Agreement in Contract: Mirror Image Rule

Learning Objectives:
Students will be analysing the importance of Mirror Image Rule in detecting starting point of an agreement

1. Agreement in Contract Preeti Kana Sikder Lecturer Department of Law & Justice Jahangirnagar University

2. Clearing the Ground

3. Who decides that an agreement has been reached? The Objective Test (Subjective Approach)

4. Has an agreement been reached?

5. Formation of a Contract

6. What is a Proposal? (Section 2 of the Contract Act) When one person signifies to another his willingness to do or to abstain from doing anything , with a view to obtaining the assent of that other to such act or abstinence , he is said to make a proposal.

7. Communication of Proposal ((Section 3 )) The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made .

8. Communication of Proposal (Section 3) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter.

9. Communication of Acceptance (Section 4) The communication of an acceptance is complete,– as against the proposer, when it is put in a course of transmission to him , so as to be out of the power of the acceptor ; as against the acceptor, when it comes to the knowledge of the propose r .

10. Communication of Acceptance B accepts A's proposal by a letter sent by post. The communication of the acceptance is complete,– as against A, when the letter is posted ; as against B, when the letter is received by A.

11. What is a Promise? (Section 2) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise:

12. The General Rule The Court must be able to find the documents which passed between the parties a clear and unequivocal offer which is matched or ‘mirrored’ by an equally clear and unequivocal acceptance.

13. Mirror Image Rule

14. Butler v Ex-Cell-O Corp (England) Ltd (1979) Butler Machine Tool Co. made and sold machine tools . They sent a letter to Ex-Cell-O on May 23, 1969 offering Ex-Cell-O some new machinery for £75,535. With it, was Butler's standard contract terms which included a price variation clause , so if their manufacturing costs went up, that price rise would be passed on to Ex-Cell-O .

15. Butler v Ex-Cell-O Corp (England) Ltd (1979) Ex-Cell-O replied on May 27 and said they would order the machinery, but on Ex-Cell-O's own standard terms. Ex-Cell-O's standard terms did not have a price variation clause. Butler replied on June 5 on the tear-off slip from Ex-Cell-O's terms. At the bottom of this slip it read, "We accept your order on the terms and conditions stated therein" however Butler added a letter reasserting that the deal was being made under Butler's own terms, from the May 23 letter.

16. Butler v Ex-Cell-O Corp (England) Ltd (1979) A while later, nothing further had been said, and Butler delivered the machinery. They asked for £75,535, plus £2,892 according to their price variation clause. Ex-Cell-O refused to pay the extra . Butler sued Ex-Cell-O for £ 2,892 in damages.

17. What would be your decision as a judge?

18. Butler v Ex-Cell-O Corp (England) Ltd (1979) The lower court held that the seller's price variation clause continued through the whole dealing and so the sellers were entitled to rely upon it. The Court of Appeal held that they were not entitled to recover the sum claimed because a contract had been concluded on the buyer’s terms which did not include the price variation clause.

19. Counter Offer

20. Counter Offer A purported acceptance which does not accept all the terms of the original offer is not in fact a true acceptance at all but is a counter offer. A Counter Offer kills off the original offer and amounts to a new offer which in turn can be accepted by the other party.

21. “Battle of Forms Case” Popular Terminology

22. Advantages of Mirror Image Rule

23. Criticisms of Mirror Image Rule

24. Lord Denning (1899-1999), Twentieth Century’s greatest Judge In Butler’s case, he held the traditional approach to be ‘out of date’. He claimed that all contracts can not be analysed into the form of offer and acceptance. Rather better way is to look at all the documents and also the conduct of parties .

25. The approach adopted by Lord Denning seeks to construct a more flexible framework for the law of contract which can accommodate inconsistent terms and an apparent lack of consensus

26. Does Mirror Image Rule prevail in modern contract law? Longmore LJ observed in Tekdata Interconnections Ltd v Amphenol Ltd : “…it will always be difficult to displace the traditional analysis, in a battle of the forms case, unless it can be said that there was a clear course of dealing between the parties.’

27. Does Mirror Image Rule prevail in modern contract law? Only in very exceptional cases where the parties have an established course of dealing and that course of dealing is governed by certain terms, the courts may skip applying the traditional analysis. The traditional rule is not always rigidly applied by the judiciary either. Currently, a rather technical and schematic doctrine of contract is in vogue.

28. Thank you