Malcolm v OUP (2), 1991 (original) (raw)
Publishing: Contract By Telephone
Malcolm v The Chancellor, Masters and Scholars of the University of Oxford, Entertainment Law Review [1991] 3 ENT.LR, detailed report by Bernard Nyman, of Rubinstein Callingham, Polden & Gale, London
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"In conclusion then, I am adamant about nothing at the moment and I very much hope that we can agree some formula that will result in the book's publication. However, in the light of experience, one firm resolution that I have made is not to embark upon any further major polishing/rewriting exercise, which I reckon could well take up to six months of full-time work, without first securing a firm commitment from a publisher." - Andrew Malcolm, 24 March 1985
"It follows that in my judgment when Mr Hardy used the expressions "commitment" and "a fair royalty" he did in fact mean what he said; and I venture to think that it would take a lawyer to arrive at any other conclusion. There was therefore an enforceable contract for the publication of Mr Malcolm's book". - Leggatt LJ. 18 December 1990
The Background
Andrew Malcolm graduated in moral sciences at Cambridge University. In the 1970s he taught a series of adult education courses on philosophy. As a result of his teaching experiences Malcolm evolved his own philosophical ideas and encapsulated these into a draft book mainly consisting of essays, but including two long dialogue sections. At the suggestion of a publishing house Malcolm then spent several years revising the entire work into the form of a dialogue. At the conclusion of this task in 1984 he found the publishers were no longer interested in publishing the book.
In August 1984 Malcolm submitted a synopsis entitled "Making Names" to Oxford University Press ("OUP"). The project was assigned to Henry Hardy, a senior editor in the general books department. Hardy requested the full manuscript. As a senior editor it was Hardy who would have day-to-day contact with the author.
The affairs of OUP are governed by the statutes of the University of Oxford. The statutes are entrusted to a body of individuals known as the Delegates who are distinguished in various fields of learning. Their function is to control the policy of OUP generally and through the acceptance of books for publication to ensure that OUP complements the aims and standards of the University of Oxford. This function is carried out by fortnightly meetings. Alan Ryan was a Delegate and Assessor for OUP at the material time. The project was referred to Ryan who was "rather keen that we should have a go [at the book] if it's possible".
Hardy undertook a reading of the full manuscript. In March 1985 Hardy wrote to Malcolm in an optimistic tome but complained at the length of the book. Malcolm replied in detail on 24 March 1985. He concluded his letter with the following words
"In conclusion then, I am adamant about nothing at the moment and I very much hope that we can agree some formula that will result in the book's publication. However, in the light of experience, one firm resolution that I have made is not to embark upon any further major polishing/rewriting exercise, which I reckon could well take up to six months of full-time work, without first securing a firm commitment from a publisher."
Malcolm then telephoned Hardy on 26 April 1985 and 20 May 1985. Malcolm recorded both of these telephone conversations. Hardy had completed his reading of the manuscript by the time of the second, vital, telephone conversation. Hardy told Malcolm he had finished reading the manuscript:
"... and like Alan Ryan who read it before, I feel much more warmly towards it having finished it. And we would like to do it. That is to say, I mean I know you want a commitment sufficient to take you through the last stage of revision, and that is what I'm offering. I'm not offering a totally unconditional commitment because obviously if what you do seems to us to make it worse than we would write to say so."
Hardy and Malcolm went on to discuss details and in particular Hardy stated that Malcolm would receive no advance but he would receive "a fair royalty so that if the book is a success you will do well out of it". On 21 May 1985 Hardy wrote to Malcolm asking him to fill in an author's publicity form and stating he had sent the manuscript off for cast-off. He added "I'm pleased we are going to do your book, and hope that it's a terrific success". Malcolm replied on 20 May 1985 stating that he had waited over 10 years for this moment to arrive and that he was contemplating moving to the country to undertake the rewrite.
OUP then started to put in hand the necessary internal paperwork involved in the commissioning and publication of a book. Three standard forms are material here:
(1) the publishing proposal form, into which the commissioning editor would insert details of proposed format, print numbers, anticipated sales, costings, royalties, sale price and so on;
(2) a note to the Delegates: this would describe the book and the author and contain referees' opinions and give a coded reference as to anticipated profitability;
(3) the standard form of contract.
The publishing proposal form was completed. The details inserted were: a hardback of 400 pages, to be sold at £15, 12 per cent royalties payable on UK sales, 10 per cent on overseas sales, no advance and expected sales of 2,000 copies.
