Stevenson, Jacques & Co v McLean (1880) 5 QBD 346

McLean offered to sell iron warrants to Stevenson, open till Monday. Stevenson sent an inquiry about modified terms, which McLean ignored before selling to another party. The court held Stevenson's inquiry was not a counter-offer rejecting the original offer, and their subsequent acceptance created a binding contract.

Facts

The plaintiff, Stevenson, were iron merchants who purchased iron to sell to third parties. The defendant, McLean, held warrants (titles) for quantities of iron. On Saturday 27 September, McLean sent a telegram offering to sell iron to Stevenson for ’40s., nett cash, open till Monday’.

On Monday morning, Stevenson sent a telegram asking whether McLean would accept forty for delivery over two months, or if not, the longest limit McLean would allow. McLean did not respond to this inquiry and later that day sold all warrants to another party. McLean sent a telegram to Stevenson at 1.25pm advising that all warrants had been sold. However, prior to receiving McLean’s telegram, Stevenson had sent their own telegram at 1.34pm accepting the original offer. Stevenson subsequently sued McLean for non-delivery of iron warrants, alleging breach of contract.

Issues

Main Legal Questions

• Whether Stevenson’s telegraphic inquiry constituted a counter-offer, which would have extinguished McLean’s original offer.
• Whether McLean could revoke the offer before its acceptance by Stevenson.
• Whether McLean’s telegram at 1.25pm effectively revoked the original offer, notwithstanding that it was not received by Stevenson until after they had accepted the offer.

Judgment

Lush J held in favour of the plaintiffs. On the first issue, the court determined that Stevenson’s telegraphic inquiry was not a rejection of the offer but a mere inquiry about whether terms could be modified. The judge distinguished this from Hyde v Wrench 3 Beav. 334, where there had been a clear counter-offer.

There is nothing specific by way of offer or rejection, but a mere inquiry, which should have been answered and not treated as rejection of the offer.

On the second and third issues, the court held that whilst a unilateral promise to hold open an offer is not binding and can be revoked prior to acceptance, a revocation has no effect until it is actually communicated to the person to whom the original offer was made. Relying upon American authorities including Tayloe v Merchant’s Fire Insurance Co and Byrne & Co v Leon Van Tienhoven & Co, the court held that since Stevenson had not received McLean’s telegram of warrants sold before sending their acceptance, the original offer still stood and Stevenson’s acceptance resulted in a binding contract.

Lush J awarded the plaintiffs £1900 in damages, subject to any reduction by subsequent ruling.

Implications

This case established important principles in contract law regarding the distinction between a counter-offer and a mere inquiry for information. A request for information about whether terms might be modified does not constitute a rejection of the original offer. The case also confirmed that revocation of an offer must be communicated to the offeree before acceptance to be effective. The decision contrasts with the postal rule by requiring actual communication of revocation, and remains an important authority on the formation of contracts and communication of acceptance by telegraph.

Verdict: Judgment for the plaintiffs. The court held that Stevenson’s inquiry was not a counter-offer but a mere request for information, the original offer remained open, and Stevenson’s acceptance before receiving notice of revocation created a binding contract. Damages of £1900 were awarded to the plaintiffs.

Source: Stevenson, Jacques & Co v McLean (1880) 5 QBD 346