Helby v Matthews and Ors
[1895] A.C. 471(Judgment by: Lord Watson)
Between: Helby - Appellant
And: Matthews and Ors - Respondents
Judges:
Lord Herschell LC
Lord WatsonLord MacNaghten
Lord Morris
Lord Shand
Subject References:
FACTOR
SALE OF GOODS
Agreement for
Possession of Goods under Agreement with option to buy
Hire and Purchase Agreement
Disposition of Goods by Person having option to Purchase
'Person having agreed to buy Goods'
Legislative References:
Factors Act 1889 (52 & 53 Vict. c. 45) - s. 9
Judgment date: 30 May 1895
Judgment by:
Lord Watson
My Lords, the terms of the agreement are exceedingly simple, and had it not been for the conflict of judicial opinion which they have provoked, it would not have occurred to me that their true character and substance admitted of much doubt. The only stipulations which are of materiality to the present question are these: Brewster undertook to pay a monthly rent or hire instalment of 10s. 6d., commencing on the 23rd of December 1892, subject to the condition that he might terminate the hiring at any time by delivering up the piano to the appellant. In the event of the hiring being so terminated, he was to remain liable to the owners for arrears of hire up to the date when the piano was returned. Then follows a stipulation to the effect that,
"If the hirer shall punctually pay the full sum of £18 18s., by 10s. 6d. at date of signing, and by thirty-six monthly instalments of 10s. 6d. in advance, as aforesaid, the said instrument shall become the sole and absolute property of the hirer."
These stipulations, in my opinion, constitute neither more nor less than a contract of hiring, terminable at the will of the hirer, coupled with this condition in his favour, that, if he shall elect to retain it until he has made thirty-six monthly payments as they fall due, the piano is then to become his property. The only obligation which is laid upon him is to pay the stipulated monthly hire so long as he chooses to keep the piano. In other words, he is at liberty to determine the contract in the usual way, by returning the thing hired to its owner. He is under no obligation to purchase the thing, or to pay a price for it. There is no purchase and no agreement for purchase, until the hirer actually exercises the option given him. The respondents' counsel endeavoured to assimilate this case to Lee v. Butler, [F6] but in reality the two cases differ essentially. In Lee v. Butler [F6] the so-called hirer was bound absolutely to make payment of £1 on the 6th of May and of £96 4s. on the 1st of August, 1892, these sums being described as "rent for the hire or use of certain furniture," which was the subject-matter of the agreement, it being declared that upon due payment of these rents, amounting to £97 4s., the furniture was to be "the sole and absolute property of the hirer." It appears to me to have been rightly held that Mrs. Lloyd, the hirer, had truly agreed to purchase the furniture, and could therefore give a good title to a bonâ fide purchaser. Her legal obligation to pay the price attached as soon as the agreement was executed.
Apart from the arrangement for hire of the piano, the only right given to Brewster by the agreement in question was the option to become a purchaser. It is true that whilst he was under no obligation to buy, the appellant was legally bound to give him that option, and could not retract it, if the other stipulations of the contract were duly observed by the hirer. But the possession of such a right of option was, in no sense, an agreement by Brewster to buy the piano; and the appellant's obligation to give the option was not, in the sense of law, an agreement by him to sell. In order to constitute an agreement for sale and purchase, there must be two parties who are mutually bound by it. From a legal point of view the appellant was in exactly the same position as if he had made an offer to sell on certain terms, and had undertaken to keep it open for a definite period. Until acceptance by the person to whom the offer is made, there can be no contract to buy. So long as the agreement stood unaltered there could, in this case, be no contract to purchase by Brewster until he had complied with the terms of the option given him, and had duly made the thirty-six monthly payments which it prescribes as the condition of his becoming owner of the piano.
The distinction between a pre-contract of that kind and a proper agreement for the sale and purchase of goods, does not appear to me to have been sufficiently regarded by the learned judges of the Appeal Court. Their Lordships seem to have assumed that, because the appellant had bound himself to sell if Brewster chose to buy upon the terms prescribed, he was in reality a seller; and that the existence of a seller necessarily implies the existence of a buyer. In my opinion, that reasoning is inconclusive. Whilst, in popular language, the appellant's obligation might be described as an agreement to sell, it is in law nothing more than a binding offer to sell. There can, in such a case, be no agreement to buy, within the meaning of the Act of 1889, until the purchaser has exercised the option given him in terms of the agreement.
Another argument was urged for the respondents, which I find thus succinctly stated, in their fifth reason; "That upon Brewster pledging the pianoforte with the respondents he put it out of his power to exercise his right to determine the agreement by returning the pianoforte, and thereby the agreement to purchase became absolute and unconditional." The argument is, in my opinion, untenable. In a question with the appellant, Brewster could not become purchaser of the instrument, except upon the condition of his observing the stipulations of the agreement and making regular payment of each monthly instalment until the 23rd of November, 1895, which he was under no obligation to do. By the act of pawning he violated these stipulations: and that dishonest act, which was committed after he had paid only a few out of the thirty-six instalments, is not calculated to suggest that he entertained any intention of becoming purchaser of the piano. It is quite true that Brewster thereby put it out of his power (at least until he could raise the amount for which it was pawned) to return the piano to the appellant; but he at the same time broke his contract, and forfeited his right to exercise the option of purchase given him by the agreement.
For these reasons I am of opinion that the order of the Court of Appeal ought to be reversed, and the judgment of the Divisional Court restored.