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Cite as: [2012] ScotCS CSOH_18

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OUTER HOUSE, COURT OF SESSION

[2012] CSOH 18

A443/09

OPINION OF LORD KINCLAVEN

in the cause

PINECRAVEN CONSTRUCTION (GUERNSEY) LIMITED

Pursuer;

against

DOMINIC DONATO TADDEI and CLAIRE SUSANNE TADDEI

Defenders:

­­­­­­­­­­­­­­­­­________________

Pursuer: K Campbell, QC; Archibald Campbell & Harley WS

Defender: M O'Carroll, Advocate; Gillespie Macandrew

26 January 2012

Introduction

[1] This is an ordinary action in which the pursuer seeks certain payments from the defenders based on an alleged contract for the sale of heritable property in Melrose.

[2] The case came before me for debate on the Procedure Roll in relation to both parties' preliminary pleas to the relevance.

[3] On behalf of the defenders, Mr O'Carroll submitted that there was no binding contract. He invited me to sustain the first plea-in-law for the defenders and to dismiss the action - for the reasons set out in the defenders' note of argument. During the course of his submissions, Mr O'Carroll also suggested that I could sustain the second plea-in-law for the defenders and grant decree of absolvitor.

[4] On behalf of the pursuer, Mr Campbell submitted that there was a binding contract. Mr Campbell invited me to sustain the first plea-in-law for the pursuer and to grant decree de plano - for the reasons set out in the pursuer's note of argument. Towards the end of his submission Mr Campbell suggested that an appropriate way forward would be to repel the defenders' first plea-in-law and to put the case out "By Order" for further procedure

[5] In my opinion, having regard to the terms of the documents in this particular case and the authorities cited, the pursuer's arguments prevail.

[6] In the whole circumstances, and for the reasons outlined below, I shall repel the first plea-in-law for the defenders and put the case out By Order to hear parties on further procedure.

The Background

[7] The relevant print of the Closed Record is dated November 2010.

[8] Parties were agreed as to the relevant productions and there was no issue regarding formal validity of the documents.

[9] Helpfully, a bundle of copy authorities was produced.

[10] At the outset, on the defenders' unopposed motion and of consent, I repelled the pursuer's second plea-in-law which related to personal bar.

The Conclusions of the Summons

[11] In the conclusions of the summons, the pursuer sought inter alia:

1. Payment by the defenders jointly and severally of the sum of £120,000 Sterling with interest at the rate of five per centum per annum above the base rate from time to time of the Bank of Scotland from 15 April 2009 until payment; and

2. Payment by the defenders jointly and severally of the sum of £14,105.59 Sterling with interest at the rate of eight per centum per annum from 15 April 2009 until payment.

Productions

[12] I was referred to the following productions:

"6/1 Copy Missive letter dated 13 April 2007;

6/2 Copy Missive letter dated 26 April 2007;

6/3 Copy Missive letter dated 2 May 2007;

7/1 Letter dated 13 April 2007; and

7/2. "Sending confirmation" dated 26 April 2007.

The Documents

[13] As the terms of the documents are important, it might be helpful to set them out in a little detail.

[14] The letter dated 13 April 2007 (No 6/1 of Process) was from Messrs Cullen Kilshaw, Solicitors in Peebles, to Solicitors Direct, in Aberdeen, and it contained inter alia the following terms:

"On behalf of and as instructed by our clients, PINECRAVEN CONSTRUCTION (GUERNSEY) LIMITED, ... (hereinafter referred to as 'the seller') we hereby offer to sell to your clients, Dominic Donato Taddei and Mrs Claire Susanne Taddei, spouses, ... (hereinafter referred to as 'the purchaser') ALL and WHOLE the subjects known as Plot 25 Trimontium Heights, Dingleton Road, Melrose as the solum of Plot 25 is delineated and outlined in pink on the location plan annexed and signed as relative hereto together with the newly-built 'Teviot Handed' style detached dwellinghouse to be erected thereon (hereinafter referred to as 'the subjects of sale') and that on the following terms and conditions:-

Price

1. The purchase price shall be FOUR HUNDRED AND FORTY FIVE

THOUSAND POUNDS (£445,000) Sterling, payable as follows:-

A non-refundable deposit of FIVE THOUSAND POUNDS (£5,000) Sterling, will be paid in this case within fourteen days of conclusion of the contract. The remaining balance of the purchase price amounting to FOUR HUNDRED AND FORTY THOUSAND POUNDS (£440,000) Sterling will be paid on the date of entry hereinafter specified.

Date of Entry

2. The date of entry when vacant possession will be given will be the date seven days after the subjects of sale have been inspected and passed by Scottish Borders Council as fit for habitation, or 31st December 2008 whichever shall be the later ('the date of entry'), when full payment of the purchase price shall be made. Consignation of the price or any part thereof will not be accepted. ...

Timeous Payment

4. It is an essential condition of the Missives that the deposits, purchase price and the cost of any extras are paid by the purchaser on the due dates therefor. Consignation of the price will not be accepted as equivalent to payment and no retention from the price will be permitted. Payment on the due dates will only be made timeously and be deemed to be made timeously if paid by cleared funds received in a bank account in the name of this firm (as shall be specified to the purchaser not later than the day prior to the date of entry) by 12 noon on the date of entry. If the price or any part thereof is not paid timeously on the due dates therefore interest on the price or the balance thereof outstanding shall accrue at five per centum per annum above the Base Lending Rate of the Bank of Scotland plc from time to time until payment has been made in full and that notwithstanding consignation and whether or not entry has been taken in fact by the purchaser.

