Hillas & Co Ltd V Arcos Ltd - Judgment

Judgment

There were two issues put to the Court. First, whether the description of the goods in the option clause was sufficient, and second, whether the option clause "contemplate a future bargain the terms of which remained to be settled."

Lord Tomlin noted that the words of the option clause were also present in the rest of the contract which was certain. He argued that the context of the language could suggest a precise meaning that would give certainty to the option clause.

Lord Wright noted that businessmen familiar with their trade often "record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise." To which he concluded, that Courts must interpret contracts "fairly and broadly" following the maxim that "Words are to be so understood that the subject-matter may be preserved rather than destroyed." Wright qualified this statement by saying that courts can never create a contract where there is none.

Wright further noted that it would be mistaken to interpret the option as an offer into a new contract despite the wording suggesting otherwise. The contract for the option was formed as part of the initial agreement and was only to be executed at a later date. Lord Wright also noted that "a contract de praesenti to enter into what, in law, is an enforceable contract is simply that enforceable contract, and no more and no less".

In application to the facts, the court ruled that "fair specification" was not vague enough to void the contract. Both parties had experience in the trade and had completed similar bargains in the past thus each would have known each others' intentions at the time. Therefore, the option contract was valid.