A E Yates Trenchless Solutions Ltd v Black & Veatch Ltd

Contract formation in a commercial “battle of the forms” is determined objectively from the parties’ words and conduct. A quotation may be rejected by a counter-offer, but a contract can subsequently arise from an offer contained in formal documentation and acceptance by conduct. Conduct such as performing instructed variations, operating a self-billing arrangement, commencing work without reservation and making contractual claims may objectively establish acceptance. Where incorporated contractual documents contain an agreed order of precedence, that order governs conflicts. A document’s inclusion in a schedule does not demote higher-ranking general conditions where the contract expressly gives those conditions priority.

Gleeson Construction Services Limited engaged A E Yates Trenchless Solutions Limited to undertake directional drilling works. Black & Veatch Limited later stood in Gleeson’s position by novation. No formal subcontract was signed.

The parties accepted that a subcontract existed but disputed which terms had been incorporated. Yates relied principally on its quotation, including provisions concerning ground conditions. Black & Veatch relied on subcontract documents sent on 3 November 2005, incorporating the Institution of Chemical Engineers “Brown Book” and associated schedules. The preliminary issues were whether those documents formed the subcontract and, if so, whether the Brown Book conditions took precedence over inconsistent terms in Yates’s quotation.

1. Formation. Judgment was given for the Defendant on the preliminary issues. Contract formation was to be assessed objectively, by reference to what reasonable commercial parties would understand from their words and conduct. The principles in G Percy Trentham Ltd v Archital Luxfer Ltd & Others [1993] 1 Lloyd’s Rep 25 and Brogden v Metropolitan Railway (1877) 2 AC 666 supported the conclusion that conduct may amount to acceptance.
2. Yates’s quotation of 20 October 2005 had been rejected at the interview meeting on 1 November. The parties had not yet concluded the formal subcontract because liquidated damages remained unresolved. The email of 2 November was instead a separate, temporary offer authorising the ordering of materials, which Yates accepted.
3. The subcontract documents sent on 3 November constituted an offer. Yates’s response that they would be forwarded for head-office approval was not a rejection. Acceptance followed objectively from Yates’s receipt and performance of variation instructions issued in accordance with the subcontract, signing and returning the self-billing form, commencing the works without reservation, referring to the Brown Book and its amendments in contractual claims, and making notifications under Brown Book clauses 6.2 and 6.3.
4. The reasoning in Jayaar Impex Ltd v Toaken Group Ltd [1996] 2 Lloyd’s Rep. 437 was confined to the difficulty of inferring variation of an existing contract merely from conduct referable to that contract. It did not prevent the objective inference of acceptance of the formal subcontract here. The counter-offer principle stated in Butler Machine Tool Co. Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401, adopting Trollope & Colls Ltd v Atomic Power Construction Ltd [1963] 1 WLR 333, applied to the rejection of Yates’s original quotation.
5. The incorporated documents expressly provided that the Brown Book general conditions took precedence over the quotation. The reference to the Brown Book in a schedule did not reduce its contractual priority. The court therefore declared that the documents sent on 3 November 2005 formed the subcontract and that the Brown Book prevailed where inconsistent with Yates’s quotation. The underlying merits of Yates’s claim for compensation were left undecided.