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Texas Plc are a large multi-national oil company. They are seeking to expand their business in South America and purchase the drilling rights to a large and potentially lucrative oil filed in Brazil. On the strength of this purchase the market value of Texas Plc’s shares rises to £500 per share.
Seeking to take advantage on their increased share value, Texas Plc intend to sell more of their shares to investors. They write to a number of companies who have expressed an interest in exploring investment opportunities in South America. The letter states that they will sell 10,000 shares in Texas Plc at “a price determined by the market value of our shares on the date of acceptance of our offer.”
One of the companies, Pebble Ltd, receives the letter and sends a letter on 10th June 2012 accepting Texas Plc’s offer to purchase all 10,000 shares. The market value of the shares on 10th June is £500 per share. The letter is delayed in the post as Pebble Ltd misaddressed the letter of acceptance.
On 15th June 2012, Texas Plc strike oil on the Brazilian oil field. As a result, the market value of Texas Plc’s shares climbs sharply and continues to rise over the next few days. The cheque sent by Pebble Ltd arrives on 18th June 2012, by which time Texas Plc’s shares have a market value of £2000 per share.
Pebble Ltd state that they are unable to pay such a high price for the shares. Pebble Ltd submit evidence to Texas Ltd confirming that payment of £2000 per share would force Pebble Ltd into liquidation.
Texas Plc are now seeking to enforce a contract against Pebble Ltd for a price of £2000 per share.
At first instance it is held that the contract was formed on 10th June 2012 when the letter of acceptance was posted. Pebble Ltd therefore were only ordered to pay £500 per share.
Texas Plc now appeal to the Court of Appeal on the following ground.
1) That in the case of a misaddressed acceptance, the acceptance should be effective at the time least favourable to the party responsible for the delay.