Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd

 

[1979] 1 All ER 965

Court of Appeal

 

The facts are set out in the judgement of Lord Denning MR.

 

Lord Denning MR

 

This case is a 'battle of forms'. The suppliers of a machine, Butler Machine Tool Co Ltd ('the sellers'), on 23 May 1969 quoted a price for a machine tool of £75,535. Delivery was to be given in ten months. On the back of the quotation there were terms and conditions. One of them was a price variation clause. It provided for an increase in the price if there was an increase in the costs and so forth. The machine tool was not delivered until November 1970. By that time costs had increased so much that the sellers claimed an additional sum of £2,892 as due to them under the price variation clause.

 

The buyers, Ex-Cell-O Corpn, rejected the excess charge. They relied on their own terms and conditions. They said: 'We did not accept the sellers' quotation as it was. We gave an order for the self-same machine at the self-same price, but on the back of our order we had our own terms and conditions. Our terms and conditions did not contain any price variation clause.'

 

... he case was decided on the documents alone. I propose therefore to go through them.

 

On 23 May 1969 the sellers offered to deliver one 'Butler' double column plano-miller for the total price of £75,535, 'DELIVERY: 10 months (Subject to confirmation at time of ordering) Other terms and conditions are on the reverse of this quotation'. On the back there were 16 conditions in small print staring with this general condition:

 

'All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the Buyer's order.'

 

Clause 3 was the price variation clause. It said:

 

'... Prices are based on present day costs of manufacture and design and having regard to the delivery quoted and uncertainty as to the cost of labour, materials etc during the period of manufacture, we regret that we have no alternative but to make it a condition of acceptance of order that goods will be charged at prices ruling upon date of delivery.'

 

The buyers, Ex-Cell-O, replied on 27 May 1969 giving an order in these words: 'Please supply on terms and conditions as below and overleaf.' Below there was a list of the goods ordered, but there were differences from the quotation of the sellers in these respects: (i) there was an additional item for the cost of installation, £3,100; (ii) there was a different delivery date: instead of 10 months, it was 10 to 11 months. Overleaf there were different terms as to the cost of carriage, in that it was to be paid to the delivery address of the buyers; whereas the sellers' terms were ex-warehouse. There were different terms as to the right to cancel for late delivery. The buyers in their conditions reserved the right to cancel if delivery was not made by the agreed date, whereas the sellers in their conditions said that cancellation of order due to late delivery would not be accepted.

 

On the foot of the buyers' order there was a tear-off slip:

 

'Acknowledgement: Please sign and return to Ex-Cell-O Corp (England) Ltd. We accept your order on the Terms and Conditions stated thereon -- and undertake to deliver by... Date... Signed...'

 

In that slip the delivery date and signature were left blank ready to be filled in by the sellers.

 

On 5 June 1969 the sellers wrote this letter to the buyers:

 

'We have pleasure in acknowledging receipt of your official order dated 27 May covering the supply of one 'Butler' Double Column Plano-Miller... This is being entered in accordance with our revised quotation of 23 May for delivery in 10/11 months, ie March/April, 1970. We return herewith, duly completed, your acknowledgement of order form.'

 

They enclosed the acknowledgement form duly filled in with the delivery date, March/April 1970, and signed by the Butler Machine Tool Co Ltd.

 

No doubt a contract was then concluded. But on what terms? The sellers rely on their general conditions and on their last letter which said 'in accordance with our revised quotation of 23 May' (which had on the back the price variation clause). The buyers rely on the acknowledgement signed by the sellers which accepted the buyers' order 'on the terms and conditions stated thereon' (which did not include a price variation clause).

 

If those documents are analysed in our traditional method, the result would seem to me to be this: the quotation of 23 May 1969 was an offer by the sellers to the buyers containing the terms and conditions on the back. The order of 27 May 1969 purported to be an acceptance of that offer in that it was for the same machine at the same price, but it contained such additions as to cost of installation, date of delivery and so forth, that it was in law a rejection of the offer and constituted a counter-offer. That is clear from Hyde v Wrench. As Megaw J said in Trollope & Colls Ltd v Atomic Power Constructions Ltd: '... the counter-offer kills the original offer.' The letter of the sellers of 5 June 1969 was an acceptance of that counter-offer, as is shown by the acknowledgement which the sellers signed and returned to the buyers. The reference to the quotation of 23 May 1969 referred only to the price and identity of the machine.

 

To go on with the facts of the case. The important thing is that the sellers did not keep the contractual date of delivery which was March/April 1970. The machine was ready about September 1970 but by that time the buyers' production schedule had to be rearranged as they could not accept delivery until November 1970. Meanwhile the sellers had invoked the price increase clause. They sought to charge the buyers an increase due to the rise in costs between 27 May 1969 (when the order was given) and 1st April 1970 (when the machine ought to have been delivered). It came to £2,892. The buyers rejected the claim. The judge held that the sellers were entitled to the sum of £2,892 under the price variation clause. He did not apply the traditional method of analysis by way of offer and counter-offer. He said that in the quotation of 23 May 1969 'one finds the price variation clause appearing under a most emphatic heading stating that it is a term or condition that is to prevail'. So he held that it did prevail.

