• In the case of Centrovincial Estates PLC v Merchant Investors Assurance Company Ltd [1983] Com LR 158, the Court of Appeal ruled consideration is required to support a promise and to take intentions of a reasonable observer into account.
  • This case concerned contract law, consideration, mistakes and lease agreements.

Facts of the Case

  • D received a letter from C stating that the current market rental value of the lent property was £65,000.
  • C and D contracted until later it was discovered the offer price was supposed to state £126,000.
  • D however contended the terms of the contract had been fulfilled and they could not have known the original offer contained a mistaken price until C brought it to their attention.

Issues

  • Was there an apparent binding agreement in law?
  • Should D ought reasonably to have known there was an error?
  • Was the contract rendered void by mistake?

Held by Court of Appeal

  • Appeal allowed – C did not prove that D knew, or ought reasonably to have known, of their error at the relevant time.

Slade LJ

Contract law principles

  • £65,000 was lower than the payment according to the Lease agreement so D did not change their position and C could rightfully withdraw their offer. D gave consideration.
  • “But in the absence of any proof, as yet, that the defendants either knew or ought reasonably to have known of the plaintiffs’ error at the time when they purported to accept the plaintiffs’ offer, why should the plaintiffs now be allowed to resile from that offer? It is a well-established principle of the English law of contract that an offer falls to be interpreted not subjectively by reference to what has actually passed through the mind of the offeror, but objectively, by reference to the interpretation which a reasonable man in the shoes of the offeree would place on the offer.”

Offer and acceptance

  • “An offer, when unequivocally accepted according to its precise terms, will give rise to a legally binding agreement as soon as acceptance is communicated to the offeror in the manner contemplated by the offer, and cannot thereafter be revoked without the consent of the other party.”
  • “The offeror under a bilateral contract can withdraw an unambiguous offer, after it has been accepted in the manner contemplated by the offer, merely because he has made a mistake which the offeree neither knew nor could reasonably have known at the time when he accepted it. And in this context, provided only that the offeree has given sufficient consideration for the offeror’s promise, it is nothing to the point that the offeree may not have changed his position beyond giving the promise requested of him.”

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