Delay in Payment

5. Failure to pay the deposit(s) and balance of the purchase price and the price of any variations and any interest thereon in full within seven days of the due dates will constitute a material breach of the Missives entitling the seller to:-

5.1 Rescind the Missives by notice to the purchaser at any time thereafter but prior to payment of the full amount of the price, the price of variations and any interest due thereon; and

5.2 Resell the subjects and recover from the purchaser notwithstanding that the seller has so rescinded the Missives.

5.2.1 any shortfall between the price on such re-sale and the purchase price under the Missives; and

5.2.2 interest at the rate hereinbefore specified on the purchase price payable in terms of these Missives from the duet date for payment under these Missives until the contractual date of entry in a re-sale, and, if there be any such shortfall, on such shortfall until such shortfall is received in full by the seller; and

5.2.3 all expenses of re-advertising together with all legal and other professional expenses and any other disbursements incurred in connection with the re-sale; and

5.2.4 all other loss and damage sustained by the seller as a result of the purchaser having failed to settle the price timeously.

5.3 Exercise the rights and remedies available to the seller in terms of this clause without prejudice to any claims for damages or other claims competent or which may be competent to the seller against the purchaser as a result of the material breach of the Missives by the purchaser and the damages which the seller may claim by law or by virtue of this clause shall be deemed to be exigible notwithstanding that the seller may exercise the right to rescind the Missives and for this purpose the seller's claim to interest shall be deemed to be a liquidate damages provision (representing the seller's loss of use of the purchase price) exigible after rescission of the Missives.

5.4 For the avoidance of doubt, in computing the interest and the period of seven days hereinbefore referred to in this clause there shall be disregarded any period during which the delay in payment is directly attributable to fault or delay on the part of the seller or the seller's agents. ...

Settlement

10. In exchange for the purchase price there will be delivered a valid Disposition of the subjects of sale in favour of the purchaser in the form of the draft Disposition annexed and signed as relative hereto ...

Missives

19. The missives will at date of conclusion thereof represent the complete agreement between seller and purchaser relating to the sale and purchase of the subjects and will supersede any previous agreements between the seller and the purchase relating to such sale and purchase. The missives, with exception of condition 12 hereof, shall remain in full force and effect for a period of one year only after the date of entry in terms of the Disposition in so far as unimplemented thereby and except as founded upon in any court proceedings commenced within the said period.


Assignation of rights

20. The purchaser is prohibited from assigning or otherwise dealing with their interest in the missives and the purchaser is also prohibited from either effecting a sub-sale of the subjects of sale prior to the date of settlement of the purchase transaction, or appointing a nominee to take title to the subjects of sale in place of the purchaser. Prior to the date of settlement of the purchase transaction, the purchaser shall be prohibited from marketing the subjects of sale and/or entering into a contract for the onward sale of the subjects of sale. In the event of any breach of the terms of this condition, it shall be available to the seller to resile from the missives without penalty and to retain the deposit.

Time Limit

21. This offer unless sooner withdrawn is open for acceptance in writing reaching us not later than 12 noon fourteen days from the date hereof. The purchasers agree that if this offer is not accepted within the time limit aforementioned the offer shall be null and void."

[15] The letter dated 13 April 2007 (No 7/1 of Process), was a covering letter from Cullen Kilshaw to Solicitors Direct which stated inter alia:

"We now enclose our standard offer of sale for your attention.

We look forward to receiving your formal letter concluding the bargain within the time limit stipulated, failing which our clients reserve the right to remarket the property."

[16] The letter dated 26 April 2007 (No 6/2 of Process), which was from Solicitors Direct in Aberdeen to Cullen Kilshaw DX 540979, was in the following terms:

"Dear Sirs,

Mr and Mrs Dominic Taddei

Plot 25 Trimontium Heights, Dingleton Road, Melrose

Pinecraven Construction (Guernsey) Limited

On behalf of and as instructed by our clients Mr and Mrs Dominic Taddei we hereby accept the terms of your offer dated 13th April 2007 but subject to the following modification:-

1. With reference to your Condition 20 the second sentence is deleted.

Yours faithfully, ..."

[17] The "sending confirmation" dated 26 April 2007 (No 7/2 of Process) related to the fax transmission of the qualified acceptance (No 6/2 of Process) from Solicitors Direct fax number to Cullen Kilshaw's fax number. The start time of the fax transmission was stated to be 09.55 on 26 April 2007.

[18] The letter dated 2 May 2007 (No 6/3 of Process) was from Messrs Cullen Kilshaw to Solicitors Direct and was in the following terms:

"We refer to:-

1. Our formal offer dated 13th April 2007 on behalf of our clients Pinecraven Construction (Guernsey) Limited being an offer to sell to your clients the subjects known as and forming Plot 25 Trimontium Heights, Dingleton Road, Melrose;

2. Your formal letter on behalf of your clients Mr & Mrs Dominic Taddei dated 26th April 2007.

On behalf of and as instructed by our clients we hereby accept the terms of your formal letter dated 26th April 2007 and accordingly hold the bargain between our respective clients to be concluded."

List of Authorities

[19] I was provided with the following authorities:

1. Gloag, The Law of Contract (2nd edition), pages 36-40, particularly at page 36;

2. McBryde, The Law of Contract in Scotland (3rd edition), at paragraphs 6-38, 6-39, 6-48, and 6-92 to 6-94;

3. Rennie and Cusine, Missives (2nd edition), at paragraph.3.14;

4. McQueen and Thomson; Contract Law in Scotland, at paragraph 2.22;

5. Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56 - although it was not specifically referred to in argument (waiver not being in issue).