 

I have much sympathy with the judge's approach to this case. In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out-of-date. This was observed by Lord Wilberforce in New Zealand Shipping Co Ltd v A M Satterthwaite. The better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them. As Lord Cairns LC said in Brogden v Metropolitan Railway Co:

 

... 'there may be a consensus between the parties far short of a complete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description.'

 

Applying this guide, it will be found that in most cases when there is a 'battle of forms' there is a contract as soon as the last of the forms is sent and received without objection being taken to it. That is well observed in Benjamin on Sale (Benjamin on the Sale of Goods (9th Edn, 1974). The difficulty is to decide which form, or which part of which form, is a term or condition of the contract. In some cases the battle is won by the man who fires the last shot. He is the man who puts forward the latest term and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. Such was British Road Services Ltd v Arthur V Crutchley & Co Ltd per Lord Pearson; and the illustration given by Professor Guest in Anson's Law of Contract (24th Edn) where he says that 'the terms of the contract consist of the terms of the offer subject to the modifications contained in the acceptance'. That may however go too far. In some cases, however, the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back and the buyer orders the goods purporting to accept the offer on an order form with his own different terms and conditions on the back, then, if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired on both sides. There is a concluded contract but the forms vary. The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable, so that they are mutually contradictory, then the conflicting terms may have to be scrapped and replaced by a reasonable implication.

 

In the present case the judge thought that the sellers in their original quotation got their blow in first; especially by the provision that 'These terms and conditions shall prevail over any terms and conditions in the Buyer's order'. It was so emphatic that the price variation clause continued through all the subsequent dealings and that the buyer must be taken to have agreed to it. I can understand that point of view. But I think that the documents have to be considered as a whole. And, as a matter of construction, I think the acknowledgement of 5 June 1969 is the decisive document. It makes it clear that the contract was on the buyers' terms and not on the sellers' terms: and the buyers' terms did not include a price variation clause.

 

Lawton and Bridge LJJ preferred the more traditional approach of offer and counter offer.

 

Lawton LJ

 

The rules relating to a battle of [forms] of this kind have been known for the past 130-odd years. They were set out by the then Master of the Rolls, Lord Langdale, in Hyde v Wrench, and Lord Denning MR has already referred to them; and, if anyone should have thought they were obsolescent, Megaw J in Trollope & Colls Ltd v Atomic Power Constructions Ltd called attention to the facts that those rules are still in force.

 

When those rules are applied to this case, in my judgement, the answer is obvious. The sellers started by making an offer. That was in their quotation. The small print was headed by the following words:

 

'General. All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the Buyer's order.'

 

That offer was not accepted. The buyers were only prepared to have one of these very expensive machines on their own terms. Their terms had very material differences in them from the terms put forward by the sellers...

 

As I understand Hyde v Wrench and the cases which have followed, the consequence of placing the order in that way, if I may adopt Megaw J's words (Trollope & Colls Ltd v Atomic Power Constructions Ltd, was 'to kill the quotation'. It follows that the court has to look at what happened after the buyers made their counter-offer. By letter dated 4 June 1969 the sellers' acknowledged receipt of the counter-offer, and they went on in this way: 'Details of this order have been passed to our Halifax works for attention and a formal acknowledgement of order will follow in due course.' That is clearly a reference to the printed tear-off slip which was at the bottom of the buyers' counter-offer. By letter dated 5 June 1969 the sales office manager at the sellers' Halifax factory completed that tear-off slip and sent it back to the buyers.

 

It is true, as counsel for the sellers has reminded us, that the return of that printed slip was accompanied by a letter which had this sentence in it: 'This is being entered in accordance with our revised quotation of 23 May for delivery in 10/11 months.' I agree with Lord Denning MR that, in a business sense, that refers to the quotation as to the price and the identity of the machine, and it does not bring into the contract the small print conditions on the back of the quotation. Those small print conditions had disappeared from the story. That was when the contract was made. At that date it was a fixed price contract without a price escalation clause.

 

As I pointed out in the course of argument to counsel for the sellers, if the letter of 5 June which accompanied the form acknowledging the terms which the buyers had specified had amounted to a counter-offer, then in my judgement the parties never were ad idem. It cannot be said that the buyers accepted the counter-offer by reason of the fact that ultimately they took physical delivery of the machine. By the time they took physical delivery of the machine, they had made it clear by correspondence that they were not accepting that there was any price escalation clause in any contract which they had made with the plaintiffs.