The Scottish case of Specialist Insulation Ltd v Pro-Duct (Fife)
Ltd [2012] CSOH 79 is one of the latest to consider contractual
interpretation and provides a view on recent English judgements on
the "battle of the forms". The Court of Session has found
that the "last shot" doctrine is not always applicable
where it is clear that this is inconsistent with the intentions of
the parties.
Pro-Duct (Fife) Ltd ("Pro-Duct") was a sub-contractor on
a project at Edgbaston cricket ground. In connection with this,
Pro-Duct asked Specialist Insulation Ltd ("SIL") for a
quotation for the supply of ductwork. A quotation was provided
marked as subject to its "standard terms and conditions of
trading"; these were in turn subject to English law and the
jurisdiction of the English courts. In addition the terms provided
that:
(i) Its conditions applied to the exclusion of any other set of
terms unless otherwise agreed in writing;
(ii) SIL's conditions would prevail in the event of
inconsistency with any other term; and
(iii) Any dispute should be referred to arbitration.
Shortly after receiving the quotation, Pro-Duct issued a purchase
order to SIL along with a Pro-Duct executed document titled
"Material Supply Only Sub-contract Agreement" (the
"Sub-contact"). This was never executed by SIL and was
inconsistent with the terms of the purchase order (in particular,
the Sub-contract provided that works were to be supplied on a
labour only basis, as opposed to supply). There were also
significant differences when compared with SIL's terms and
conditions, in particular, Pro-Duct's provided for disputes to
be referred to adjudication under the Scheme for Construction
Contracts 1998 and was subject to the jurisdiction of the Scottish
Courts. SIL failed to sign and return the Sub-contract, but
proceeded to supply the ductwork which was duly accepted by
Pro-Duct.
By 2011 a dispute arose regarding payments due to SIL. SIL
issued a notice of adjudication. The question then arose as to
which set of terms was applicable. In an interesting twist, both
parties sought to argue that the other party's terms and
conditions applied. Pro-Duct challenged the adjudicator's
jurisdiction on the basis that the contract was for supply only so
therefore fell out with the scope of construction operations. They
subsequently refused to pay the £85,500 plus VAT awarded to
SIL and commenced court proceedings.
Pro-Duct argued that, because the Sub-contract Agreement had not
been executed by SIL, it could not form part of the parties'
contract. In contrast SIL provided that it did form part of the
parties' contract on the basis of (i) performance by SIL; and
(ii) the 'last shot doctrine'... i.e. the traditional
argument that Pro-Duct's terms should prevail as they were the
last to state that their terms and conditions applied.
Lord Malcolm refused to enforce the adjudicator's decision,
bringing the battle of the forms theory into debate. Lord
Malcolm found that the Sub-contract did not form part of the
parties' contract; that the parties had not agreed to
adjudication; and that SIL's standard terms applied. Reference
was made to Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA
Civ which confirmed that the last set of terms exchanged
(Pro-Duct's) does not always prevail if any agreement to that
effect can "be inferred from the circumstances of the
case". Lord Malcolm held that "it always depends on an
assessment of what the parties must objectively be taken to have
intended". As part of his analysis the following was
considered:
(i) SIL's quotation specifically incorporated their conditions
by reference, whereas Pro-Duct's purchase order made no such
reference to their equivalent;
(ii) SIL's terms stated that they would apply and take
precedence over any other terms unless specifically provided
otherwise in writing; no such agreement in writing existed;
(iii) Pro-Duct's Sub-contract provided for execution by both
parties. This was not a requirement of SIL's quotation.
By taking delivery of the goods without querying the lack of
signature on their own document Pro-Duct must be taken as having
accepted the goods on the basis of SIL's conditions.
In summary, we consider the case is of interest for a number of
reasons:
(i) Previous case law held that it is possible to displace the
last shot rule but generally it has been applied. Lord Malcolm
decided to disapply the doctrine on the basis of non-signature of a
document requiring signature and the inappropriateness of
Pro-Duct's terms. This therefore suggests that unless requests
for counter-signature are followed up, it may be more effective to
state that performance amounts to acceptance;
(ii) The court did not address the fact that SIL's quotation,
which was held to govern the parties' agreement, was subject to
English law and English courts;
(iii) The court held that Pro-Duct effectively challenged the
adjudicator's jurisdiction throughout the adjudication even
though, before the court, it changed the legal basis of that
challenge. The court appeared to accept the general reservation
that the adjudicator did not have jurisdiction and did not trouble
itself with the details of the actual challenge made.
There is an appeal pending and we await the result with
interest.
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The original publication date for this article was 18/06/2012.