6. Wolf and Wolf v Forfar Potato Co 1984 SLT 100, Lord McDonald at pages 106 and 107;

7. Rutterford v Allied Breweries Ltd 1990 SLT 249, particularly Lord Caplan at page 252;

8. Findlater v Mann 1990 SC 150, at pages 151 and 153 (the sheriff), 155 and 156 (the sheriff principal) and 159, 160, 161, 163 and 164 (The Lord Justice Clerk);

9. McMillan v Caldwell 1990 SC 389, Lord Kirkwood at page 397; and

10. Howgate Shopping Centre Ltd v GLS 164 Ltd 2002 SLT 820, Lord Macfadyen at paragraph [25].

The Pursuer's Averments

[20] It might be helpful to outline the pursuer's position on Record.

[21] Article 1 of condescendence relates to the parties and jurisdiction and is in standard terms. Jurisdiction was admitted by the defenders.

[22] In Article 2 the pursuer avers inter alia that:

"The pursuer is a property development company. By missives dated 13th April, 26th April and 2nd May 2007 ('the Missives') the pursuer agreed to sell and the defenders agreed to buy heritable subjects known as and forming Plot 25 Trimontium Heights, Dingleton Road, Melrose ('the Subjects'). Copies of the Missives are produced and referred to for their terms, which are held incorporated herein brevitatis causa. With reference to the averments in answer, clause 21 of the offer dated 13th April 2007 is referred to for its terms, beyond which no admission is made. Quoad ultra denied. Explained and averred that the defender's formal letter dated 26th April 2007 was a counter-offer and contained no provision about period for acceptance. The contract was concluded by the pursuer's formal letter dated 2nd May 2007. ..."

[23] In Article 3 the pursuer avers that:

"In terms of the Missives, the purchase price was £445,000. The defenders paid £5,000 on conclusion of the Missives. The balance of the purchase price was due to be paid on the date of entry. In terms of the Missives, the date of entry was the later of the date seven days after the Subjects had been inspected and passed by Scottish Borders Council as fit for habitation, or 31st December 2008. Completion certificates were issued on 4th December 2008. By letter dated 16th December 2008 the pursuer's agents intimated that the date of entry in terms of the Missives would therefore be 31st December 2008, and that settlement would be accepted on 5th January 2009, being the first business day thereafter. The averments in answer are denied except insofar as coinciding herewith."

[24] In Article 4 the pursuer avers that:

"The defenders declined to settle the purchase in terms of the Missives. Their agents indicated in correspondence dated 19th December 2008 that they would not do so. By letter dated 5th January 2009, the pursuer's agents formally called on the defenders to complete. The defenders failed to do so. The pursuer caused the Subjects to be re-marketed. Missives were concluded on 15th April 2009 for sale of the Subjects to a third party. The price was £320,000. The date of entry was 15th April 2009. The pursuer incurred the costs hereinafter condescended upon in connection with this sale. The averments in answer are denied except insofar as coinciding herewith."

[25] In Article 5 the pursuer quotes in detail from condition 4 and condition 5 of the offer dated 13 April 2007 (No 6/1 of Process) - which I have already set out above.

[26] In Article 6 the pursuer avers:

"In terms of the Missives, the pursuer is entitled to payment of the shortfall in the purchase price which the defenders were due to pay, and the price which it received in the sale which was concluded on 15th April 2009. The shortfall is £120,000. In terms of the Missives, the pursuer is entitled to interest on that sum at the rate of 5% per annum above the base rate from time to time of the Bank of Scotland from the date of resale until payment. That is the sum first concluded for. The averments in answer are denied except insofar as coinciding herewith."

[27] In Article 7 the pursuer avers:

"In terms of the Missives, interest ran on the purchase price from the date of entry until resale at the rate of 5% per annum above the base rate from time to time of the Bank of Scotland. For the period 12th January - 15th April 2009 the total due is £6,702.46. In terms of the Missives, the pursuer is entitled to recover the costs of re-marketing the Subjects. The pursuer incurred estate agency fees of £3,835.25. It incurred advertising costs of £1,957.88. It incurred legal fees of £1,610.00. The total of these sums is £14,105.13. That is the sum second concluded for. The averments in answer are denied except insofar as coinciding herewith."

[28] Article 8 is in standard form to the effect that the defenders refuse, or at least delay unreasonably, to make payment and that the action is therefore necessary.

[29] The pursuer's pleas-in-law are as follows:

"1. The defences being irrelevant et separatim being lacking in specification, decree de plano should be pronounced.

2. The defenders being personally barred from denying the existence of the contract, the pursuer is entitled to decree as first and second concluded for. (As mentioned above this plea was repelled on the defenders' motion of consent.)

3. The pursuer being contractually entitled to payment of the shortfall in the price of the Subjects, decree should be pronounced as first concluded for.

4. The pursuer being contractually entitled to payment of the interest on the purchase price and the costs of re-marketing the Subjects, decree should be pronounced as second concluded for".