From 16 July 1985 a Note to Delegates was prepared. The coded reference indicated good profitability. On 17 July 1985 the project was submitted to the editorial committee and was rejected out of hand by Richard Charkin, the managing director of the Academic and General division. He rejected the book on the grounds of "profitability, quality and author". He had not read the manuscript. Charkin wrote to Malcolm on 18 July 1985 saying that OUP would not be issuing a contract, that work was necessary on the manuscript and that "I cannot hold out much hope that we would publish and I would quite understand if you felt unable to undertake the revision without a firm commitment from us".
Malcolm was prepared to withdraw the manuscript at this stage but was unofficially encouraged by Hardy and did undertake the revision. The work was resubmitted in February 1986 and OUP notified Malcolm that although the revision was "undoubtedly an improvement", they still did not "feel that it works."
Within OUP Charkin instituted abortive disciplinary proceedings against Hardy. His letter of rebuke stated that Hardy had given a written indication to an author that OUP would publish without having gone through the proper procedures.
On 23 December 1986 Malcolm issued proceedings against the Chancellor, Masters and Scholars of the University of Oxford. Charkin was sued as second defendant but dropped out after 10 months and played no relevant part in the litigation.
The Interlocutory Stages
During the early stages of the action Malcolm was legally represented but later became a litigant in person. The statement of claim pleaded a contract to publish the work and concluded with a prayer for a order for specific performance for OUP to publish the work together with a claim for damages cumulatively or in the alternative. The defence stated that the alleged contract had not been made, denied that that substance of the telephone conversations between Malcolm and Hardy was as pleaded and pleaded that if any agreement to publish had been concluded then it was subject to a term that OUP should approve the final revised version of the book and that such approval had not been given. Consequential amendments were made to the statement of claim and the defence concerning whether the work had been submitted to and approved by the Delegates.
The Trial
On the first day of the trial deputy judge Gavin Lightman QC rejected OUP's very late application to amend to plead that Hardy had no authority to conclude whatever contract he may have purported to make on their behalf. If there was anything in this point, it is surprising that OUP did not plead this from the beginning. It is also surprising that OUP should have sought to deny Hardy's authority to commit OUP when Charkin had in his letter of rebuke to Hardy complained that Hardy had "committed the press to an investment of £10,000".
Counsel for OUP accompanied his closing submissions with a clear written summary. These were his arguments:
(1) the telephone conversations left unresolved:
(a) the form of the text;
(b) the number of copies to be printed;
(c) the format (hardback or paperback);
(d) the sale price of the book;
(e) Malcolm's rate of royalty.(2) the contract was subject to conditions precedent or subsequent relating to:
(a) the approval of the work by the Delegates;
(b) the satisfaction of the editorial staff with the revised version;
(c) the tender of a revised draft which was "no worse" than the first version.
The trial judge found in favour of Malcolm on points 2(a) and 2(b). He also held that there was no dispute that 2(c) had been satisfied, and rejected the submission that its presence made the contract too vague to be enforceable. His judgment when on to say that "I am therefore quite satisfied that a clear commitment was made by the university". However, the trial judge held that the commitment did not constitute a contract or give rise to a contractual obligation. He did so on two grounds: first, that fundamental terms, such as royalties, the print run and form of publication (that is whether hardback or paperback), had not been agreed, nor had any formula to settle these matters; second, the telephone conversations on 27 April and 20 May 1985 proceeded on the basis that there were matters to be agreed between the parties and incorporated in a contract. The judge felt he could not therefore hold that the parties intended to enter into a legally binding contract.
Malcolm lodged Notice of Appeal.
Post-Trial Applications
On 17 May 1990 OUP gave notice of additional grounds for affirming the judgment. The grounds were:
(1) They had new evidence to support the conclusion that no complete agreement had been reached.
(2) They repeated their contention that any agreement was subject to the following conditions precedent:
(i) the Delegates would approve the publication;
(ii) Malcolm would revise the work as specified by Hardy;
(iii) OUP would be satisfied in good faith that the work as revised was sufficiently improved to warrant publication.
Not surprisingly, a number of applications to the Court of Appeal followed, which perhaps indicate more about the stance the parties took to each other than genuine legal issues. These are dealt with in turn.
OUP applied to adduce evidence of a fresh transcription of the 20 May 1985 telephone conversation. The application was rejected. Malcolm argued, correctly, that this fresh manuscript could have been brought forward at the trial if OUP had thoroughly checked the transcriptions. It was recognised that the rules as regards fresh evidence laid down in Ladd v Marshall 1 [1954] 1 WLR 1489 are not invariable, but that court did not think it possible that new evidence could have any bearing on the outcome of the case.
