Payment Of Invoice Did Not Mean That A Contract Had Been Formed

J D Cleverly Limited & Cwmbran Motors Limited –v- Family Finance Limited [2010] EWCA Civ 1477

This case involved a rogue intermediary, Gwent, who took orders for cars from customers. There were 38 separate but similar fraudulent incidents, one of which used for the purposes of the hearing.

In the particular case, Gwent ordered the car through a dealer and was paid directly by the end customer. Because Gwent was supposedly such a good customer, the dealer allowed it 30 days credit. In practice that meant that the dealer was prepared to deliver the cars to the end customer before payment was made to the dealer. Despite having been paid by the end customer, Gwent instructed the dealer to invoice Family Finance (evidence given at the trial was that this practice was not unusual in the motor trade). FF is a company which provides finance for the purchase of consumer goods by means of hire purchase agreements. At the same time, Gwent entered into a hire purchase agreement with FF ostensibly to finance the purchase of the vehicle for the purposes of a consumer hire business. The dealer was unaware of the arrangements between Gwent and FF.

An invoice was duly submitted by the dealer and paid by FF. The invoice contained terms, one of which was that a contract would only come into force once an order had been signed by one of the dealer's sales executives.

The question for the court was, essentially, who should bear the loss as between the dealer and FF. It appears to have been accepted that the end customer had obtained good title under the Sale of Goods Act. FF contended that payment of the invoices constituted a contract between it and the dealer for the sale and purchase of the car, as it could then claim for recovery of sums paid on the grounds of total failure of consideration. (It appears to have failed to claim restitution as an alternative in the particulars of claim.)

The Court of Appeal held that there was no contract. The dealer was entirely unaware of the proposed hp arrangements between Gwent and FF. The invoice made it...