WN Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
Citation:WN Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
Rule of thumb:Do basic business practices which are not affirmed in any legal source have to be implemented by a business? Yes, any basic quality standards carried out by a business consistently for a long period, though not rights under common law or statute, are implied terms of the contract, albeit this does not apply to gold-standard practices.
Background facts:
The facts of this case were that there was an agreement between Hillas and Arcos over the purchase of timber at a certain price. There was between the parties over whether it was agreed that if a certain amount of timber was purchased then there would be a discount in the second year. This was also found to be a regular past practice of the business. The seller of the timber refused to offer this discount to the buyer, and the buyer believed they were legally entitled to it, so the matter ended up in Court.
Parties argued:
The seller argued that this was a discretionary discount they could offer to customers who they liked - they argued that this was their choice and there was no legal obigation on to offer this. The seller provided accounting evidence of how much it cost them to run their machines for cutting wood and showed how they were still offering the purchaser a very reasonable and competitive price. The purchaser argued that they offered all their customers this all the time and they were legally bound to offer it to them as well - the purchaser argued that the seller could not just take the huff with them and not offer them their standard business terms.
Judgment:
The Court upheld the arguments of the purchaser - the seller had to offer the discount. This was deemed to be an implied term of the contract and the purchaser was entitled to a discount. It was also held that repeated dealings by a business become part of their standard terms and conditions and these are implied terms of the contract. It should also be noted that this was a clear and unwaveringly repeated practice by the business, and if it was not then it is seems very unlikely the Court would have held it to be an implied term of the contract. In short, repeated customs of the business become implied terms in their contracts.
Ratio-decidendi:
‘First it is said that there is in clause 9 no sufficient description of the goods to be sold and Secondly it is said that clause 9 contemplates a future bargain the terms of which remain to be settled. As to the first point it is plain that something must necessarily be implied in clause 9... What is implied by law is as strong to bind the parties... But in past years in the conduct of this business it had been an invariable practice of the Respondents to issue such a list: the evidence and finding in the present case are that an official price list was issued in 1931; indeed it is difficult to see how the Respondents could carry on the business unless it was issued. I think that as regards the definition of the machinery for fixing the price there is sufficient certainty here for a business transaction: the issue in 1931 of the official price list is not a mere contingency but a practical certainty: it is unnecessary to consider what would have been- the legal position if the Respondents had ceased to carry on business or had been dispossessed by war or revolution ’, Lord Tomlin
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.