THE SUPREME COURT
[Appeal No. 401/2011]
O’Donnell J.
MacMenamin J.
Dunne J.
BETWEEN
NORESIDE CONSTRUCTION LIMITED
PLAINTIFF/RESPONDENT
AND
IRISH ASPHALT LIMITED
DEFENDANT/APPELLANT
Judgment of Ms. Justice Dunne delivered the 2nd day of December, 2014
This is an appeal from a judgment of the High Court (Finlay Geoghegan J.) on an issue directed to be tried prior to other issues in a modular trial in the Commercial Court, namely, “What were the terms of the contract between the plaintiff and the defendant (express or implied) for the purchase and sale of the aggregate, the subject matter of the proceedings”.
Background
The background to this matter is described in the judgment of the High Court herein but for ease of reference it would be helpful to set out some of the details. The plaintiff/respondent (Noreside) is a construction company based in Kilkenny. The defendant/appellant (Irish Asphalt) operates quarries at a number of locations including one at Bay Lane, County Dublin and produces, manufactures and supplies products for the construction industry. Noreside was awarded a contract by Dublin City Council to build a development of fifty two houses and thirty one senior citizen units at Griffith Avenue, Finglas, County Dublin. Mr. Michael Regan, a director of Noreside, made contact with a number of suppliers of aggregate, including Irish Asphalt, in relation to the project. Following a number of exchanges between the parties, a purchase order was faxed by Noreside to Irish Asphalt on the 26th March, 2003 and subsequently, the original purchase order was sent by post to Irish Asphalt. It was date stamped as having been received by Irish Asphalt on the 28th March, 2003. Noreside’s terms and conditions were printed on the reverse side of the purchase order although there was no reference to those terms and conditions on the face of the purchase order. Ultimately, it was concluded that Noreside’s terms and conditions as set out on the reverse side of the purchase order were not incorporated into the contract between the parties. The purchase order contained details as to the price agreed for four types of stone by reference to the price for the collection of the goods and for delivery of the goods. Credit terms of sixty days were specified and it was also specified that the price agreed was to be fixed for the duration of the contract. There is no dispute between the parties as to these terms.
The first delivery of aggregate took place on the 27th March, 2003 and deliveries continued until May 2005. Each delivery was accompanied by a delivery docket signed by an employee of Noreside on site or by a haulier. Each delivery docket contained on its face the following statement:
“This material is sold subject to the terms and conditions available on request”.
That statement appeared at the foot of the page.
Subsequently in 2008, Irish Asphalt informed Noreside that the products supplied from the Bay Lane quarry contained pyrite. It was advised that the material should not be used as under-floor infill or within 500 mm of any concrete or metal structure. This is how it had been used by Noreside at the Griffith Avenue site. Dublin City Council notified Noreside of claims arising out of the use of the aggregates in December 2008. Noreside sought an indemnity from Irish Asphalt on foot of its terms and conditions as set out in the purchase order and when indemnity was refused, Noreside commenced these proceedings.
Following the hearing before the High Court the following declarations were made:
(1) A declaration that the contract of supply between the plaintiff and the defendant according to which the defendant supplied aggregate and stone from March 2003 to May 2005 for the plaintiff’s construction contract at Griffith Avenue, Finglas, did not include either the plaintiff’s purchase order conditions or the defendant’s terms and conditions.
(2) A declaration that there is no limitation on the defendant’s liability for defective product (if any) supplied implied by custom into the said contract of supply between the plaintiff and the defendant.
(3) There is an implied condition of merchantable quality pursuant to s. 14(2) of the Sale of Goods Act 1893, as inserted by s. 10 of the Sale of Goods and Supply of Services Act 1980, [in] the said contract of supply between the plaintiff and the defendant.
A number of ancillary orders were also made.
The appeal of Irish Asphalt was limited to the finding of the learned trial Judge that Irish Asphalt’s terms and conditions were not incorporated into the contract between the parties. Irish Asphalt sought to rely on those terms and conditions which it contended were incorporated into the contract or contracts between the parties in order to enable Irish Asphalt to rely upon the provisions of Clause 8 of the terms and conditions to the following effect:
“In the event of goods being delivered which are defective the company’s liability shall be limited to the cost of their replacement. In no circumstances shall the company be liable for any other loss arising directly or indirectly from the supply of defective materials.”
