May & Butcher Ltd v R [1934]

May & Butcher Ltd v R [1934] 2 KB 17 is a significant case in English contract law that underscores the principle that material terms of a contract must be agreed upon for a valid contract to exist. The case clarifies that an agreement to agree on the future price is too uncertain, rendering the contract void. It's worth noting that contemporary statutes, such as Section 8(2) of the Sale of Goods Act 1979 and Section 15 of the Supply of Goods Act 1982, now provide exceptions to this rule.

May & Butcher Ltd entered into an agreement to purchase surplus tentage from the Disposal Board, which consisted of leftover military equipment from World War I. The contract stipulated that the price shall be agreed upon from time to time as the tentage became available for disposal. Additionally, any disputes were to be submitted to arbitration in accordance with the Arbitration Act 1889.

The critical issue arose when no price could be mutually agreed upon, prompting Disposal Board to notify May & Butcher Ltd that it was no longer bound by the contract. May & Butcher Ltd contended that a reasonable price could either be implied under Section 8 of the Sale of Goods Act 1893 or determined through arbitration as per the arbitration clause.

The House of Lords held that no contract existed between the parties due to the absence of an agreed-upon price. Lord Buckmaster emphasised that leaving a vital part of the contract undetermined goes against the fundamental principle of contract formation. Section 8 of the Sale of Goods Act did not apply since the agreement explicitly addressed the manner in which the price was to be determined. Furthermore, the arbitration clause could not be invoked as there was no initial agreement in place.

This case reinforces the foundational requirement in contract law that essential terms must be agreed upon for a contract to be valid. The case provides valuable insights into the significance of certainty in contractual agreements.
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