Heilbut Symons & Co v Buckleton [1912] UKHL 2 (11 November 1912)

An agent stated his firm was 'bringing out a rubber company.' The claimant bought shares, but the company wasn't solely for rubber. The House of Lords held this was an innocent misrepresentation, not a contractual warranty, establishing a high threshold for such claims.

Facts

The respondent, Mr Buckleton, contacted the appellants, Heilbut Symons & Co., a firm of rubber merchants, to inquire about shares in a new rubber and produce company. Mr Buckleton telephoned Mr Johnston, the appellants’ manager, and asked if they were ‘bringing out a rubber company’. Mr Johnston replied that they were. On the basis of this statement, Mr Buckleton purchased a significant number of shares. The company turned out not to be a pure rubber company as expected; a large portion of the planted trees were oil palms, not rubber trees. The share value subsequently fell, and Buckleton brought an action against Heilbut Symons, claiming damages for breach of warranty. The jury found that the statement amounted to a warranty.

Issues

The primary legal issue before the House of Lords was whether the appellants’ statement that they were ‘bringing out a rubber company’ constituted a binding contractual promise (a warranty) or was merely an innocent misrepresentation. A secondary, related issue was whether the evidence supported the existence of a collateral contract, separate from the main share purchase contract, in which the appellants warranted the nature of the company.

Judgment

The House of Lords unanimously overturned the decision of the Court of Appeal and held that there was no evidence to justify the jury’s finding of a warranty. The statement was deemed to be an innocent misrepresentation, which at the time did not give rise to a claim for damages.

Viscount Haldane L.C.

Viscount Haldane emphasised the fundamental distinction between a simple representation and a contractual warranty. He stated that for a statement to become a warranty, there must be a clear intention on the part of both parties that it should be a binding promise. He reasoned that in the context of a hurried telephone conversation, there was no evidence of such an intention to create a warranty. He was critical of any attempt to easily infer warranties from pre-contractual statements:

It is contrary to the general policy of the law of England to drag in by means of warranties a liability for the conduct of business upon which the rendering of the contract must depend.

He further stressed that collateral contracts must be proven with strict evidence of an intention to create legal relations (animus contrahendi):

…they must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shewn.

Lord Moulton

Lord Moulton delivered the most influential judgment, which clearly laid out the high bar for establishing a collateral contract. He explained that statements made during negotiations could fall into three categories: fraudulent misrepresentation, innocent misrepresentation, or a contractual term (warranty). He affirmed the then-established principle that no damages could be claimed for a purely innocent misrepresentation. His core argument was that an ‘animus contrahendi’ (an intention to contract) is the vital ingredient for a warranty, and it was absent in this case. He expressed a deep suspicion of collateral contracts that add to or vary a main written contract:

Such collateral contracts, the sole effect of which is to vary or add to the terms of the principal contract, are therefore viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shewn. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have the effect of lessening the authority of written contracts.

He concluded that the conversation between the parties showed no evidence of an intention to create a warranty; it was a simple, honest response to a question.

Implications

The decision in Heilbut, Symons & Co. v Buckleton established a significant and lasting precedent in English contract law. It firmly established the principle that not all pre-contractual statements are terms of the contract. The key implications are:

1. Strict Test for Warranties: It set a high threshold for elevating a pre-contractual representation into a contractual term (a warranty), requiring clear evidence of an intention from both parties to be bound by that statement.
2. Collateral Contracts Viewed with Suspicion: It established that collateral contracts must be proven strictly and that courts should not easily infer them, thereby protecting the certainty of a main, often written, contract.
3. Distinction between Terms and Representations: The case is a primary authority for the distinction between contractual terms and mere representations.
4. Innocent Misrepresentation: It affirmed the common law position at the time that a claim for damages could not arise from a purely innocent misrepresentation (a position later altered by the Misrepresentation Act 1967).

Verdict: The appeal was allowed. Judgment was entered for the appellants (the defendants, Heilbut, Symons & Co.).

Source: Heilbut Symons & Co v Buckleton [1912] UKHL 2 (11 November 1912)