The Scottish case of Specialist Insulation Ltd v Pro-Duct (Fife) Ltd  CSOH 79 is one of the latest to consider contractual interpretation and provides a view on recent English judgements on the “battle of the forms”. The Court of Session has found that the “last shot” doctrine is not always applicable where it is clear that this is inconsistent with the intentions of the parties.
Pro-Duct (Fife) Ltd (“Pro-Duct”) was a sub-contractor on a project at Edgbaston cricket ground. In connection with this, Pro-Duct asked Specialist Insulation Ltd (“SIL”) for a quotation for the supply of ductwork. A quotation was provided marked as subject to its “standard terms and conditions of trading”; these were in turn subject to English law and the jurisdiction of the English courts. In addition the terms provided that:
- Its conditions applied to the exclusion of any other set of terms unless otherwise agreed in writing;
- SIL’s conditions would prevail in the event of inconsistency with any other term; and
- Any dispute should be referred to arbitration.
Shortly after receiving the quotation, Pro-Duct issued a purchase order to SIL along with a Pro-Duct executed document titled “Material Supply Only Sub-contract Agreement” (the “Sub-contact”). This was never executed by SIL and was inconsistent with the terms of the purchase order (in particular, the Sub-contract provided that works were to be supplied on a labour only basis, as opposed to supply). There were also significant differences when compared with SIL’s terms and conditions, in particular, Pro-Duct’s provided for disputes to be referred to adjudication under the Scheme for Construction Contracts 1998 and was subject to the jurisdiction of the Scottish Courts. SIL failed to sign and return the Sub-contract, but proceeded to supply the ductwork which was duly accepted by Pro-Duct.
By 2011 a dispute arose regarding payments due to SIL. SIL issued a notice of adjudication. The question then arose as to which set of terms was applicable. In an interesting twist, both parties sought to argue that the other party’s terms and conditions applied. Pro-Duct challenged the adjudicator’s jurisdiction on the basis that the contract was for supply only so therefore fell out with the scope of construction operations. They subsequently refused to pay the £85,500 plus VAT awarded to SIL and commenced court proceedings.
Pro-Duct argued that, because the Sub-contract Agreement had not been executed by SIL, it could not form part of the parties’ contract. In contrast SIL provided that it did form part of the parties’ contract on the basis of (i) performance by SIL; and (ii) the ‘last shot doctrine’... i.e. the traditional argument that Pro-Duct’s terms should prevail as they were the last to state that their terms and conditions applied.
Lord Malcolm refused to enforce the adjudicator’s decision, bringing the battle of the forms theory into debate. Lord Malcolm found that the Sub-contract did not form part of the parties’ contract; that the parties had not agreed to adjudication; and that SIL’s standard terms applied. Reference was made to Tekdata Interconnections Ltd v Amphenol Ltd  EWCA Civ which confirmed that the last set of terms exchanged (Pro-Duct’s) does not always prevail if any agreement to that effect can “be inferred from the circumstances of the case”. Lord Malcolm held that “it always depends on an assessment of what the parties must objectively be taken to have intended”. As part of his analysis the following was considered:
- SIL’s quotation specifically incorporated their conditions by reference, whereas Pro-Duct’s purchase order made no such reference to their equivalent;
- SIL’s terms stated that they would apply and take precedence over any other terms unless specifically provided otherwise in writing; no such agreement in writing existed;
- Pro-Duct’s Sub-contract provided for execution by both parties. This was not a requirement of SIL’s quotation. By taking delivery of the goods without querying the lack of signature on their own document Pro-Duct must be taken as having accepted the goods on the basis of SIL’s conditions.
In summary, we consider the case is of interest for a number of reasons:
- Previous case law held that it is possible to displace the last shot rule but generally it has been applied. Lord Malcolm decided to disapply the doctrine on the basis of non-signature of a document requiring signature and the inappropriateness of Pro-Duct’s terms. This therefore suggests that unless requests for counter-signature are followed up, it may be more effective to state that performance amounts to acceptance;
- The court did not address the fact that SIL’s quotation, which was held to govern the parties’ agreement, was subject to English law and English courts;
- The court held that Pro-Duct effectively challenged the adjudicator’s jurisdiction throughout the adjudication even though, before the court, it changed the legal basis of that challenge. The court appeared to accept the general reservation that the adjudicator did not have jurisdiction and did not trouble itself with the details of the actual challenge made.
There is an appeal pending and we await the result with interest.