Contract Pactice Points Over The Past Nine Months

The key to resolving most disputes often lies in establishing what the contract between the parties means. As a result there is a steady stream of cases which come before the courts. This month's Insight reviews six of the more interesting.

The incorporation of standard terms

Am I bound by another party's standard terms and conditions, even if they have not sent me a copy?

Quite possibly, yes. Provided the contract documents make reference to them being included.

Barrier Ltd v Redhall Marine Ltd [2016] EWHC 381 (QB)

It can sometimes happen that when parties are negotiating contracts (or maybe exchanging purchase orders which may or may not have standard terms printed on the back), a contract is formed where one party has not seen a copy of all the documents which are said to make up the contract in question. In those circumstances will the "missing document" form part of the contract terms?

This issue came before Judge Behrens QC in a case about the painting of submarines. The Purchase Order included the words:

"The terms overleaf must be read and strictly adhered to."

Those terms were Redhall's standard Terms and Conditions. The purchase order did not include the conditions overleaf. Redhall said that the conditions were part of a standard form contract which had been communicated to Barrier. Redhall further said that Barrier did not need to have read the conditions in order to be bound by them. It was sufficient that they had been drawn to Barrier's attention. Redhall made the following three points:1

(i) If the person receiving the document did not know that there was writing or printing on it, he is not bound;

(ii) If he knew that the writing or printing contained or referred to conditions, he is bound;

(iii) If the party tendering the document did what was reasonably sufficient to give the other party notice of the conditions, and if the other party knew that there was writing or printing on the document, but did not know it contained conditions, then the conditions will become the terms of the contract between them.

It was not necessary for the conditions to be set out in the document provided as the time of tender. They can be incorporated by reference, provided that reasonable notice of them has been given. HHJ Behrens agreed, noting that assuming that the purchase order sent to Barrier had no conditions on the back and that for some unexplained reason the wrong copy was sent or given to Barrier:

"a reasonable person reading clause 10 of the subcontract would have no doubt that CIL's standard terms were incorporated. The fact that they were not on the back of the purchase order does not affect this. It would, at all times have been open to Barrier to request a copy of the terms if they had wanted to." [emphasis added]

Practice point

During contract negotiations, where a document is clearly missing, the sensible course of action is to request a copy rather than find that you are bound by something you were unaware of when a dispute arises.

Agreeing your contract

Can email exchanges be sufficient to constitute a binding contract?

Yes.

Mi-Space (UK) Ltd v Bridgewater Civil Engineering Ltd [2015] EWHC 3360 (TCC)

Sometimes parties to construction contracts are not very clear on what they have or have not agreed which can lead to a number of difficulties. Here, the parties, were in dispute over an interim payment which had led to the defendant suspending works. The Judge Mr Justice Edwards-Stuart identified the following events:

(i) Settlement discussions took place via email with Mi-Space making an offer to Bridgwater to make an interim payment if Bridgwater withdrew its claim relative to the interim application and restarted works;

(ii) The defendant agreed, payment was made and the works restarted;

(iii) Whilst the emails were marked "without prejudice", the tag was removed in the final email exchange, as Mi-Space put it "to allow you to formally accept";

(iv) Mi-Space sent a contract to Bridgwater to formalise the agreement they had reached by email but Bridgwater refused to sign, claiming that the agreement in the email chain was "subject to contract" and not binding on the parties;

(v) The dispute was referred to adjudication and the adjudicator held that as Mi-Space had failed to serve a payment notice in time, Bridgewater were entitled to be paid the amount claimed;

(vi) Mi-Space failed to pay the sum so Bridgwater started proceedings to enforce the adjudicator's decision. In response, Mi-Space filed an application for a declaration, again...