The next application was by Malcolm. He applied to bring evidence to rebut the additional ground in OUP's notice that, contrary to the decision of the trial judge, any agreement was subject to the approval of the Delegates and this had not been fulfilled. Shortly before the appeal was due to be heard OUP abandoned their contention regarding the Delegates' approval. They deposed that the decision was taken as a result of the legal merits of the point and based on a review of the transcript of the trial judge's judgment. This was fatal to Malcolm's application to produce more evidence, Mustill LJ in the appeal judgment commenting that approval by the Delegates, not at that stage communicated to Malcolm, of a bargain containing too many gaps to be enforceable in law could not in logic build a new and complete agreement even if details on print run and so on were included.
Malcolm then made an application to argue that he could recover money to reflect work done and expenses incurred under quasi-contract. The court held it would not be just to admit a claim never before pleaded or raised at trial, or in the Notice of Appeal. Mustill LJ commented in the appeal judgment that even if the claim had been allowed any financial recovery would have been very modest, as OUP made it clear from 18 July 1985 that any rewriting would be at Malcolm's risk and Malcolm did little between 20 May and 18 July 1985. Mustill LJ also very briefly considered the question of a claim in "estoppel by convention" which was never raised by Malcolm. He simply commented that as little was done by one party to the knowledge of the other between 20 May and 18 July 1985 such an argument would have only a modest prospect of success.
In the last of these applications Malcolm sought to adduce further evidence as to "custom and usage" over the necessity for agreement on royalties, print run and so on. This was a matter raised by OUP at the closing stages of the trial as being vital to the contract. Mustill LJ commented in the appeal judgment that a lawyer may have made more of this point at the time and pointed out that the OUP's standard form of contract (which, had things gone differently, Malcolm would have been asked to sign) states at clause 5:
[The Publisher] shall have the sole control of all details of production advertising price sale and terms of sale of the work and the right at his discretion to raise or reduce the published price of the work.
As the question of the standard contract was not raised at trial no discussion of custom and usage ensued at that stage as it might otherwise have done.
Malcolm obtained affidavit evidence from a well-known literary agent and from the general secretary of the Society of Authors. Their evidence was that in written contracts and memoranda of agreement between author and publisher, print run, format (namely hardback or paperback) and price are rarely stipulated. OUP objected to the new evidence and tried to exclude it on technical grounds. The court felt the evidence would provide a background of practice against which they could decide if certain aspects of performance were so fundamental that the absence of any provision for them would be fatal to the enforceability of the bargain. The evidence was therefore admitted. OUP had sought on technical grounds to have incontrovertible evidence excluded. Once the Court of Appeal had decided to admit the evidence, OUP made it clear they did not wish to cross-examine the deponents and did not produce rebutting evidence.
The Appeal
Malcolm won his appeal on a majority decision, Nourse and Leggatt LJJ deciding in his favour and Mustill LJ dissenting.
Mustill LJ accepted the trial judge's approach which was that the issue had two aspects:
(1) Even if Malcolm and Hardy intended to make a contract which would be immediately binding in law, even though subject to a condition precedent, did the absence of agreement on certain matters mean that they had failed to do so?
(2) Were the gaps in the bargain such that the parties cannot have thought the contract would be binding before the gaps were filled by further agreement?
The law on incomplete bargains had to be considered. This was a case involving specialist knowledge with which the court was not familiar. Given the additional evidence on matters like print run which the Court of Appeal allowed Malcolm to introduce, and the terms of OUP's standard contract, Mustill LJ held it was impossible for the respondents to argue that in an informal bargain otherwise possessing the attributes of a binding contract the failure to agree on these matters entails that no contract can exist. He relied on Abrahams v Herbert Reiach Ltd 2 [1922] 1 KB 477. However, his Lordship accepted OUP's counsel's warning reminder of Lord Roskill's words in Aoterroa International Ltd v Scancarriers A/S 3 [1985] 1 NZLR 513 of the dangers of building up a contract where no express bargain exists by implying one group of potential implied terms, and then moving on to another group and so on.
The question for the court was therefore whether there was a "sufficient skeleton of express terms to be fleshed out by implication".
His Lordship held that Malcolm received an assurance from OUP the time spent on revision would not be wasted but that the use of the word "commitment" by Hardy was insufficient to say that so long as the revision was satisfactory OUP must publish or be sued. Also the undertaking that Malcolm would have a fair royalty was insufficient to insert a concrete express term and from there build up an "edifice of implication". Mustill LJ therefore dismissed the appeal.