The judgment of the High Court
Finlay Geoghegan J., having set out the history of the matter, reached the following conclusions:
“In my judgment, an oral agreement was reached between Mr. Regan and Mr. Tuite on the morning of 26th March, 2003, as to the terms upon which the defendant would supply aggregate to the plaintiff for the construction contract at Finglas. There is no requirement that such a contract be in writing. The express terms agreed are recorded on the Purchase Order then sent by fax on the same day at 13.09 hours, stated to be for the attention of ‘Terry’, who, it was stated, was Mr. Terry Lagan, a director of the defendant. The fax number given by Mr. Tuite, and to which the fax was sent, was that of the head office of the defendant at Rosemount, where Mr. Lagan worked.”
She then went on to describe the express terms of the contract as including:
“The name of the purchaser, the plaintiff; the name of the vendor, the defendant; the place of delivery, Griffith Avenue, Finglas; the four types of aggregate or stone, the unit price of each type per tonne for collection and the delivery charge per tonne and the specification that the credit terms were 60 days and that it was ‘fixed price for duration of contract’.”
She further accepted that as a matter of probability, the contract between the parties contained a number of implied terms, including that a written purchase order signed by the plaintiff had to be communicated by fax to the defendant which she accepted was done on the 26th March, 2003. She further concluded that a credit application had to be completed by the plaintiff and returned to the defendant. In addition, she accepted that there were implied terms as to the manner in which the contract would be performed, including the ordering system by oral “call offs” placed in a telephone call by Noreside’s site manager or other operative to Irish Asphalt’s operative on the weighbridge at Baylane and the recording of the aggregate supplied by means of delivery dockets. Thus she reached the conclusion that there was a concluded agreement between Noreside and Irish Asphalt on the 26th March, 2003 as to the terms on which Irish Asphalt would supply aggregate to Noreside for the duration of the contract at Griffith Avenue.
A central plank of the submissions on behalf of Irish Asphalt before Finlay Geoghegan J. was that its terms and conditions and, in particular, Clause 8 of those terms and conditions, were incorporated into the contract/contracts between the parties by reference to the signature by or on behalf of Noreside on each delivery docket. She noted the submission on behalf of Irish Asphalt to the effect that:
“. . .each individual delivery formed a distinct and unique contract between the plaintiff and the defendant, albeit part of the over-arching or master contract between them, and that its terms and conditions were incorporated into each such contract, either by the signature given on behalf of the plaintiff, by reasonable notice of the prior delivery documents or by a course of dealing.”
As was acknowledged by Finlay Geoghegan J., it is well established that terms and conditions may be incorporated into a contract by signature, reasonable notice or by a course of dealing.
At the heart of the question of incorporation of terms and conditions relied on by Irish Asphalt into the contract/contracts in this case is the role of the delivery dockets signed on each occasion that a delivery of material was made by Irish Asphalt to Noreside. Finlay Geoghegan J., at page 11 of her judgment, noted the importance of signature in respect of incorporation and in doing so referred to the judgment of Denning L.J. in Curtis v. Chemical Cleaning and Dyeing Company [1951] 1 K.B. 805, at p. 808, where he said:
“If the party affected signs a written document, knowing it to be a contract which governs the relations between them, his signature is irrefragable evidence of his assent to the whole contract, including the exempting clauses, unless the signature is shown to be obtained by fraud or misrepresentation: L’Estrange v. Graucob [1934] 2 K.B. 394.”
Finlay Geoghegan J. commented on this passage as follows:
“It is important to note the condition of ‘knowing it to be a contract which governs the relations between them’.”
Thus Finlay Geoghegan J. went on to consider the role of delivery dockets in the context of the argument of Irish Asphalt to the effect that the terms and conditions relied on by Irish Asphalt had been incorporated into the contract/contracts between Noreside and Irish Asphalt by means of the delivery dockets either by signature, by reasonable notice or by course of dealing.
