Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 (HL)

Facts

  • Brogden was a coal supplier to the Metropolitan Railway Company, supplying coal for several years under informal arrangements and without a formal written contract.
  • Seeking a structured agreement, the railway company drafted a contract and sent it to Brogden for review.
  • Brogden amended the draft, notably adding the name of an arbitrator, and returned it to the railway company.
  • The railway company’s agent filed away the amended document without explicitly communicating acceptance to Brogden.
  • Despite the absence of formal execution or express notification, both parties continued to perform as before: Brogden supplied coal and the railway company paid for it under the terms of the draft agreement.
  • A dispute later arose, and Brogden claimed no binding contract existed due to the lack of formal acceptance.

Issues

  1. Whether a binding contract can be formed where there is no formal execution or explicit communication of acceptance.
  2. Whether acceptance can be established through the parties’ conduct in accordance with the draft agreement’s terms.
  3. Whether amendments to a contract draft constitute a counter offer and if subsequent conduct amounts to acceptance of such a counter offer.

Decision

  • The House of Lords held that a valid contract had been formed between Brogden and the Metropolitan Railway Company.
  • The amended draft sent by Brogden was regarded as a counter offer.
  • The railway company’s conduct—ordering and receiving coal according to the terms of the amended draft—constituted acceptance of the counter offer.
  • The absence of explicit or formal acceptance did not prevent the formation of a contract when both parties acted in accordance with the contract’s terms.
  • The Court emphasized that the existence of a contract depends on the conduct of the parties, not merely on the formalities or the method of communication.

Legal Principles

  • A contract can be formed by conduct, not just by written or verbal acceptance, if parties behave as if bound by the agreement.
  • When an offeree proposes amendments, this constitutes a counter offer; subsequent conduct consistent with the counter offer can amount to acceptance.
  • Observable conduct, rather than mere mental assent or formal execution, determines contract formation.
  • Acceptance does not always require express or formal communication when actions demonstrate assent; acting on a proposed contract can be sufficient evidence of acceptance.
  • This principle contrasts with the rigid requirements of express acceptance and silence not constituting acceptance.

Conclusion

Brogden v Metropolitan Railway Co established that acceptance by conduct can create a binding contract even where no formal execution or explicit notification occurs, provided the parties’ actions demonstrate mutual assent to the contract’s terms. The decision remains fundamental in illustrating the significance of conduct in contract formation under English law.

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