Brogden v Directors of The Metropolitan Railway Company (1877) 2 App Cas 666

Brogden supplied coal to the Metropolitan Railway Company for years. When they attempted to formalise the arrangement, Brogden added terms to a draft contract and returned it marked 'approved', but no formal agreement was executed. Both parties acted on the terms. The House of Lords held a contract arose by conduct.

Facts

Mr Alexander Brogden, chief of a partnership, had supplied coal to the Metropolitan Railway Company for several years. Brogden suggested formalising their arrangement through a written contract. Metropolitan’s agents drew up draft terms and sent them to Brogden, who filled in blank sections, inserted the name of an arbitrator for resolving disputes, wrote ‘approved’ at the end, and returned the document. Metropolitan’s agent filed the documents but took no further formal action. Both parties then acted according to the draft agreement’s terms for a period of time until a dispute arose, at which point Brogden argued no formal contract had been established.

Issues

Primary Issue

Whether a binding contract could arise through the conduct of the parties where a draft agreement had been approved but not formally executed by either party.

Secondary Issue

Whether Brogden’s signature as ‘approved’ with his name bound all partners, despite not using the standard partnership signature.

Judgment

The House of Lords unanimously held that a binding contract had arisen through the parties’ conduct, and Brogden was liable for breach.

Lord Blackburn delivered the most detailed reasoning on the law of acceptance:

I have always believed the law to be this, that when an offer is made to another party, and in that offer there is a request express or implied that he must signify his acceptance by doing some particular thing, then as soon as he does that thing, he is bound.

Lord Blackburn distinguished between mere mental acceptance and acceptance demonstrated through conduct:

But when you come to the general proposition which Mr. Justice Brett seems to have laid down, that a simple acceptance in your own mind, without any intimation to the other party, and expressed by a mere private act, such as putting a letter into a drawer, completes a contract, I must say I differ from that.

Drawing on historical authority dating back to the time of Edward IV, Lord Blackburn emphasised that internal intention alone is insufficient:

your having it in your own mind is nothing, for it is trite law that the thought of man is not triable, for even the devil does not know what the thought of man is

On the key question of acting upon a draft agreement, Lord Blackburn stated:

if a draft having been prepared and agreed upon as the basis of a deed or contract to be executed between two parties, the parties, without waiting for the execution of the more formal instrument, proceed to act upon the draft, and treat it as binding upon them, both parties will be bound by it.

Implications

This case established the fundamental principle that contracts may be formed through conduct, even where formal execution of written agreements has not occurred. Where parties act upon the terms of a draft agreement, they may be taken to have waived the requirement for formal execution. The decision demonstrates that acceptance need not be communicated expressly but may be inferred from conduct that objectively manifests assent to the terms proposed. This principle remains central to English contract law regarding formation of agreements and acceptance by conduct.

Verdict: Appeal dismissed. The House of Lords held that a binding contract had been formed by the conduct of the parties, and Brogden was liable for breach of that contract.

Source: Brogden v Directors of The Metropolitan Railway Company (1877) 2 App Cas 666