| Date | 14 March 2007 |
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| Judgment | P4 Limited v Unite Integrated Solutions plc, TCC 27 October 2006 |
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| The Issue | The incorporation of terms and conditions. |
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| Implication |
Make sure that if you want your terms and conditions to apply, they are brought to the attention of the other party. |
printDisputes often arise when one party to a contract is unable to pay its debts and either goes into receivership, has a liquidator appointed, or enters into some form of voluntary arrangement with its creditors. Such circumstances were the behind the recent case of P4 Limited v Unite Integrated Solutions plc. By way of background, P4 is a manufacturer and supplier of light fittings and other equipment for use in emergency lighting systems. Unite constructs accommodation for key workers and students and, over the years, has utilised P4’s equipment on a number of its previous schemes. The way this happened in practice was that Unite had discussions with P4 concerning the design and specification of suitable systems, resulting in a quotation being supplied by P4 to Unite who would then effectively require its preferred electrical subcontractor to utilise P4’s products. In this case the electrical subcontractor was called Tudor, and the reason the case came to court was that at some time after P4 supplied its light fittings to Tudor, Tudor went into a creditor’s voluntary arrangement, with substantial sums of money owing to P4 at that point. Subsequently Tudor went into liquidation and P4 only recovered a very small proportion of what it was owed. P4 took the view that its terms and conditions contained a provision which meant that it retained ownership of the goods supplied until they had been paid for in full, meaning that if they had not been paid for then either it was entitled to recover those goods or was entitled to payment from whoever used them subsequently (in this case Unite). Such provisions are commonly called “retention of title” or “Romalpa” clauses. In this article I consider the question of whether P4’s terms had been successfully incorporated, whilst a subsequent article will consider the effect of retention of title clauses in the context of commonly found contract and subcontract conditions. In contrast to the many cases that seem to arise in relation to letters of intent and whether there is in fact a contract, in this case the parties were in agreement that a contract existed between P4 and Tudor but were in dispute concerning the terms of that contract. The problem arose because P4’s standard terms and conditions, which included the retention of title clause, appeared on the reverse of its quotation. Initially P4 had quoted to Unite and this quotation was passed to Tudor, who then approached P4 to obtain a quotation of its own. This quotation was sent by fax to Tudor, and the evidence showed that not only did the quotation not refer to “conditions on the reverse”, but only the face of the quotation was faxed in any event. Tudor was not therefore aware that the quotation was subject to any conditions. There was a subsequent meeting between Tudor and P4 resulting in Tudor sending an order to P4 which included words to the effect of “subject to our conditions on the reverse”. Again this order was sent by fax and (again) it was only the face of the quotation that was sent. Seeing the difficulty it faced, P4 tried to say firstly that Tudor was aware of its conditions from the original quotation provided to Unite, a copy of which had been passed to P4, and secondly to refer to the fact that upon receipt of the order it issued a standard credit application form which stated “please note our terms and conditions on the reverse”. Perhaps predictably the judge found the position to be straightforward. P4 had made an offer to Tudor which had been accepted by Tudor’s order. P4’s offer had not incorporated any terms and conditions, and neither had Tudor’s offer, meaning that neither party’s conditions were incorporated. P4’s quote to Unite was not relevant because even if it had contained P4’s conditions on its reverse (which was not certain), there was insufficient reason for Tudor to think that those conditions were relevant to the quotation it received from P4. As regards the credit application form, the judge considered that this had no bearing upon the terms of the contract previously entered into. Subsequently Tudor required additional fittings and this time sent its quotation by post, together with its conditions on the reverse. However the face of the quotation made no reference to the conditions and the judge decided, after considering various authorities on the subject, that P4 had not done sufficient to give Tudor notice of its conditions. Tudor for its part had issued an order by fax and whilst this again referred to conditions on its reverse, only the face of the order was sent. Again therefore, these further fittings were supplied on the basis of a simple contract with neither party’s terms and conditions incorporated. Thus there was no retention of title clause in respect of either the original fittings or the additional fittings. The fittings supplied a total value in excess of £50,000.00 and this case therefore contains a clear lesson for all suppliers and purchasers that it doesn’t matter what your standard terms and conditions say if you don’t bring them to the attention of the other party in a way which will allow them to be incorporated into the contract. Good procedures and record keeping, to establish what was sent and when, are essential and issues such as making sure conditions are referred to in quotations, printing conditions on separate sheets for fax purposes and making sure that the text is clear and will remain legible after faxing all merit consideration.
CJ-0710
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