The Defenders' Averments

[30] In Answer 2 the defenders aver:

"Admitted that the pursuer is a property development company. Quoad ultra denied. Explained and averred that no binding offer to sell and to purchase the heritable subjects known as and forming Plot 25 Trimontium Heights, Dingleton Road, Melrose was made between the parties. Explained and averred that by letter dated 13 April 2007, the pursuer, through their agents, offered to sell the subjects to the defenders for the sum of £445,000. Said missive contained the following condition at clause 21 ... [which I have set out in full above]. ... Accordingly the defenders had until 12 noon on 27 April 2007 to accept said offer. Explained and averred that by letter dated 26 April 2007, agents acting for the defenders sent a qualified acceptance to the pursuers accepting their offer dated 13 April 2007 but subject to the deletion of [the second sentence of] Condition 20 thereof which related to onward sale of the subjects. They did not seek to delete condition 21 as set out herein. No further correspondence was entered into prior to 12 noon on 27 April 2007, either to agree the condition in the qualified acceptance dated 26 April 2007 or to vary the condition relating to the time limit set out by the pursuers. Accordingly, as that time, and in terms of the pursuer's letter of missive dated 13 April 2007, their offer became null and void as it had not been finally accepted. Explained and averred that the pursuer's agents sent a letter to agents for the defenders dated 2 May 2007 purporting to conclude the contract between the parties. Explained and averred that said letter was of no effect since as of 12 noon, 6 days prior, the original offer had become null and void and missives could not be concluded thereby. There was no binding contract between the parties. The said offer and qualified acceptance are produced, referred to for their terms and for the sake of brevity held to be incorporated herein. Admitted that the defenders paid a deposit of £5,000 to the pursuers. Explained and averred that the payment of a deposit does not constitute a binding contract between the parties. ... [There then followed averments in rebuttal of the pursuer's plea relating to personal bar which has now been repelled of consent]. ... Explained and averred that by letter dated 1 July 2008, solicitors for the pursuers wrote to the defenders' solicitors announcing that they were proceeding to construct the Subjects in the full knowledge that the defenders were unable to pay the purchase price for the Subjects and no longer wished to conclude the purchase having been so informed on 6 or 18 June 2008. Explained that any loss incurred by the pursuers in constructing the Subjects and exposing them for sale was a loss of their own making and not one induced by the words or actings on the part of the defenders."

[31] In Answer 3 the defenders aver:

"Admitted that the purchase price was to be £445,000. Admitted that the defenders paid the pursuer £5,000 by way of deposit. Admitted that there were other clauses contained within the terms of the missives under explanation that they were all void and of no effect. Explained and averred that by letter dated 19 December 2008 agents for the defenders sought return of the deposit of £5,000 in the foregoing circumstances. Reference is made to the preceding answer. Quoad ultra denied."

[32] In Answer 4 the defenders aver:

"Admitted that the defenders declined to pay the remainder of the purchase price as indicated by their agents by their said letter dated 19 December 2008. Admitted that by letter dated 5 January 2009 agents for the pursuer formally called upon the defenders to complete, which demand was refused under explanation that they had no contractual basis for doing so. Believed to be true that the pursuer remarketed the subjects and that missives were concluded with a third party therefor. Quoad ultra denied."

[33] In Answer 5 the defenders aver:

"Admitted that there were other clauses contained within the terms of the missives under explanation that they were all void and of no effect. Reference is made to answer 3 hereof. Quoad ultra denied."

[34] Answers 6, 7 and 8 were basically denials.

[35] The defenders' pleas-in-law are as follows:

"1. The pursuer's averments being irrelevant et separatim lacking in specification, the action should be dismissed.

2. There being no binding contract between the parties, the offer of sale being null and void in its own terms, the defenders should be assoilzied.

3. The defenders not being barred from denying the existence of any contract between the parties, the defenders should be assoilzied.

4. The pursuer's averments insofar as material, being unfounded in fact, the defenders should be assoilzied."

The Defenders' Submissions

[36] As noted above, the pursuer's second plea-in-law in relation to personal bar was repelled on the unopposed motion of the defenders and of consent. Thereafter, Mr O'Carroll insisted upon the defenders' first plea-in-law for essentially two reasons

[37] The first line of argument for the defenders was as follows. In Article 2 of condescendence, the pursuer avers that a binding contract of sale for the subjects known as Plot 25 Trimontium Heights was concluded between the pursuer and the defenders. The pursuer further avers that the contract was concluded by the pursuer's formal offer letter of 2 May 2007. The remaining averments, and thus the action against the defenders, are irrelevant because of Clause 21 of the original offer dated 13 April 2007. That clause provided that the offer was open for acceptance until 12 noon on 27 April 2007 and thereafter would be null and void. No unqualified acceptance of the offer of 13 April 2007 was made by the defenders prior to that date (i.e. prior to 27 April 2007) and therefore the offer lapsed in its own terms. The pursuer's' formal offer letter of 2 May 2007 was thus of no effect and no bargain in law was concluded between the parties to this action.

[38] The second line of argument was to the following effect. In Articles 5 and 6 of condescendence, the pursuers make averments regarding the interest clause contained within the offer letter dated 13 April 2007 and the contractual terms relating to non-payment of the purchase price which purport to entitle the pursuers to claim any shortfall between the purchase price in terms of the alleged missives and the re-sale price of the subjects and to interest thereon. Said averments of loss are irrelevant given that the contractual terms relied upon are null and void and of no effect given the operation of clause 21 of the offer letter as aforesaid. The second line of argument really stands or falls with the first

[39] The action ought therefore to be dismissed - so argued the defenders. During the course of his submissions, Mr O'Carroll also suggested that I could sustain the second plea-in-law for the defenders and grant decree of absolvitor.

The Pursuer's' Submissions

[40] Mr Campbell insisted on the pursuer's first plea-in-law and sought decree de plano. He did so on the following bases.

[41] The missives in dispute comprise formal letters dated 13 April, 26 April and 2 May 2007. They are respectively Nos 6/1, 6/2 and 6/3 of Process.

[42] The defenders' averments anent the character of the missives (in Answer 2 at page 4-B-F of the Record) are irrelevant because they conflate the terms of clause 21 of the offer dated 13 April 2007 (No 6/1 of Process) with the legal character of the letter of 26 April 2007 (No 6/2).