The press through its representatives made a gentleman's agreement, and broke it. No legal remedy ensues.
Nourse LJ stated that the only real question was whether during a telephone conversation at 20 May 1985, Malcolm and Hardy entered into a contract for the publication of Malcolm's book. He applied the assumption first made an argument by William Jowett and accepted by a division of the Court of Appeal comprising Bankes, Scrutton and Atkin LJJ in Abrahams v Herbert Reiach Ltd 2 [1922] 1 KB 477 that an agreement between a publisher and an author for the publication of a book for a stated consideration and no more is a complete and enforceable contract. Thus, the contract in the form postulated "simply requires the publisher to perform his distinct function".
Nourse LJ held that during the telephone conversation at 20 May 1985 Hardy entered into a conditional contract for publication with Malcolm to have a royalty at a rate to be agreed or in default of agreement a fair royalty. The condition having been satisfied the contract is enforceable. His Lordship emphasised his belief that his was an objective view of the words the parties used to express themselves and was without the implication of any term or terms.
Leggatt LJ stated that the trial judge decided the case on two associated points:
that essential terms were not agreed, and
that the parties contemplated that particular terms were yet to be determined by agreement.
OUP's case was that if the royalty or some formula for determining a royalty was not agreed there was no framework of a legally binding contract into which the term as to the payment of a reasonable royalty could be implied. However, OUP conceded that, following Abrahams v Herbert Reiach Ltd 2 [1922] 1 KB 477, matters such as print run, format and price can be implied, if there was express agreement for the payment of royalty. Both parties accept that Hardy gave an assurance that Malcolm would receive a fair royalty. The question was whether this was said with contractual intent. OUP's alternative argument was that the parties intended the royalty to be determined by a subsequent agreement. Again the question was, did the parties not intend to be contractually bound until agreement had been reached?
His Lordship considered the trial judge's interpretation of "a firm commitment". Nothing short of an intention to create legal relations would have had any value for Mr Malcolm, it was this he was seeking before undertaking the work of revision. Leggatt LJ commented that to interpret it otherwise would be to suggest that Hardy intended to induce Malcolm to revise the book by giving him a valueless assurance which is "tantamount to an imputation of fraud" or, as OUP's counsel had to explain it, would make it just a valueless expression of a revocable intention. His Lordship considered it important that Hardy wrote to Malcolm the day after the telephone assurance was given and stated "I am pleased that we are going to do your book". He considered that to be an acknowledgement that OUP was contractually bound to do so.
Leggatt LJ held there was an enforceable contract for the publication a Malcolm's book based on the commitment made and the agreement of a fair royalty:
"It follows that in my judgment when Mr Hardy used the expressions "commitment" and "a fair royalty" he did in fact mean what he said; and I venture to think that it would take a lawyer to arrive at any other conclusion. There was therefore an enforceable contract for the publication of Mr Malcolm's book".
The Remedy
The trial judge and all three appeal judges held that specific performance was inappropriate. There would be no means of enforcing an order for specific performance as the book would have required editing and the court could not have been able or prepared to supervise this. Furthermore, there was a complete breakdown in the relationship between Malcolm and OUP, whereas the publication of the book requires considerable co-operation between author and publisher. An inquiry was therefore ordered as to damages, although Leggatt LJ commented that
A becoming magnanimity on the respondents' part matched on the part of Mr Malcolm by a realistic moderation, will avoid the need for any inquiry."
Comment
This case emphasises what are, at the end of the day, the inadequacies of the law. Nothing will really compensate Malcolm for the non-appearance of his book on the bookshelves and that is something the law cannot achieve. He may be further from that goal now than before the commencement of the action, and, as Leggatt LJ commented, a fair financial settlement in such cases is more likely if a spirit of co-operation can be fostered by both parties. Sadly this appears to have been lacking from start to finish.
The case does have implications for publishers. Traditionally, they have tended to assume that there is no contract to publish a book unless and until a formal written contract has been signed (usually on the publisher's standard terms, but sometimes on those of an author's literary agent). Now it has been established beyond doubt that a publishing contract can be concluded orally, even where details of royalty rates, for example, have not yet been spelt out. Commissioning editors will have to be on their guard when taking authors out to lunch - what Mustill LJ held to be no more than an unenforceable gentleman's agreement was held by his fellow Lords Justices to be a binding contract.
Click for the Court of Appeal judgment, Entertainment Law Review preliminary report, or Publishing contracts by telephone Bookseller article by Hugh Jones, 5/7/1991.
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