Case Facts
The claimant, Mr Powell, applied for the position of headmaster at a school. The school's governing body considered his application and passed a resolution appointing him to the role. However, rather than the governing body itself communicating this decision to Powell, an individual board member took it upon himself, acting in his personal capacity and without any authority from the governing body as a whole, to inform Powell of the resolution.
Powell relied on this unauthorised communication and took significant steps in preparation for the new post, including resigning from his previous position. He believed, on the basis of what he had been told, that a binding contract of appointment had been concluded between himself and the Board.
Subsequently, however, the governing body reconsidered the matter and resolved to appoint a different candidate entirely. The Board did not notify Powell of this change in decision. Powell only learned that he had not been appointed when the appointment of the new headmaster was publicly announced. He brought a claim against Mr Lee, as representative of the governing body, alleging breach of contract and seeking damages for the loss he had suffered as a result of his reliance on the earlier communication.
The three issues before the King's Bench Division were: first, whether a binding contract existed between Powell and the Board regarding his appointment; second, whether the Board's failure to appoint Powell constituted a breach of contract; and third, whether Powell was entitled to damages for the alleged breach.
Held
The court held that no binding contract had been formed between Powell and the governing body. The communication made to Powell by the individual board member was entirely unauthorised — that member had no authority from the governing body to convey acceptance of the offer of the headmaster's position on the Board's behalf. Because there had been no authorised communication of an intention to contract on the part of the governing body, the essential requirement of effective acceptance had not been satisfied.
Since no binding contract had ever come into existence, the question of breach did not arise. Powell was accordingly not entitled to any damages whatsoever. His claim failed entirely.
Ratio Decidendi
The ratio of this case establishes two closely connected propositions fundamental to the law of contract formation.
First, the communication of acceptance is an essential requirement for the formation of a binding contract. It is not sufficient that the offeror's governing body has internally resolved to accept an offer; that resolution must be communicated to the offeree before any enforceable contract can arise.
Second, and critically, such communication of acceptance must be made by the offeror — in this case the governing body — or by a person duly authorised to act on its behalf. A board member acting in his individual capacity, without any authority conferred upon him by the governing body, cannot bind the Board by communicating its internal resolution to the offeree. The court drew a clear distinction between mere knowledge of a resolution conveyed by an unauthorised individual and formal acceptance communicated by the proper authority or its duly authorised agent. Only the latter constitutes valid and effective acceptance capable of giving rise to a binding contract.
This principle reinforces the broader rule that acceptance must be unequivocal and must emanate from a competent source. An offeree who receives what purports to be an acceptance from a person lacking authority to give it acquires no contractual rights, regardless of the steps taken in reliance upon that communication. The case is frequently cited alongside Felthouse v Bindley [1862] and Entores v Miles Far East Corp [1955] as authority for the proposition that communication of acceptance is a strict requirement of contract formation under English common law.
Obiter Dicta
Not applicable.