[43] The first letter is clearly an offer to sell. Clause 21 of that letter provided that:

"This offer unless sooner withdrawn is open for acceptance in writing reaching us not later than 12 noon fourteen days from the date hereof. The purchasers agree that if this offer is not accepted within the time limit aforementioned the offer shall be null and void".

[44] The pursuer contends that the letter dated 26 April 2007 ((No 6/2) is properly to be understood to be a counter offer by the defenders which was open for acceptance by the pursuer. That letter dated 26 April 2007 (No 6/2) contains no provision about a period within which it may be accepted, and the pursuer therefore had a reasonable time to accept. The pursuer did so 6 days later - in the letter dated 2 May 2007 (No 6/3). There was therefore a concluded contract.

[45] Accordingly, decree should be pronounced de plano - so submitted the pursuer. Towards the end of his submission, however, Mr Campbell suggested that an appropriate way forward would be to repel the defenders' first plea-in-law and to put the case out "By Order" for further procedure

Authorities

[46] The following authorities were referred to during the debate:

Gloag, The Law of Contract (2nd edition)

[47] Professor Gloag said this, at page 36:

"Time Allowed for Acceptance. - Where no time is fixed for acceptance, it is conceived that the law is that the offer is open for a time reasonable in the circumstances. It is true that it is laid down in Bell's Commentaries (i. 343) that where an offer is made simply the common law is that it may be accepted at any time until it is withdrawn. But there is authority for holding that this is a mistake."

McBryde, The Law of Contract in Scotland (3rd edition)

[48] Professor McBryde said this, at paragraphs 6-38, 6-39, 6-48, and 6-92 to 6-94:

"Duration of an offer

6-36 An offer may lapse and can no longer be accepted on the occurrence of certain events. These are: (1) rejection by the offeree; (2) lapse of time; (3) revocation by the offeror; (4) material change of circumstances; and (5) death and insanity.

(1) Rejection by the offeree

6-37 It is reasonable in principle that if the offeree indicates, expressly or impliedly, that the offer is not accepted, the offer lapses. The offeree could reject the offer outright or reply with a counter‑offer. Either is rejection, although one is express and the other may be implied. ...

6-38 A reply which commences with "I accept the offer subject the following conditions" is often treated as a counter offer and thus rejection of the offer. This is despite the fact that it is a normal part of the bargain for the sale of heritage which includes the original offer, although at the stage of the reply the bargain is inchoate. However, an inquiry about the terms of an offer, or an indication that it is being considered, is not rejection of the offer.

6-39 It is obvious that whether the reply by the offeree is to be treated as a rejection or not may be difficult to decide on the facts. As it depends on interpretation of the actings of the offeree, decisions on other circumstances would not be conclusive. The problem is illustrated by the cases noted [a reference to a footnote including Woolf and Woolf v Forfar Potato Co discussed later at paragraph 6-93]. Scottish authority sometimes cited does not clearly demonstrate the point. [a reference to a footnote which included Gloag at page 37] ...

(b) Reasonable time

6-48 If the offer fixes no time for acceptance, it must be accepted within a reasonable time. Professor Bell said that an offer could be accepted until it was withdrawn except in cases of mercantile transactions where it must be accepted without delay. This dictum was noted in Murray v Rennie & Angus without a decision on it accuracy. In Hall-Maxwell v Gill, Lord Stormonth Darling decided that it was wrong. He quoted Stair:

"if the acceptance be not adhibit presently, or within the time expressed in the offer, in which the other party hath liberty to accept, there ariseth no obligation".

There are dicta in Thomson v James to the effect that an offer lapses after a reasonable time. Similarly, Lord President Inglis in Glasgow Steam Shipping Co v Watson said: "every offer requires to be timeously accepted". ...

Qualified acceptance

6-92 Subject to what has been said about terms which have no effect on the parties' bargain, an acceptance which contains conditions additional to, different from, or modifying, the offer amounts to a counter‑offer. A contract is concluded when the qualifications in the acceptance are in turn accepted, without qualification, by the original offeror. The process of exchanging communications containing qualifications can proceed until the patience of the parties is exhausted. A consequence may be that the final contract is on terms which are materially different from those contained in the original offer. The general rule appears to be that a qualified acceptance is rejection of the offer. (Findlater v Maan, 1990 SC 150 (cf. opinion of Sheriff Principal); McMillan v Caldwell, 1990 SC 389 at 397 per Lord Kirkwood; Ferguson v MacLennan Salmon Co Ltd, 1990 S.C. 45 at 52 per Lord McCluskey; Rutterford Ltd v Allied Breweries Ltd, 1990 S.L.T. 249; Tenbey v Stolt Comex Seaway Ltd, 2001 S.C. 638.)

6-93 In Wolf and Wolf v Forfar Potato Co it was held that after the making of a qualified acceptance there was not in the circumstances of the case an unqualified acceptance of the original offer. The qualified acceptance was a counter‑offer and a later telex from the acceptor did not withdraw these qualifications. Two of the judges in the Second Division founded on a passage in Gloag (at page 37) which reads:

"An offer falls if it is refused. If the refusal is not peremptory, but combined with request for better terms, the general construction is that the offer is gone, and that the party to whom it was made, on failure to obtain the terms he requests, cannot fall back on an acceptance of the original offer".

Despite this general expression, it may not always apply. Lord McDonald observed (in Wolf and Wolf at page 106) that if the parties continue to negotiate there could be a concluded contract based on the terms of the original offer.

