Terms and conditions on delivery dockets not incorporated into contract by reference

The Supreme Court has dismissed an appeal by Irish Asphalt in Noreside Construction Ltd v Irish Asphalt [2014] IESC 68.  

Dunne J. (O'Donnell J, and MacMenamin J. concurring) found there was one "master" contract for sale agreed at senior management level between the parties.  She rejected Irish Asphalt's claims that the terms and conditions referred to, but not contained, in the delivery dockets were incorporated in to the contract, so as to limit their liability to the costs of replacement of the defective goods. 

Facts
This case involved an appeal against Finlay Geoghegan J's ruling at the High Court (click here to view our Update on the High Court judgment).  In summary, she found that:

(i) An oral agreement was reached between the parties on 26 March 2003, and that the express terms on which Irish Asphalt would supply the aggregate to Noreside were recorded on a purchase order sent by fax on the same day.  This was the "master" contract agreed by the parties. 

(ii) The contract did not include either Noreside's conditions (which were printed on the reverse side of the purchase order), or Irish Asphalt's terms and conditions (which were referred to on its delivery dockets).

(ii) No limitation on Irish Asphalt's liability could be imposed by custom into the said contract of supply between the parties. 

(iv) There was an implied condition of merchantable quality pursuant to section 14(2) of the Sale of Goods Act 1893, as inserted by section 10 of the Sale of Goods and Supply of Services Act 1980, in the contract of supply between the parties.

Irish Asphalt's appeal was limited to the Trial Judge's finding that their terms and conditions, referred to on its delivery dockets, were not incorporated into the contract between the parties.  Irish Asphalt sought to rely on those terms and conditions in order to enable it to limit its liability to the costs of replacement of the defective goods.

Decision
Dismissing the appeal, the Supreme Court was not satisfied that the terms and conditions relied on had been incorporated by reference or by custom and practice. The Court found that there was a  "master" contract, and on every subsequent occasion when an order was placed and a delivery of aggregate was made, a separate and distinct contract was made in respect of each such delivery which incorporated the terms and conditions of the "master" agreement.

Status of the delivery dockets
The Supreme Court concluded that the delivery dockets were not contractual documents. Dunne J noted that the authorities show that whilst a delivery docket can be a contractual document – "whether it is or not depends on the facts and circumstances in a particular case.  The purpose for which the delivery docket was created may be of relevance".  She stated that the crucial point is that the delivery docket or other document at issue must contain the relevant terms and conditions or at the very least contain a reference to terms and conditions well known in a particular industry. 

Incorporation of terms and conditions by reference
The phrase "The material is sold subject to our terms and conditions available on request" on the delivery dockets was not sufficient for the purpose of making or varying a contract. Irish Asphalt's terms and conditions were never provided or made known to Noreside.  Irish Asphalt did not establish that there was a custom and practice in the industry such that terms and conditions could be implied or incorporated into the contract between the parties.

Dunne J. stated:

"This is a case in which Irish Asphalt have sought to rely on terms and conditions which would limit their liability to Noreside for the defective aggregate supplied to Noreside. Irish Asphalt could have incorporated their terms and conditions into the contracts by any number of simple steps. For example, their terms and conditions could have been printed on their delivery dockets or on their invoices. All that occurred in this case was the inclusion of a reference in the delivery dockets to terms and conditions. This did not indicate in any way what those terms and conditions were. It is difficult to see how one could be bound by terms and conditions which are not contained in a signed contractual document or by terms and conditions which are never provided, identified or disclosed or by terms and conditions said to be incorporated by custom or usage unless they are “so notorious, well known and acquiesced in” as to be taken to be incorporated into the terms in the contract, as Maguire P. explained in O’Reilly v. Irish Press. In my view, Irish Asphalt has failed to establish that its terms and conditions were incorporated into the contracts with Noreside on any basis."

Incorporation of terms and conditions by custom or practice
Dunne J. referred with approval to the findings of Finlay Geoghegan J., in the High Court, in regard to the existence of a custom or practice within the industry of a standard practice of including a limitation of liability clause in terms and conditions provided by quarry owners. The Trial Judge had stated: "I am not satisfied that there is evidence of a custom well known and according to which quarry operators were entitled to limit their liability for defective product to replacement product in the absence of the inclusion of an express contractual term to that effect. The practice, insofar as it existed, appears to have been of the inclusion of such an express contractual term.”

Accordingly, Dunne J was not satisfied that there was sufficient evidence of a custom well known within the quarry industry such that quarry owners or operators were entitled to limit their liability in the absence of the inclusion of an express contractual term.

Comment
This decision confirms the willingness of the Court to conclude that an oral agreement has been formed for the supply of goods, without the necessity for such an agreement to be in writing.  It serves as a warning to parties to take all necessary steps, at the time the contract is being negotiated, to clearly establish what all of the terms of the agreement actually are.

It shows that reliance on a reference to terms and conditions said to be "available on request "will not automatically be sufficient to result in the incorporation of those terms and conditions into the contract between the parties. 

In order for delivery dockets or invoices to be viewed as contractual documents, companies should not only ensure their terms and conditions are printed on same, but also ensure that the delivery dockets or invoices contain a reference to the price to be paid.  The signature box should further indicate that the person signing is not merely acknowledging receipt of materials already contracted for.

For further information please contact Davinia Brennan at dbrennan@algoodbody.com or Jack O'Farrell at jofarrell@algoodbody.com

Date published: 20 January 2015