A number of findings of the learned trial Judge are central to the arguments in this case:
(1) Finlay Geoghegan J. concluded that the terms agreed between the parties on the 26th March, 2003 were the terms on which Irish Asphalt agreed to supply aggregate to Noreside. On that basis she concluded that the delivery dockets were all post-contractual unless they had the effect either of making a new and distinct contract or of varying the existing contract.
(2) She acknowledged the evidence of both parties that delivery dockets were crucial documents for both the construction and the quarrying industry, being the written record of the amount and type of aggregate delivered and the time, date and place of delivery. She noted that they contained no reference as to price.
(3) She concluded that the delivery dockets had a contractual purpose in the sense of being documents used in the execution of the contract which came into existence on the 26th March, 2003. They did not have a contractual effect in the sense of making or varying a contract.
(4) The purpose of the delivery dockets was to record the particular supply with a view to payment. They were crucial documents but only in the administration or execution of the contract already agreed.
(5) She concluded that the facts in the case did not support the coming into existence of new and distinct contracts of supply to which potentially new terms applied upon Noreside’s site foreman or other operative making what was termed “a call off” or placing an order for a specified quantity of aggregate referred to in the purchase order, which was accepted by the Irish Asphalt’s weighbridge operator, by either making the product available for collection or arranging the delivery of same to Noreside’s site.
(6) She concluded that the system which operated between Irish Asphalt and Noreside was that the contractual terms applicable to supply were agreed at senior management level. Those terms, once agreed, were to last for the duration of Noreside’s construction contract at Finglas. The operatives who arranged for deliveries had no authority to negotiate any variation in the terms agreed. She concluded that insofar as individual contracts for sale may be considered to have come into existence, they were all for sales on the terms of the single supply contract.
(7) Finally, she concluded that the agreed supply terms including price and credit upon which it was being sold was not recorded in the delivery dockets. Those terms were terms which had been agreed on the 26th March, 2003.
Submissions
It is a key contention on the part of Irish Asphalt that the learned trial Judge was wrong in finding that there was only one contract agreed between the parties, namely, that which was agreed on the 26th March, 2003, leading to the conclusion that the delivery dockets were post-contractual documents which did not have the effect of varying or altering the terms of the contract between the parties by incorporating terms and conditions relied on by Irish Asphalt into the contract. Irish Asphalt contends that while there was a “master” contract between the parties, separate and distinct contracts were formed in relation to each delivery of aggregate. On the basis that each delivery docket contained the sentence “This material is sold subject to the terms and conditions available on request”, it is contended that the terms and conditions relied on by Irish Asphalt were incorporated into each separate and distinct contract by signature, reasonable notice or course of dealing.
Noreside contended that there was one contract between the parties, namely, that concluded on the 26th or, at the latest the 27th March, 2003, which contained all the necessary terms and conditions negotiated between the parties. On that basis, the delivery dockets were not contract making documents - they were simply documents generated in the course of the execution of the pre-existing contract. Even if that view was wrong and there were separate and distinct contracts each time a delivery was made, the delivery dockets did not alter or vary the pre-existing terms or provide additional terms to the contractual arrangements made between the parties.
The status of the delivery dockets and the signing of same
I am satisfied that the parties herein reached a concluded agreement following their negotiations on the 26th March, 2003. This could be described as the “master” contract. I am also of the view that 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 negotiated between the parties as to the price for the goods to be supplied, depending on whether the goods were to be collected or delivered, credit terms and so on. It was always open to the parties to vary the terms and conditions of the “master” contract between them. The question at issue between the parties is whether the use of delivery dockets on numerous occasions had the effect of varying the terms of the contracts by the incorporation of Irish Asphalt’s terms and conditions into the series of contracts made over the course of Noreside’s project at Griffith Avenue as contended by Irish Asphalt. The answer to this question gives rise to an analysis as to whether or not the delivery dockets relied on by Irish Asphalt are contractual documents. I now propose to consider this question.
