When you have an ongoing, long standing relationship with a customer it is easy to assume that your terms and conditions that were previously issued to that customer are accepted each and every time. However, a recent case of La Rosa v Nudrill Pty Ltd in the Western Australian Court of Appeal reinforces the importance of obtaining acceptance of your terms and conditions of trade from customers prior to providing any goods and services. These terms and conditions are essential to protecting you against liability claims in the case of an incident or accident occurring.

In this case, the supplier was liable for damages up to $200,000 to their customer who they had been working with for over 10 years. Are you at risk?

Facts

The facts of this case are fairly straight forward. In summary:

  1. La Rosa, the supplier operated a transport business and provided cartage to the customer over a period of 10 years;
  2. the transport contracts were oral except for the tax invoice issued by La Rosa, that were sent to the customer after the completion of the relevant cartage;
  3. the terms and conditions contained an exclusion clause that read:
    'All goods are handled, lifted or carried at owner's risk. The Contractor shall not be liable for any loss or damage of property and/or goods of the Client whether such damage was caused by act, default or negligence on the part of the Contractor, and/or his servants'.
  4. during a cartage for the customer in August 2011, the customer's drill rig fell from La Rosa's trailer and sustained damage and the customer made a claim for damages.

Court's decision

At first instance and on appeal, the Court found that La Rosa had failed to exercise reasonable care and skill when transporting the drill rig because this was the only likely explanation for the rig falling off the trailer and La Rosa was liable for the damage incurred to the drill rig.

On appeal, La Rosa argued that the exclusion clause printed on the back of the tax invoice removed all liability from La Rosa during transport and that Nudrill Pty Ltd had accepted this clause in all prior dealings. With respect to this, the Court held that:

  1. despite the parties history of dealing, there was no evidence that demonstrates that Nudrill knew of, and accepted the exclusion clause during or before the time the contract for the transport of the drill rig was entered into;
  2. because La Rosa sent the invoice to Nudrill after the transport of the drill rig, there was no acceptance (or ought to have been acceptance) of the exclusion clause. This was because by the time the invoice was sent the contract had already been completed;
  3. tax invoices are not considered to be a contractual document, and rather to secure payment for services;
  4. La Rosa had failed to demonstrate that the exclusion clause had come to be accepted and treated as contractual by the conduct of the parties.

What this means for you

This decision illustrates that the issue of terms on the back of tax invoices is not sufficient notice of the terms and conditions and is not acceptance that a party would do business with you in the future on those terms. Hence, a supplier is exposed to their terms printed on the tax invoices not forming part of the contractual relationship with a customer.

This decision also reinforces that a supplier of goods and services must:

  1. have a process by which they notify customers of their terms and conditions of trade that apply to a particular arrangement. This could be met by providing such notice and terms in quotations and ensuring that customers accept such terms;
  2. continuously review arrangements with customers to protect terms of engagement;
  3. ensure that the contract is clear about which terms and conditions apply to a particular arrangement, whether it be the customer's or the suppliers terms and conditions of trade.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.