Transformers & Rectifiers Ltd v Needs Ltd

[2015] EWHC 269 (TCC)

The parties disagreed over the terms of the contract between them. T&R said that its terms and conditions applied because they were printed on the back of the purchase orders. Needs argued that its terms and conditions applied because they were referred to on its acknowledgements of order. The commercial relationship went back to the mid-1990s. T&R placed orders for nitrile gaskets and other components on almost a weekly basis and in a variety of ways: sometimes by fax, sometimes as a pdf attachment to an e-mail and, occasionally, by post.

The top copy of T&R’s purchase orders was printed on white paper. On the reverse, printed in small type and light-coloured lettering, were the terms and conditions. Mr Edwards-Stuart was shown an example of a blank purchase order. He said that it was not obvious that there was any printing on the back. Accordingly he thought that anyone receiving the document would probably not know that there was anything on its back unless they turned it over or were specifically referred to its existence. This was relevant because there was no reference on the face of the purchase order itself to the existence of the terms and conditions on the reverse. Further, when T&R placed an order by either fax or e-mail it did not transmit a copy of the conditions on the reverse of the purchase order. All that was sent was the front page of the purchase order. This meant that Needs did not receive a copy of the terms and conditions on the back. Needs responded to purchase orders by sending an acknowledgement, which included the following wording: “The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request)”.

T&R argued that since Needs was aware of its terms and conditions, it must be taken to have accepted an offer which included those terms when it returned its acknowledgement of order. Needs argued that T&R had failed to take sufficient steps to give reasonable notice of its terms and conditions which meant that they were not incorporated into the contract.

By contrast, Needs had given sufficient notice of its terms in its acknowledgement of order, which was therefore a counter-offer that had been accepted by T&R when it took delivery of the goods. The purchase orders were offers made by T&R. But these were responded to by Needs sending to T&R its written Order Acknowledgement. This stated the terms upon which the goods were to be sold, namely upon Needs’ written Terms and Conditions of sale. This was a counter-offer which T&R accepted by taking delivery of the goods.

The Judge concluded that the following legal principles applied:

  1. Where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, assuming that each party’s conditions have been reasonably drawn to the attention of the other, there is a contract on B’s conditions;
  2. Where there is reliance on a previous course of dealing it does not have to be extensive. But that course of dealing by the party contending that its conditions are incorporated has to be consistent and unequivocal;
  3. Where trade standard terms exist, it will usually be easier to persuade the court that they should be incorporated, provided that reasonable notice of the application of the terms has been given;
  4. A party’s standard terms will not be incorporated unless that party has given the other party reasonable notice of them;
  5. It is not always necessary for a party’s terms and conditions to be included or referred to in the documents forming the contract; it may be sufficient if they are clearly contained in or referred to in invoices sent subsequently. By contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late.

Here, Mr Justice Edwards-Stuart thought that the problem for T&R was that it did not place its orders in the same way each time. The majority of orders were sent by fax or e-mail, when the terms and conditions were not included. Where a buyer wishes to incorporate his own standard terms (and those orders are sent by fax or e-mail), the buyer must give the seller reasonable notice of those terms and must make it clear to the other party that he intends to rely on them. This might include faxing the terms on the back of the purchase order as a separate document together with the purchase order or ensuring that the pdf attachment on an email includes both the face of the purchase order and the terms on its back.

What about Needs? Their terms were not trade standard. Needs further took no steps to provide T&R with a copy of their terms and at the time T&R did not ask for them. A seller who wishes to incorporate his terms by referring to them in his order acknowledgement - thus making it a counter-offer - must, at the very least, refer to the conditions on the acknowledgement and make it plain that they are to govern the contract. Here, as Needs’ terms were not printed on the reverse of its acknowledgements of order, it had not done enough to bring those terms to the attention of T&R. Accordingly, the Judge held that neither party’s terms and conditions were incorporated into the purchase orders.