It is well understood that parties can incorporate standard terms into a contract. Less clear is the minimum that contracting parties must do in order to achieve this. A recent Court of Appeal decision has held that the words “terms and conditions available upon request” at the foot of a form of work order are reasonably capable of being understood as intended to incorporate the contractor’s standard terms.1

Facts

The facts centre around maintenance work undertaken by the defendant, CSE, on an aircraft operated by EBJ.

CSE and EBJ had worked together for a number of years. The two companies had entered into maintenance agreements (the latest of which was dated 4 February 2008) and a Continuing Airworthiness Managing Support Contract.

In addition to this, before starting work on any aircraft, it was CSE’s standard practice to require a work order to be signed on behalf of EBJ. Out of 50 work orders signed in this manner, 40 included the words “terms and conditions available on request” at the foot of the order, just below the signature box.

In June 2008, the aircraft concerned was delivered to CSE for maintenance work. A work order (containing the words referred to above) was signed and the work completed. However, this was done negligently, resulting in damage to the aircraft engine.

EBJ assigned its right to recover damages from CSE to the aircraft owner, Rooney, who brought the action.

Decision

In its defence, CSE claimed that it undertook the work on its standard conditions. It relied on a number of those conditions which, on its case, had been incorporated into the contract. The claimants applied for summary judgment on the basis that the work order was not a contractual document and was, in any event, insuffi cient to incorporate CSE’s terms and conditions into the contract.

Mr Justice Simon held that, although it was reasonably arguably that the work order was a contractual document, the phrase “terms and conditions available on request” was insuffi cient effectively to incorporate those terms. He relied on the fact that there were no words of incorporation at all, considering the phrase to be a mere statement of the fact that there were terms and conditions which were available if requested by the contractual counterparty. He struck out the parts of the defence which referred to the terms and conditions.

The Court of Appeal agreed that to interpret the meaning of the words used the correct question was whether reasonable people, in the position of the parties, would understand the words used as referring to contractual terms upon which CSE agreed to do the work. However, it disagreed with the fi rst instance judge’s conclusion.

Although the words could be construed simply as a reference to the availability of CSE’s terms and conditions, the Court of Appeal would not have expected a businessman in the position of the parties to have construed the words in that way.

Given that the appeal was against an order striking out parts of the defence, the Court of Appeal merely had to determine whether it was reasonably arguable that the wording was suffi cient to incorporate CSE’s terms. The court went further than that, however, fi nding that on the material before it the incorporation interpretation was the more likely construction. Lord Justice Toulson commented that it would be commercially most odd to have a contract for the performance of services where the contractor had devised detailed commercial terms but left them for inclusion only at the customer’s request.

Comment

Although the interpretation to be given will now be determined by the trial judge, the Court of Appeal’s approach is clearly the most commercially attractive. To focus on the absence of any express language of incorporation undermines the basic English law principle of construction which requires courts to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would have been available to the parties in the situation in which they were at the time of the contract.

Whatever the fi nal outcome, the divergent judicial opinion on the correct interpretation serves to highlight the importance of precise drafting. Any attempt to incorporate standard terms should be by means clear and express wording.

The Court of Appeal’s commercially sensible construction offers hope to parties with ambiguous words of incorporation. It also means that a party faced with this ambiguity should be alive to the danger of being bound by terms which were not expressly incorporated and, worse, terms which it may never have read.