Introduction
The formation of a legally binding contract requires a clear offer and a corresponding acceptance. The case of Stevenson, Jaques & Co v McLean (1880) is a fundamental authority in English contract law that clarifies the distinction between a counter-offer and a mere request for further information. This distinction is crucial because a counter-offer destroys the original offer, whereas a request for information leaves the original offer open for acceptance. This commentary will explain the facts, decision, and legal significance of Stevenson v McLean, demonstrating its importance in the rules of negotiation and contract formation.
Facts and Judgment
The defendant, McLean, offered to sell a quantity of iron to the claimant, Stevenson, for a price of "40s., net cash per ton, open till Monday" (Stevenson, Jaques & Co v McLean, 1880, p. 347). On Monday morning, Stevenson sent a telegram to McLean asking: "Please wire whether you would accept forty for delivery over two months, or if not, longest limit you would give" (p. 348). McLean did not respond to this telegram and, later that day, sold the iron to a third party. At 1.25 pm, McLean sent a telegram to Stevenson revoking his offer. However, before this revocation was received, Stevenson sent a further telegram at 1.34 pm unconditionally accepting the original offer. Stevenson subsequently sued for breach of contract.
The key legal issue was whether Stevenson's first telegram constituted a counter-offer. If it was a counter-offer, it would have terminated McLean's original offer, meaning there was nothing left for Stevenson to accept later in the day. This would follow the principle established in Hyde v Wrench (1840), where an offer to sell for £1,000 was terminated by a counter-offer of £950. However, Lush J held that Stevenson’s telegram was not a counter-offer. The wording of the telegram was an inquiry to see if the terms of the offer could be modified, rather than a rejection of the original offer. As Lush J noted, the telegram was not a firm rejection but simply explored the possibility of different payment terms. Therefore, the original offer remained open. As Stevenson’s final telegram was an unconditional acceptance of that open offer, and since it was sent before McLean’s revocation had been communicated to him, a binding contract was formed.
Legal Analysis
The significance of Stevenson v McLean lies in the practical distinction it draws between a counter-offer and a request for information. The judgment recognised that in commercial negotiations, it is common for parties to explore the terms on offer without intending to reject them outright. To treat every inquiry as a counter-offer would make negotiations difficult and rigid. This case provides the necessary flexibility, allowing an offeree to clarify terms or ask about potential variations while keeping the original offer alive.
The court distinguished the facts from Hyde v Wrench (1840). In Hyde, the offeree made a clear and different proposal, which was held to be a rejection of the original offer. In contrast, Stevenson’s communication was framed as a question. This highlights that the court will look at the language used by the offeree to determine their intention. A communication that proposes new terms as a clear alternative will likely be a counter-offer, whereas one that merely inquires about the offeror’s willingness to change terms is not.
Furthermore, the case reinforces the rule on the revocation of an offer. An offer can be withdrawn at any point before acceptance, but the revocation is only effective once it has been communicated to the offeree. This principle was also confirmed in Byrne & Co v Van Tienhoven & Co (1880). In Stevenson, McLean’s revocation was not effective until his telegram was received by Stevenson, by which time Stevenson had already accepted the offer. This created a binding contract, which McLean breached by selling the iron to another party.
Conclusion
Stevenson v McLean is a key case in contract law that establishes an important and practical rule for negotiations. By creating a clear distinction between a counter-offer that terminates an offer and a request for information that does not, the law avoids penalising parties who wish to clarify terms before committing to a contract. The decision ensures that negotiations can proceed with a degree of flexibility, preventing offers from being extinguished by simple inquiries. It remains a foundational case for students and practitioners in understanding the dynamics of offer and acceptance.
References
- Byrne & Co v Van Tienhoven & Co (1880) 5 CPD 344.
- Hyde v Wrench (1840) 3 Beav 334.
- Stevenson, Jaques & Co v McLean (1880) 5 QBD 346.
