| Date | 26 October 2005 |
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| Judgment | Machenair Ltd v Gill and Wilkinson Ltd, TCC 14 March 2005 |
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| The Issue | The incorporation of express terms by reference. |
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| Implication |
Where
it is intended that standard printed conditions are to be incorporated
by reference into a contract, reasonably sufficient notice of those
conditions must be given. |
printThe recent case of Machenair v Gill and Wilkinson examined the manner in which a contractor's standard conditions may be incorporated into a subcontract by simple reference to those conditions on the face of the order issued to the subcontractor. Gill was engaged as subcontractor for the design, supply and installation of mechanical and electrical installations for the refurbishment of Macaulay Hall at Leeds Metropolitan University. Gill had engaged Machenair as sub-subcontractor to carry out the mechanical works on the project. The sub-subcontract was based upon three separate purchase orders which in large measure engaged Machenair only for the provision of labour. Disputes arose between the parties concerning the value of the final account. The parties could not agree upon the causes of delay to the installation of the mechanical works and whether Gill was entitled to deduct damages for delay. Machenair also claimed an entitlement to be paid for additional resources brought to site. When these matters came before the court, it became necessary to determine what were the terms of the sub-subcontract between Gill and Machenair. Each of the three purchase orders sent by Gill to Machenair had a note at the bottom stating "this order is placed subject to our conditions of purchase, a copy which is available upon request". Gill contended that this note had the effect of incorporating its standard conditions into the subcontract. Machenair disputed that position. Under English law, it is an accepted principle that express terms can be incorporated in a contract simply by making a reference to those terms within the written order, but without setting out in full all the relevant terms. For this to be effective it is essential that the party tendering the document has done all that has reasonably sufficient to give the other party notice of the terms. If this should be disputed, it is then for a court or tribunal as a matter of law to decide whether there is evidence for holding that the notice given was reasonably sufficient. There have however been a long line of cases in which the notice given of terms to be incorporated into a contract has been held to be insufficient. In the 1972 case of White v Blackmoor the conditions were printed on the back of an order document without any adequate reference on the face of the document. The court rejected the submission that the conditions should be incorporated into the contract. In the 1996 case of Poseidon Freight Forwarding v Davis Turner, contract documents had been sent by fax with reference made to conditions stated to be on the back, but those conditions were not in fact contained on the back or otherwise communicated. Again the court rejected the application of the disputed contract conditions. In Richardson v Rowntree the court refused the incorporation of conditions which had been obliterated by a printed stamp. Although a party receiving a contract document may know that it contains reference to additional conditions, if a particular condition relied upon by the other party is one which is onerous or unusual, or one which seeks to exclude a right which would otherwise be given by statute, very clear notification of the term must be given. In the 1956 case of Spurling v Bradshaw Lord Denning said "Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient". Returning to the present case, Mr Justice Jackson concluded that Gill's standard conditions were not incorporated into the sub-subcontract. On the first two purchase orders, the crucial words mentioning that the order was placed subject to Gill's conditions of purchase had been substantially obliterated by the fax header to such an extent that it was unreasonable to expect Machenair to decipher the words underneath. Justice Jackson commented that even if that had not been the case, the words used at the bottom of the purchase orders were not sufficient to incorporate Gill's standard conditions. Those conditions were extensive. They were not one of the standard forms used within the construction industry and they had never been supplied to Machenair. The note on the purchase orders did not contain any form of resume of the conditions. Taking all those points into account it was not reasonable to impose those conditions upon Machenair.
CJ-0542
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