McMeel in the Construction of Contracts (11th Ed. at para. 15.56) commented on the question of whether or not a particular document is a contractual document as follows:
“A first hurdle to overcome is whether the document is of a character that it could be reasonably expected would contain terms and conditions. Is it a contractual document? This can either be satisfied by actual knowledge of the receiving party that it contains terms or by an objective test: would the reasonable recipient expect it to contain conditions? This is relevant to all modes of incorporation. A distinction has to be drawn between documents which effect or form part of the background to the formation of the contract, and post-contractual documents. The former are an obvious source of terms, whereas a court may conclude that the latter came too late to prove an argument of incorporation. Auld L.J. has drawn this distinction:
‘A document may have a contractual purpose as a contract making document or in the execution of an existing contract. Documents such as a time sheet, an invoice or a statement of account are within the latter category. They do not normally have a contractual effect in the sense of the making or the varying of a contract.’ (Grogan v. Robin Mededith Plant Hire [1996] CLC 1127 at 1130 CA).
That may be an appropriate distinction to draw so far as ‘one off’ arguments about incorporation by signature or notice are concerned. It may go too far if the argument is that incorporation has arisen by a course of dealing or of industry standard terms. In that context both invoices and other administrative documents are often the basis of an argument of incorporation based on the parties’ practice.”
Mr. Darling Q.C., on behalf of Irish Asphalt placed particular emphasis on the last paragraph of the passage quoted above from McMeel.
Treitel, The Law of Contract (12th Ed.) contains the following explanation of the nature of a document at paragraph 7 - 006:
“Nature of the Document. An exemption clause is not incorporated in the contract if the document in which it is set out (or referred to) is not intended to have contractual force: e.g. if the document is a mere receipt for payment. On the other hand, the mere fact that a document is called a ‘receipt’ will not prevent it from having contractual effect. A document will have such effect if the party to whom it was handed knew it was intended to be a contractual document or if it was handed to him in such circumstances as to give him reasonable notice of the fact that it contained conditions. It will also be contractual if it is obvious to a reasonable person that it must have been intended to have this effect. This will be the case if the document is of a kind that generally contains contractual terms. Whether a document falls into this class depends on current commercial practice, which may vary from time to time.”
As I have said, it is my view that each delivery of aggregate was a separate and distinct contract which incorporated the terms of the “master” contract concluded by the parties. The evidence as to the creation of these contracts was that a delivery of aggregate was ordered by oral “call off” in a telephone call by an operative or site foreman of Noreside, received by an operative of Irish Asphalt and then delivered to Noreside’s construction site, which arrangement was then recorded by the delivery docket which noted the amount of aggregate provided, the particular type of aggregate and whether the aggregate was either collected or delivered to the site. They were simply for the purpose of recording what occurred. As is clear from the passage referred to above from McMeel, such documents may come too late to prove an argument of incorporation. The status of a delivery note in any given situation will depend very much on the facts and circumstances of the particular case.
The fundamental question in this case is whether the delivery dockets have contractual effect. These delivery dockets contain a reference to terms and conditions but none are expressly set out or identified. Are these delivery dockets intended to have contractual effect? There is no doubt that the delivery dockets herein were important documents in the execution of the contracts given that they were relied on for the purpose of checking that the amounts set out on invoices that had to be paid by Noreside to Irish Asphalt was correct. To that extent, there is no dispute between the parties that the delivery dockets had an important role to play in the overall contractual relationship between the parties.
