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Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd

Court of Appeal [1979] 1 WLR 401; EWCA Civ 9

Overview

An offer was made containing a price escalation clause. A counter offer was then made without this clause; it contained a detachable receipt which the company (original offeror) sent back with a notation stating that they assumed it was on their terms.

A question subsequently arose about whether the price escalation clause was part of the contract.

The Court observed that this case involved a 'battle of the forms' - it was necessary to look at the documents as a whole to determine whether agreement had been reached and on what terms.

Document exchange

 

Facts

An offer was made by Butler Machine Tool Co Ltd to sell machinery to Ex-Cell-O. It contained Butler's standard terms, including a price variation clause. 

A counter offer was then made by Ex-Cell-O, indicating they would buy the machinery but only on Ex-Cell-O's standard terms that did not include the price variation. That counter-offer included a tear-off/detachable receipt.

Butler then replied on the detachable receipt stating: 'We accept your order on the terms and conditions stated therein' but it also added a letter stating that the deal was being made on Butler's terms.

Butler subsequently delivered the machinery, asking for the original amount plus an additional amounted added in accordance with the price escalation clause.

Ex-Cell-O refused to pay the extra sum and Butler then sued for that sum.

Held

There was an offer, then a counter-offer, then the counter-offer was accepted because the detachable form was SIGNED, notwithstanding their reference to the original terms.

Denning MR

This case is a "battle of the forms". ...

In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out-of-date. … The better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them. … Applying this guide, it will be found that in most cases when there is a “battle of the forms” there is a contract as soon as the last of the forms is sent and received without objection being taken to it. … The difficulty is to decide which form, or which part of which form, is a term or condition of the contract. In some cases the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. … In some cases, however, the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back and the buyer orders the goods purporting to accept the offer on an order form with his own different terms and conditions on the back, then, if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired on both sides. … The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable - so that they arc mutually contradictory - then the conflicting terms may have to be scrapped and replaced by a reasonable implication.

... the documents have to be considered as a whole. And, as a matter of construction, I think the acknowledgement of the 5th June, 1969 is the decisive document. It makes it clear that the contract was on the buyers' terms and not on the sellers' terms: and the buyers' terms did not include a price variation clause.

Lawton LJ

The modern commercial practice of making quotations and placing orders with conditions attached, usually in small print, is indeed likely, as in this case to produce a battle of forms. The problem is how should that battle be conducted? The view taken by the learned judge was that the battle should extend over a wide area and the court should do its best to look into the minds of the parties and make certain assumptions. In my judgment, the battle has to be conducted in accordance with set rules. It is a battle more on classical 18th century lines when convention decided who had the right to open fire first rather than in accordance with the modern concept of attrition.

The rules relating to a battle of this kind have been known for the past 130-odd years. They were set out by the then Master of the Rolls, Lord Langdale in the case of Hyde v. Wrench ...

When those rules are applied to this case, in my judgment, the answer is obvious. The plaintiffs started by making an offer. That was in their quotation. The small print was headed by the following words: "General. All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the Buyer's order". That offer was not accepted. The buyers were only prepared to have one of these very expensive machines on their own terms. Their terms had very material differences in them from the terms put forward by the plaintiffs. They could not be reconciled in any way. In the language of article 7 of the Uniform Law on the Formation of Contracts for the International Sale of Goods they did materially alter the terms set out in the offer made by the plaintiffs.

As I understand Hyde v Wrench and the cases which have followed, the consequence of placing the order in that way, if I may adopt Mr. Justice Megaw's words, was "to kill the quotation".

It follows that the court has to look at what happened after the buyers made their counter-offer. By letter dated the 4th June, 1969 the plaintiffs acknowledged receipt of the counter-offer, and they went on in this way: "Details of this order have been passed to our Halifax works for attention and a formal acknowledgement of order will follow in due course". That is clearly a reference to the printed tear-off slip which was at the bottom of the buyers' counter-offer. By letter dated the 5th June, 1969 the sales office manager at the plaintiffs' Halifax factory completed that tear-off slip and sent it back to the buyers.

It is true, as Mr. Scott has reminded us, that the return of that printed slip was accompanied by a letter which had this sentence in it: "This is being entered in accordance with our revised quotation of 25rd May for delivery in 10/11 months". I agree with my Lord that, in business sense, that refers to the quotation as to the price and the identity of the machine, and it does not bring into the contract the small print conditions on the back of the quotation. Those small print conditions had disappeared from the story. That was when the contract was made. At that date it was a fixed price contract without a price escalation clause.

As I pointed out in the course of argument to Mr. Scott, if the letter of the 5th June which accompanied the form acknowledging the terms which the buyers had specified had amounted to a counter-offer, then in my judgment the parties never were ad idem. It cannot be said that the buyers accepted the counter-offer by reason of the fact that ultimately they took physical delivery of the machine. By the time they took physical delivery of the machine, they had made it clear by correspondence that they were not accepting that there was any price escalation clause in any contract which they had made with the plaintiffs, I agree with my Lord, the Master of the Rolls, that this appeal should be allowed.

 

Bridge LJ

...

Mr Scott [appearing for Butler] has struggled manfully to say that the contract concluded on those terms and conditions was in some way over-ruled or varied by the references in the two letters dated the 4th and 5th June to the quotation of the 23rd May, 1969. The first refers to the machinery being as quoted on the 23rd Nay. The second letter says that the order has been entered in accordance with the quotation of the 23rd May. I agree with my Lords that that language has no other effect than to identify the machinery and to refer to the prices quoted on the 23rd May. But on any view, at its highest, the language is equivocal and wholly ineffective to override the plain and unequivocal terms of the printed acknowledgement of order which was enclosed with the letter of the 5th June. Even if that were not so and if Mr. Scott could show that the sellers' acknowledgement of the order was itself a further counter-offer, I suspect that he would be in considerable difficulties in showing that any later circumstance amounted to an acceptance of that counter-offer in the terms of the original quotation of the 23rd May by the buyers. But I do not consider that question further because I am content to rest upon the view that there is nothing in the letter of the 5th June which overrides the plain effect of the acceptance of the order on the terms and conditions stated thereon. I too would allow the appeal and enter judgment for the defendants.