6-94 Wolf and Wolf was not concerned with this problem, namely (1) an offer followed by (2) a qualified acceptance followed by (3) a withdrawal of qualified acceptance and transmission of unqualified acceptance of the original offer. If the original offer is open for acceptance there will be a concluded contract. The doubt arises as to whether stage (2) - the qualified acceptance - is a rejection of the offer. The normal rule is that the qualified acceptance is rejection of the offer which can no longer be accepted. Despite this it is a result which may be difficult to explain. A buyer who submitted an offer would not be told by his or her solicitor that the seller had sent a qualified acceptance which was a rejection of the offer. The very phrase "qualified acceptance" is illustrative of what is really happening. An offer followed by a qualified acceptance is a normal part of the process for conclusion of missives. When missives are finally concluded the contract includes the original offer, subject to qualification of its terms. Rejection of an offer, or the making of a fresh offer, is a more positive step than an acceptance subject to qualifications, although obviously it may sometimes be difficult to categorise any particular communication. That an offer could be incorporated into a qualified acceptance is apparent from Lord Macfadyen's opinion in Howgate Shopping Centre Ltd v GLS 164 Ltd. The effect of a qualified acceptance is not completely to remove the original offer from consideration as a contractual document. In the days when stamp duty was payable on an agreement it was the practice to take or send all the documents, including the original offer, to the stamp duty office for stamping. Similarly, the offer would be part of the documents founded on if the contract were to be enforced, rectified or reduced."

Rennie and Cusine, Missives (2nd edition)

[49] Professors Rennie and Cusine said this at paragraph.3.14:

"Time for acceptance and time limits

3.14 It is normal practice for an offer to contain a time limit for acceptance. This is not to bind the offerer to keep the offer open for a set period but to ensure that the acceptor must accept within a set period. Care must, however, be taken in the framing of such a clause otherwise the offerer can be held bound to keep the offer open during the period of the time limit with the effect that he or she is precluded from withdrawing. In order to avoid complications arising from the 'postal rule' it is usual to provide that the acceptance must reach the other party by a particular time on a specified date.

Assuming the time limit is properly drafted then the offer can be withdrawn at any time before acceptance. The general rule as to timing is that the offer is effective when it is received but an acceptance is effective from the date of posting. This apparently applies even although the acceptance is held up by postal delay. This of course assumes that the acceptance is a clear and complete acceptance of the offer and not a qualified acceptance setting out new terms. Qualified acceptances are, of course, new offers. If an offer contains no time limit then it must be accepted within a reasonable time. The question of what is a reasonable time is a question of fact and circumstance to be decided in each particular case. It is clear that it is preferable to include a time limit in any offer. ... "

McQueen and Thomson, Contract Law in Scotland.

[50] Professors McQueen and Thomson said this at paragraph 2.22:

"When an offer stipulates that it must be accepted within a time limit, an acceptance must be communicated to the offeror within that period. If no acceptance has been received during that period, the offer will automatically lapse when the time limit expires. If no time limit is stipulated, an offer will lapse after a reasonable period: what is reasonable will depend on the commercial environment in which the offer is made."

Wolf and Wolf v Forfar Potato Co 1984 SLT 100

[51] I was referred in particular to pages 106 and 107 where Lord McDonald said:

"I accept that a qualified acceptance can properly be regarded as a counter-offer which in turn requires acceptance by the original offeror before the bargain is complete. I also accept that if the qualifications are unacceptable to the original offeror he is entitled to regard his original offer, including any time-limit contained therein, as having fallen. If, however, he continues to negotiate with the offeree and the latter, within the period of the original time-limit, unreservedly accepts the original offer, I feel that the offeror may well be barred from maintaining at a later date that no bargain had been concluded."

Rutterford v Allied Breweries Ltd 1990 SLT 249

[52] I was referred in particular to page 252 where Lord Caplan said:

"In my view counsel for the defenders were quite correct when they contended that the effect of the qualified acceptance of 11 October 1988, was to set up a counter offer which supplanted and cancelled out the offer represented by the defenders' acceptance dated 29 September. The law on the matter may not be supported by voluminous authority but the authority which exists is clear and has remained uncontradicted over a long period of time. Professor Gloag sets out in his textbook on Contract at p. 37of the 2nd edition, the position as he understood it. Certainly the effect of Hunter v Hunters (one of the two cases he relies on) is somewhat obscure but Hyde v Wrench is a clear enough case and appears to proceed upon good principles which would be common to both Scots and English law. That Hyde v Wrench is still the cornerstone of English law on the relevant topic was made clear by the judicial observations in Butler Machine Tool Co. Ltd v Ex‑Cell‑O Co (England) Ltd.

The position in Scotland has been made no less clear in the recent case of Wolf and Wolf v Forfar Potato Co. As Lord Robertson observes at p. 106, the rule spoken to by Gloag accords with common sense. In the case of an offer with no time limit attached, the offer by implication remains open for a reasonable time and that would include such time as in all the particular circumstances of the case may reasonably be required to allow the offeree to reply. However, when the offeree replies by way of a qualified acceptance he is, in effect, saying this is my response to your offer. The focus then shifts to the original offeror who has to consider whether or not he will accept the counter proposals. He does not require to consider whether or not specifically to withdraw his original offer for he already has had the offeree's response to it. If the position were otherwise there would effectively be two offers affecting the same subjects on the table at the same time. If the original offeror were to accept the qualified acceptance simultaneously with the offeree withdrawing his qualified acceptance and accepting the original offer, the considerable practical difficulties could emerge. ... The great advantage of the law as I understand it to be is that it is clear and certain."

