| Date | 27 September 2006 |
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| Judgment | Balmoral Group Ltd v Borealis Group Ltd and (1) Borealis [UK] Ltd (2) Borealis AS (3) Borealis A/S |
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| The Issue | The battle of the forms, exclusion clauses, and guidance to experts. |
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| Implication |
In circumstances where there is a course of dealing through a series of orders for supply and invoices for payment and where the supplier’s terms are provided with the invoice after order and delivery, if the invoice is paid without demur then it may be found that the supplier’s terms will apply to the contract between the parties, provided the supplier has made it clear that its prices are quoted subject to its terms and conditions. |
printThe situation where each contracting party seeks to impose on the other its particular terms and conditions is often described as the ‘battle of forms’ where the conditions that are last past the post before the contract is performed may be found to apply to the contract between the parties. The position may be different where there are a series of transactions. This was one of a number of interesting points considered in the Commercial Court decision of Mr Justice Christopher Clarke in the case of Balmoral Group Ltd v Borealis Group Ltd and others. The basic facts of the case were that between the spring of 1997 and July 2002 Balmoral purchased from one or more of the Borealis defendants, large quantities of a polyethylene polymer known as borecene for use in the production of chemical storage tanks by a manufacturing technique called rotomoulding. An unusually high proportion of green oil tanks manufactured by Balmoral using this material have since failed. Balmoral claimed damages of circa £50 million against the Borealis defendants. The issues were (1) whether borecene was not reasonably fit for the purpose of manufacturing static green oil tanks by rotomoulding and, if so, whether that unfitness caused the multiple failures of the tanks manufactured from borecene supplied by Borealis, and (2) which of the Borealis suppliers was Balmoral’s contractual counterparty at any time, which of the party’s standard terms applied to the various contracts, and if Borealis’ standard terms applied whether they excluded the statutory terms of satisfactory quality and fitness for purpose, and whether the Unfair Contract Terms Act 1997 applied to them. The court found that Balmoral had failed to establish that borecene was not fit for the purpose of producing the oil tanks. The court accepted the evidence of an expert that it was fit for purpose and found that Balmoral had failed to optimise its processing parameters and monitor the quality of its production. On the second issue concerning the terms of the contracts for supply, Balmoral made some 400 purchases from one Borealis entity or another, in respect of which Borealis rendered invoices which included their standard terms. From December 1995, Balmoral’s purchase orders referred to Balmoral’s terms, which included a condition that the goods would be of satisfactory quality and fit for purpose. Borealis UK’s terms excluded both the warranties of satisfactory quality and fitness for purpose. Borealis’ general terms only excluded the latter, but allowed for a warranty of fitness if Borealis had approved such purpose in writing. Both limited liability to replacement of defective goods or repayment of the purchase price. The court found that there are no customary terms in the polymer trade in the UK in the sense of words that are so “certain, notorious and reasonable” that anyone purchasing polymer must be taken contracted on those terms, unless expressly excluded or otherwise expressly agreed. The court accepted that the course of business was that when the order was received, someone at Borealis checked the order and confirmed the order, probably by phone to Balmoral and delivery would then be made. Balmoral therefore argued that the offer was constituted by the purchase order, which was accepted either by the verbal confirmation of the order or by delivery of the goods. They therefore argued that the invoice came after each contract was made and that each invoice was merely a claim for payment. Balmoral argued that the order prior to 1997 were too few to establish a course of dealing that applied to the much greater volume of orders that began in 1997. Borealis on the other hand argued that (a) under the principle described by Lord Denning in British Crane Hire v Ipswich Plant Hire [1975] that the standard terms of the supplier were incorporated into the contract by virtue of the common understanding which was to be derived from the conduct of the parties; (b) by virtue of Borealis’ quote of 18 January 1995, prices were quoted subject to Borealis’ terms and conditions; (c) the position did not change in December 1995 when a reference to Balmoral’s terms first appeared on its purchase orders; (d) the first order of borecene by telephone in April 1997 was in the light of what had happened in the case of the previous 7 orders on Borealis’ terms, with each repetitive sending of an invoice reinforcing the applicability of those terms; and (e) the express notification by Borealis of new terms in 1998 and 2000 without objection and with continued payment confirmed the position. After considering the authorities in support of both positions, the court did not accept that the British Crane Hire case applied since this applied to two crane hire companies that hired cranes on similar conditions. The court did however conclude that by the fax of 18 January 1995 Borealis had made it plain that its prices were quoted subject to its terms, that by putting the terms on the back of its invoices it intended the contract to be on those terms. Balmoral knew that invoices had terms on the back, and checked the invoices and paid them without demur. It also continued to do so without demur following changes of Borealis supplier and did not object when given notice of changes in Borealis’ conditions. The court therefore found that applying an objective test Borealis’ standard terms (first those of Borealis UK and then the Borealis general conditions) applied throughout. A final point of interest to all experts is the judge’s comments in the postscript at the end of the judgment about the basic requirements of expert reports which must (a) append what they say they append; (b) identify clearly and accurately the facts upon which they are based; (c) state clearly and prominently any key points of disagreement with the opposing side; and (d) include reference to facts known to the expert which have, or may have, a significant bearing on the issue, even if unfavourable to its clients’ cause. They must also be as concise as possible.
CJ-0638
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