Once an offer is made and accepted a legally binding contract exists - the offer and acceptance represent a 'meeting of the minds' alongside legal capacity and intention to create legal relations (consideration of course, in this case was either £2m or £200k). We're all familiar with the stories of misprints in advertising when the supplier has to stand over the price for those who accept the offered price before the supplier realises the mistake and rescinds the offer. Well, that's what the professional training says but the High Court judgement in the above case appears to have rewritten that fundamental of contract law.
The case came about as a result of the commodities trader, Kai Herbert, recognising a mistake had been made by JP Morgan Chase, and his decision to accept the contract in the knowledge that a mistake had been made. He then didn't turn up for work, JP Morgan then rescinded the offer and Herbert took a case against JPMC for loss of earnings. You couldn't make it up. The court ironically has ruled in favour of JPMC.
We now have potentially interesting implications for procurement.
- What happens if a supplier makes a mistake in pricing and the buyer just thinks it represents a particularly good offer as opposed to an abnormally low bid? Can the supplier now come back some time later and rip up the deal?
- Could we start to see suppliers coming back, under the guise of a mistake, to rip up deals which just weren't good business sense?
- What happens if the buyer misunderstands prices and the provider knows that is the case - can the contract be set aside?
- What happens if you move beyond prices and something fundamental to delivery is accepted by mistake to the knowledge of the other party?
This looks like an interesting precedent to me, or have I missed something and have a need to pull out my trusty Charlesworth's Mercantile Law with the poor binding for a refresh?
Daily Mail reporter (2012) 'Disastrous typo in contract saw commodities trader paid £2m by JP Morgan for job that should only have been £200,000', 27 March.
Spence, A. (2012) 'Trader with typo in contract 'did not have a point'', The Tines, 27 March, p.31