Magnetic Shields Limited v Vacuum and Atmosphere Services Limited

A contract may be formed by acceptance of a purchase order which incorporates the buyer’s standard terms. A later invoice referring to the seller’s terms will not normally alter the contract where acceptance and performance have already occurred. A no oral modification clause prevents an oral instruction from varying contractual obligations unless the requirements for variation are satisfied. Estoppel requires a clear and unqualified representation that an informal variation is valid. In a defective works claim, reinstatement is ordinarily measured by the reasonable cost of restoring the property to the contractual condition. A claimant cannot recover the full refurbishment cost without proving that full replacement is necessary, and must prove that claimed mitigation expenditure was reasonably incurred.

Magnetic Shields Limited engaged Vacuum and Atmosphere Services Limited to refurbish and commission a vacuum furnace to an as-new specification. After an overpressure incident, the furnace was taken out of service. Magnetic Shields claimed damages for defective refurbishment, including repair, replacement and consequential costs. Vacuum and Atmosphere Services alleged that the contractual pressure specification had later been varied orally and brought counterclaims for unpaid invoices.

The court determined which standard terms governed, whether the specification had been varied, which pleaded defects were established, the appropriate measure of loss, mitigation, and the effect of contractual set-off provisions.

1. Contractual terms. The contract was formed when Vacuum and Atmosphere Services sent its order confirmation email at 15.38 on 10 November 2017. The purchase order was a counter-offer and incorporated Magnetic Shields’ standard terms. The later invoice, sent after formation and to a different recipient, did not incorporate the seller’s terms. The case was therefore not governed by the usual last-shot analysis in a battle of forms. (paras [10]-[14])
2. Pressure specification and variation. The contractual obligation was to refurbish, commission and test the furnace so that it could operate to its original positive-pressure specification. The alleged oral instruction to commission it only at 0.8 bar was a significant contractual variation. The no oral modification clause prevented it from taking effect without a written variation. There was also no clear and unequivocal representation that an informal variation was valid, so estoppel did not arise. (paras [15]-[22])
3. Breach. Breaches were established in relation to commissioning the furnace as a negative-pressure furnace, the water pressure switch, the heat-exchanger safety switch, the safety pressure valve, the gas backfill valve, the air-admit filter, the electrical schematics, and inadequate risk assessment and testing concerning overpressure. Other pleaded defects, including the alleged intermittent PLC faults, were not proved. (paras [23]-[39])
4. Loss. The proper starting point was the reasonable cost of reinstatement. The claimant failed to prove that a complete refurbishment or replacement PLC was necessary. The court assessed reinstatement, including repairs, updated drawings, and recommissioning and testing, at £15,000, and allowed £1,600 for the independent investigation. Claims for alternative-furnace costs, overtime, water-system expenditure, and further transport and installation were not proved or were not reasonably incurred. Judgment was given for £16,600 net of VAT before set-off. (paras [40]-[54])
5. Counterclaims and set-off. The defendant was entitled in principle to £1,830.65 and £752, net of VAT, under two invoices. The claimant was entitled to set those liabilities off against the defendant’s unliquidated damages liability under the refurbishment contract pursuant to its standard terms. The net liability, including agreed interest, was £16,234.97. (paras [55]-[59])