Findlater v Mann 1990 SC 150.

[53] I was referred in particular to pages 151 and 153 (the sheriff), 155 and 156 (the sheriff principal) and 159, 160, 161, 163 and 164 (The Lord Justice Clerk).

[54] In Findlater v Mann the sheriff dismissed the action. In the note appended to his interlocutor the sheriff said this:-

"The argument by the solicitor to the defender was dependent on the dictum in Gloag on Contract, at p. 37 to the following effect: 'An offer fails if it is refused. If the refusal is not peremptory, but combined with a request for better terms, the general construction is that the offer is gone, and that the party to whom it was made, on failure to obtain the terms he requests, cannot fall back on an acceptance of the original offer'. He also made reference to the case of Wolf & Wolf v Forfar Potato Co. 1984 S.L.T. 100 which he said was authority for the proposition that on the making of a qualified acceptance and counter‑offer the original offer falls and that on the failure to obtain the terms requested in the counter‑offer the party cannot fall back on and accept the original offer. ...

I also mention the passage in Gloag on Contract at p. 39: 'When the construction of a reply to an offer is in question, the difficulty has been to distinguish between an actual, through perhaps hesitating and reluctant , acceptance and an offer to accept if the offerer is prepared to alter his terms. In the former case the contract is complete; in the latter the reply is in effect a new offer and there is no contract unless the original offerer accedes to it'."

[55] The pursuers appeal to the sheriff principal. The sheriff principal stated inter alia:-

"The circumstances of this case appeared to the learned sheriff to be indistinguishable from those in Wolf & Wolf v Forfar Potato Co. Ltd. 1984 S.L.T. 100. ... In reply to this argument the agent for the respondent defender repeated the argument that the Sheriff had accepted, namely, that the circumstances in this case were indistinguishable from those in Wolf & Wolf, and accordingly none of the letters under examination was other than a qualified acceptance. In other words a rejection. Accordingly the pursuers could not revive and accept the original offer and accordingly it could not be said that there was a concluded contract. ... The circumstances in this case are, it seems to me, rather more akin to the circumstances figured by Lord McDonald who remarked, in Wolf & Wolf at pp. 106-107 ... [quoting the passage set out above at paragraph [51] hereof]. Lord McDonald, in my respectful view, was envisaging circumstances such as appertain here, namely, circumstances where communings reflecting continuing negotiations might ultimately reflect a concluded contract."

[56] In the result, the sheriff principal allowed the pursuers' appeal. Consensus had been achieved.

[57] The defender then appealed to the Court of Session.

[58] The Lord Justice Clerk (Ross) said inter alia (at pages 159 and 160):

"Against the sheriff's interlocutor dismissing the action the pursuers appealed to the sheriff principal. The sheriff principal allowed the appeal and proceeded to pronounce decree of declarator. The defender has now appealed against that interlocutor of the sheriff principal. The approach of the sheriff principal differed from that of the sheriff. The sheriff had examined the correspondence and had determined whether the letters were offers, counter‑offers or acceptances. The sheriff principal on the other hand stated:- "In my opinion parties communings here cannot be construed as a series of offers and counter‑offers. What we have here is a series of letter continuing negotiations and reflecting both parties' willingness to contract and both parties' expectations that consensus would be achieved" [supra at p. 157].

It is clearly necessary to consider whether consensus has been achieved, but, with all respect to the learned sheriff principal, I am not persuaded that this case can be determined merely by considering whether the letters show that parties were in negotiation. In my opinion, it is necessary to analyse the correspondence and determine whether each letter was an offer, a counter‑offer or an acceptance.

The first letter in the series is a letter dated 25 March 1988 from the pursuers' solicitors to estate agents offering to purchase the subjects in question upon certain terms and conditions. Condition 21 provides that unless the offer is previously withdrawn in writing it is open for acceptance to reach the pursuers' solicitors not later than 4 p.m. on 29 March, failing which the offer will be deemed to have been withdrawn. It is not suggested in this case that the offer was accepted by 29 March 1988, but as parties continued to exchange letters after that date, I am of the opinion that the pursuers must impliedly have departed from this time-limit. In making their submissions to the court neither of the parties founded upon this time-limit.

The next letter in the series is a letter dated 28 March 1988 from the defender's solicitors to the pursuers' solicitors. This letter purported to accept the offer dated 25 March subject to certain qualifications stated in the letter. There was thus a qualified acceptance of the offer of 25 March 1988. Parties were agreed that this qualified acceptance fell to be regarded as, in effect, a new offer or counter‑offer. (Gloag on Contract (2nd edn.) at p. 39.)"

[59] At page 161 The Lord Justice Clerk said:

"In these circumstances, it appears to me that the proper way to regard the correspondence in this case is as follows. On 25 March 1988 the pursuers made an offer to purchase the subjects. On 28 March 1988 the defender's solicitors sent a qualified acceptance of that offer, and that qualified acceptance falls to be treated as a new offer. It then appears that on 29 March 1988 the pursuers' solicitors sent a qualified acceptance of the acceptance dated 28 March 1988. This, in turn, also fell to be treated as a new offer. Likewise, on 30 March 1988, the defender's solicitors under reference to the offer and the qualified acceptance dated 28 March added a further qualification. This, in turn, meant that the letter of 30 March 1988 also fell to be regarded as a new offer. This meant that there were, as counsel put it, two offers on the table at the same time, namely, the letter of 29 March 1988 and the letter of 30 March 1988. ... "

[60] The Lord Justice Clerk was also of the opinion (at pages 163-163) that the pursuers were entitled to waive compliance with the condition and to withdraw it.

