Case Facts
The sellers quoted a price of £75,535 for a machine tool — a "Butler" double column plano-miller — on 23 May 1969, with delivery in ten months. The quotation was made on the sellers' standard terms and conditions, which appeared on the reverse. Crucially, those terms included a "prevalence clause" stating that the sellers' terms and conditions would prevail over any terms in the buyer's order, and a price variation clause (clause 3) providing that goods would be charged at the prices ruling on the date of delivery rather than at the date of the original quotation.
On 27 May 1969, the buyers responded with a purchase order on their own standard terms and conditions. The buyers' order differed materially from the sellers' quotation in at least three respects: it included an additional item for installation costs of £3,100; it specified a delivery period of 10–11 months rather than the sellers' stated ten months; and it contained different carriage terms and different cancellation rights for late delivery. Significantly, the buyers' order contained no price variation clause. At the foot of the buyers' order was a tear-off acknowledgment slip bearing the words "We accept your order on the Terms and Conditions stated thereon."
On 5 June 1969, the sellers completed and signed the tear-off acknowledgment slip and returned it to the buyers. The sellers also enclosed a covering letter stating that the buyers' order was being entered in accordance with the sellers' original quotation of 23 May 1969. The machine was not delivered until November 1970. By that time, the sellers' costs had risen considerably, and they claimed an additional £2,892 from the buyers under the price variation clause.
At first instance, Thesiger J ruled in favour of the sellers, holding that the price variation clause had persisted throughout the parties' dealings and awarding the sellers £2,892 plus £1,410 in interest. The buyers appealed to the Court of Appeal.
Held
The Court of Appeal allowed the buyers' appeal and held that the contract had been concluded on the buyers' terms, with no price variation clause. Applying orthodox offer-and-acceptance analysis, the buyers' order of 27 May 1969 was a counter-offer, not an acceptance, because it differed materially from the sellers' original quotation. Under the rule in Hyde v Wrench [1840], a counter-offer destroys the original offer and substitutes new terms. When the sellers completed and returned the tear-off acknowledgment slip on 5 June 1969 — a document expressly stating "We accept your order on the Terms and Conditions stated thereon" — they accepted the buyers' counter-offer on the buyers' terms. The sellers' covering letter of 5 June, which referred back to the quotation of 23 May 1969, was held to be irrelevant: it did no more than identify the price and the machine in question and did not operate to re-incorporate the sellers' original terms and conditions into the contract.
Ratio Decidendi
The ratio of the majority (Lawton LJ and Bridge LJ) rests on a straightforward application of the classical offer-and-acceptance doctrine to the battle of forms.
First, the sellers' quotation of 23 May 1969 constituted an offer. The buyers' purchase order of 27 May 1969 was not an acceptance of that offer; it was a counter-offer, because it departed from the sellers' quotation in several material respects and was made on the buyers' entirely different terms and conditions. Pursuant to the principle established in Hyde v Wrench [1840], a counter-offer destroys the original offer and cannot subsequently be accepted.
Second, the decisive document in the dealings was the sellers' signed return of the tear-off acknowledgment slip on 5 June 1969. By signing and returning a document that was expressed on its face to be acceptance of the buyers' order "on the Terms and Conditions stated thereon," the sellers unambiguously accepted the buyers' counter-offer. The contract was accordingly concluded on the buyers' terms.
Third, because the contract was on the buyers' terms, it contained no price variation clause. The sellers were not entitled to charge a price other than the originally quoted £75,535, and their claim for £2,892 failed.
Under the majority's approach, the outcome of a battle of forms is determined by identifying which party fired the "last shot" — that is, whose terms were contained in the final document that the other party accepted, either expressly or by conduct — and the terms of that document govern the contract.
Obiter Dicta
The Master of the Rolls offered an alternative analytical framework for resolving battles of forms, which was not adopted by the other members of the court and is therefore obiter dicta.
Rather than mechanically applying the offer-and-counter-offer sequence, it was suggested that the court should examine all the documents passing between the parties as a whole, seeking to determine by reasonable implication what the parties had agreed. Where the documents contain terms that are directly contradictory and cannot be reconciled, those conflicting terms may be "knocked out" — that is, treated as mutually cancelling — leaving the remainder of the contract intact to be interpreted on a reasonable basis. On the facts, however, the same outcome was reached by this route: the tear-off acknowledgment of 5 June 1969 was identified as the decisive document, and Brogden v Metropolitan Railway Company [1877] was applied in support of the proposition that acceptance may be found from the conduct of the parties in relation to such a document.
The "knock-out" or "whole documents" approach has attracted academic commentary and has been adopted in some civil law and international instruments, but it does not form part of the binding ratio of this case. English courts applying this case continue to do so on the basis of the majority's orthodox counter-offer analysis.