Facts-
The purchaser sent back an order form
outlining their own terms and conditions, which did not include a price
variation clause. Attached to this order
form was a tear off slip to be signed by the seller acknowledging their
acceptance of the buyer’s terms.
The seller’s returned the signed slip but
when the machine was delivered in November 1970 they claimed an additional
£2,982 under the price variation clause.
The buyer disputed this arguing there was no price variation clause in
the final contract.
Held
Appeal allowed.
Issues
- The main legal issue was to determine the effect of a
counter-offer on an original offer thereby establishing whether the seller
(Butler Machine Tool Co) could rely on a price variation clause which was
present in the standard form.
Here the last
offer rule was said to prevail. This
rule was developed in Hyde v Wrench
(1840) 3 Beav 334; 49 ER 132 and states that the effect of a counter-offer is
to kill the original offer.
This
case is said to be an example of the “Battle
·
Arises when both parties, for
example a buyer and seller of goods exchange inconsistent standard forms during
contract negotiations and reach an agreement without deciding whose standard
forms should prevail.
·
Standard Form Contract = a
contract that is not individually negotiated by the parties but contains the
same terms for all transactions of that type.
·
In approaching this issue, the
court suggested two methods; the conflict and the synthesis approaches.
The conflict
approach required the court to determine which set of terms prevail. This was
generally held to be the party who had the last say in the negotiation.
The synthesis
approach required the court to build a contract from both sets of terms,
including the terms common to both and those terms upon which the parties were
agreed.
·
Two questions à
1.
Has a contract been concluded
at all?
2. If there is a contract, whose terms prevail?
In
relation to question 1, has a contract been formed? The Master of the
Roles Lord Denning assessed whether there was apparent offer and acceptance in
the negotiation period.
- Offer = The sellers’ quoted price made subject to the quoted form.
- Counter Offer = Buyer’s request for the machinery and their enclosure of
their standard form without the price variation clause.
In Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 “The counter-offer
kills the original offer”.
- Acceptance of Buyer’s
counter offer = The seller’s acknowledged
receipt of the buyer’s order on an acknowledgment slip detached from the
bottom of the buyer’s standard form.
Therefore, there was a contract and it was
made on the buyer’s terms.
Question
2 – Whose terms prevail?
- Here the court used the ‘Last Shot’ approach – the seller’s
acknowledgement by signing the slip of the buyer’s terms was the final
acceptance so that there was no price escalation clause.
- The court held that the seller’s apparent attempt to reassert
its terms by saying they were filling in the order in accordance with
their revised quotations of May 23”, despite signing the buyer’s
acknowledgment slip was unsuccessful and was treated by the court as
merely a method of identifying the machine.
- Furthermore, according to Hyde
v Wrench a counter-offer acts to kill any previous offer. Therefore, When a counter-offer is
involved the last counter-offer dictates the terms of the contract.
Decision
The court’s
decision held that the contract was made on the Buyer’s terms, without a price
variation clause. Therefore the Seller
had no right to claim the extra manufacturing fee and the appeal was allowed.
SUMMARY
OF JUDGMENTS
Lord
Denning MR
Lord Denning MR approached the case
observing the documents alone, concluding that the price variation clause in
the sellers’ form continued through the whole dealing, so the sellers were
entitled to rely on it. He confirms that
the sellers’ did all that was necessary and reasonable to bring the price
variation clause to the buyers’ attention.
Agreed with Lord Denning MR that as
according to Hyde v Wrench a
counter-offer acts to kill any previous offer.
Once the tear of slip had been returned and
received by the Buyer, the contract was made.
This contract did not include the small print conditions on the back of
the quotation, because the counter offer on the buyer’s terms was the offer
accepted. Therefore it was a fixed price
contract without a price escalation clause.
The sentence in the letter accompanying the
tear-off slip dated 5 June
1969 did not amount to a counter-offer, nor could it be said that
this proposed counter-offer was accepted once the buyer received the
goods. The Buyer’s had clearly indicated
they were not accepting any price escalation clause in any contract made with
the Seller.
