Transformers & Rectifiers Ltd v Needs Ltd

In a battle of forms, standard terms become contractual only where the party relying on them gives reasonable notice and makes its intention objectively clear. A course of dealing need not be extensive, but it must be consistent and unequivocal. For orders sent by fax or email, the buyer should transmit its terms, particularly where the order does not refer to terms printed on its reverse. A seller relying on its own non-industry standard conditions must clearly identify them on the acknowledgement and give reasonable notice, ordinarily by supplying the conditions or clearly incorporating them on the document. Trade-association or routinely used industry terms may require less notice. Neither party’s terms were incorporated on these facts.

The Transformers & Rectifiers Ltd v Needs Ltd dispute came before the High Court on a preliminary issue concerning two contracts for nitrile gaskets. The parties had traded for many years. The buyer’s purchase orders contained terms printed on their reverse, while the seller’s acknowledgements referred to its terms of sale and stated that copies were available on request. The buyer alleged that the goods were unsuitable and that the seller’s terms contained limiting or excluding provisions. The central question was whether either party had incorporated its standard terms into the relevant contracts.

Disposition

The preliminary issue was determined in favour of neither party’s contractual terms. The court concluded that neither the buyer’s nor the seller’s standard terms had been incorporated into the two relevant purchase orders.

1. General principles. Where one party makes an offer on its conditions and the other accepts on its own conditions, followed by performance, the traditional analysis generally produces a contract on the latter party’s conditions, provided reasonable notice of the conditions has been given. The court drew this principle from Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209. A course of dealing need not be extensive: three or four occasions may suffice. It must, however, be consistent and unequivocal.
2. The buyer’s terms. The buyer’s purchase orders were usually sent by fax or email without the terms printed on their reverse. The face of the orders did not refer to those terms. Occasional postal orders, from which the seller became aware that terms existed on the reverse, did not establish a consistent practice. Objectively, the seller was entitled to assume that the buyer did not intend to rely on those terms. Reasonable notice therefore had not been given.
3. The seller’s terms. A seller seeking to make an acknowledgement a counter-offer must refer on its face to conditions in terms making clear that they are to govern the contract. Where the conditions are the seller’s own terms rather than routinely used industry terms, reasonable notice ordinarily requires the conditions to be printed on the reverse with a clear reference on the face, or a copy to be supplied with a statement that they are the only terms on which the seller will contract.
4. Application and conclusion. The seller had neither supplied its conditions nor printed them on the reverse of the acknowledgement. The reference to normal terms and copies being available on request was insufficient. The reasoning in Tekdata Interconnections Ltd v Amphenol Ltd did not relax the separate requirement of reasonable notice. The court reserved any unresolved questions concerning relief or costs for further submissions.

not stated in the judgment.