of contracts through written communications such as telegrams.