[61] In the result, the Lord Justice Clerk did not agree in all details with the approach adopted by the sheriff principal but he was of the opinion that he arrived at the correct conclusion, namely, that a valid contract had been concluded. Lords Murray and Morton of Shuna concurred. The appeal was refused.

McMillan v Caldwell 1990 SC 389,

[62] In McMillan v Caldwell Lord Kirkwood reduced the missives ope exceptionis, sustained the second plea in law for the defenders and pronounced decree of absolvitor.

[63] In the course of his opinion Lord Kirkwood said inter alia (at page 397):

"In this case the pursuer made a formal offer to purchase Ayton House and the offer was met by qualified acceptance. It is clear that the qualified acceptance constituted a counter offer which was open for acceptance by the pursuer and if there was a valid written acceptance by the pursuer then the bargain would have been concluded."

Howgate Shopping Centre Ltd v GLS 164 Ltd 2002 SLT 820

[64] I was referred in particular to paragraph [25] where Lord Macfadyen said inter alia:

"There is, in my view, no merit for counsel for the second defenders' submission that the pursuers' contention is precluded by the rules as to the effect of qualified acceptance. As cases such as Rutterford Ltd and Wolf and Wolf show, a qualified acceptance constitutes (a) a rejection of the original offer which precludes subsequent acceptance of it, and (b) a counter offer which is open for acceptance by the original offeror. But it cannot follow, as counsel appeared to argue, that the original offer falls out of consideration altogether. Reference to it is necessary if the qualified acceptance is to be understood. To the extent that it is accepted in the qualified acceptance the offer is in effect, incorporated into the counter offer. In the present case, where the qualification was restricted to the addition of the possibility that the lease might be taken in the name of a nominee of the original tenant, the effect is that the entirety of the original offer is incorporated into the qualified acceptance."

Conclusions

[65] In the circumstances of this particular case, having regard to productions and the authorities mentioned above, I have reached the following conclusions:

[66] In my view, it is important to bear in mind the precise terms of Clause 21 of the seller's letter dated 13 April 2007 (No 6/1 of Process).

[67] Clause 21 provides:

"Time Limit

21. This offer unless sooner withdrawn is open for acceptance in writing reaching us not later than 12 noon fourteen days from the date hereof. The purchasers agree that if this offer is not accepted within the time limit aforementioned the offer shall be null and void."

[68] As can be seen, Clause 21 relates specifically to "this offer".

[69] The word "acceptance" is clearly habile to include what the defenders referred to as a "clean acceptance" - i.e. an unqualified acceptance which concludes the bargain free of any condition.

[70] However, in my opinion, the word "acceptance" is broad enough to encompass a qualified acceptance such as the defenders' letter of 26 April 2007 (No 6/2 of Process).

[71] In my view, the defenders interpretation of Clause 21 is too narrow. "Acceptance" does not mean "clean acceptance". It also means "qualified acceptance".

[72] Clause 21 does not bear to be limited to "clean acceptance" or to an "acceptance concluding the bargain". It does not say "if this offer is not accepted and a bargain concluded within the time limit". It could easily have used words to that effect if that had been the intention.

[73] It also relates to what the purchasers are held to have agreed "if this offer is not accepted within the time limit" namely that "this offer shall be null and void".

[74] A qualified acceptance having been received (No 6/2 of Process) the requirements of Clause 21 (in No 6/1 of Process) were satisfied. Clause 21 had served its purpose. The time limit had been met and it had, in effect, flown off.

[75] In my opinion, the defenders' letter (No 6/2 of Process) was an "acceptance" within the meaning of Clause 21. It was qualified but it was nevertheless an "acceptance".

[76] Even if I am wrong about that, the pursuers' arguments, in my opinion, still prevail.

[77] It was common ground that a qualified acceptance is a counter offer. On that basis the question arises as to whether the defenders' letter of 26 April 2007 (No 6/2 of Process) included a time limit of the sort contended for by Mr O'Carroll.

[78] In my opinion it did not.

[79] Clause 21 does not lend itself, by its terms, to being incorporated into a counter-offer by the defenders. As mentioned above Clause 21 relates specifically to "this offer" (No 6/1 of Process). It also relates to what "the purchasers" are held to have agreed.

[80] If required, an express provision in relation to time limit could have been included in the defenders' counter-offer but there was no such provision.

[81] In some cases a time limit in an offer could be incorporated into a counter offer, or adapted and applied therein mutatis mutandis - but the wording of Clause 21 does not support that conclusion in the present case. Clause 21 would require to be largely re-written if a similar time limit was to apply following the counter offer. If it were to be incorporated into the counter-offer then Clause 21 would be "irredeemably ambiguous" - to use Mr Campbell's phrase.

[82] In my opinion, in the present case, the defender's counter offer was open for acceptance by the pursuer within a "reasonable time".

[83] In the present case the pursuer accepted the counter offer dated 26 April 2007 (No 6/2 of Process) timeously, within a reasonable time, by letter dated 2 May 2007 (No 6/3).

[84] In my view, in this case, there is a concluded binding contract.

[85] I have given anxious consideration to all the defenders' submissions, bearing in mind the substantial total sum in issue, but in my view the defenders' first plea-in-law falls to be repelled.

[86] I agree with Mr Campbell that the appropriate course is to put the case out "By Order" to hear parties on further procedure. All other pleas remain standing meantime.

Decision

[87] In the circumstances, and for the reasons outlined above, I shall repel the defenders' first plea-in-law.

[88] I will also appoint the case to be heard "By Order" on the question of further procedure.

[89] I will reserve the question of expenses.


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