This Court was referred to an extensive range of case law and academic commentary in the written and oral submissions of Irish Asphalt herein and in the case of James Elliot Construction Limited v. Irish Asphalt Limited which was heard immediately before this case. The case law and academic commentary was considered at length in the judgment of the Court in that case. That case also concerned the role of delivery dockets of the same defendant/appellant which contained the same phrase on the delivery dockets. It is not necessary to set out in detail all of the authorities referred to in the judgment of the Court in James Elliot Construction Limited v. Irish Asphalt Limited delivered immediately before this judgment but it would be useful to refer to a number of the relevant authorities. Thus, in the case of Spurling Limited v. Bradshaw [1956] 1 WLR 461, reliance was placed on a document described as a “landing account”. That case concerned a defendant who had had dealings with the plaintiff warehousemen. A number of barrels of orange juice were delivered for storage and thereafter the defendant received a landing account which referred on its face to conditions printed in small type on the back including an exemption clause. The barrels of orange juice were subsequently found to be empty or so damaged as to be useless. The warehousemen sued for their charges for storage and the defendant counterclaimed for damages. Denning L.J. (at p. 467) stated:
“It is to be noticed that the landing account on its face told Mr. Bradshaw that the goods would be insured if he gave instructions; otherwise they were not insured. The invoice, on its face, told him they were warehoused ‘at owner's risk’. The printed conditions, when read subject to the proviso which I have mentioned, added little or nothing to those explicit statements taken together.
Next it was said that the landing account and invoice were issued after the goods had been received and could not, therefore, be part of the contract of bailment: but Mr. Bradshaw admitted that he had received many landing accounts before. True he had not troubled to read them. On receiving this landing account, he took no objection to it, left the goods there, and went on paying the warehouse rent for months afterwards. It seems to me that by the course of business and conduct of the parties, these conditions were part of the contract.”
Similarly, in the case of British Road Services Ltd. v. Arthur V. Crutchley & Co. Ltd. [1968] 1 All ER 811, there was a reference to a delivery note. Following a long established course of business between the plaintiff carriers and the defendants, delivery notes for goods transported by the plaintiffs and delivered at the defendants’ warehouse would be handed back to the plaintiffs’ lorry drivers, on the defendants receiving the goods stamped “Received on AVC [that is the defendants’] Conditions”. Lord Pearson at p. 816 of the judgment in that case commented as follows:
“Now I come to the terms of the contract between the plaintiffs and the defendants. It was not proved that the plaintiffs’ conditions of subcontracting were ever sent to the defendants, and the defendants in evidence denied that they were subcontractors to the plaintiffs. The plaintiffs’ form of delivery note contained the words:
‘All goods are carried on the [plaintiffs’] conditions of carriage, copies of which can be obtained upon application to any office of the [plaintiffs].’
Under the long established course of business between the parties, however, the plaintiffs’ driver brought his delivery note into the defendants’ office at the Cotton Street warehouse and asked in effect if he could bring his load into the warehouse. If there was room in the warehouse, the permission would be given, and the delivery note would be rubberstamped by the defendants with the words ‘Received under AVC Conditions’, followed by the date and the address of the warehouse. The delivery note, thus converted into a receipt note, would be handed back to the plaintiffs’ driver and he would bring his load into the warehouse as instructed by the warehouse foreman. If this had only happened once, there would have been a doubt whether the plaintiffs’ driver was their agent to accept the defendants’ special contractual terms. This, however, happened frequently and regularly over many years at this and other warehouses of the defendants. Also the defendants’ invoices contained the words: ‘All goods are handled subject to conditions of carriage copies of which can be obtained on application’. It may perhaps be material to add that the defendants’ conditions of carriage were not peculiar to them, but were the conditions of carriage of Road Haulage Association Limited. At any rate, I agree with the decision of the Judge that the plaintiffs’ conditions were not, and the defendants’ conditions were, incorporated into the contract between these parties. The effect was that, while the nature of the defendants’ liability as bailees to the plaintiffs was unaffected, the liability was limited in amount to £800 per ton, which, when credit is given for sixty bottles of whisky recovered after the theft, produces a total in this case of £6,135.”
At first glance it may be difficult to see why there was a different approach taken to the plaintiffs’ terms and conditions in that case and those of the defendants. However, the reason is clear from the judgment of Lord Pearson - it was not proved that the plaintiffs’ conditions of sub-contracting were ever sent to the defendants; by contrast the defendants’ terms and conditions, although not peculiar to them, were the conditions of carriage of the Road Hauliers Association Limited and were incorporated into the contract by reference to the rubberstamping of the words “Received under AVC Conditions” on the delivery note. In other words, there could have been no doubt as to what the terms and conditions were.
Another case of interest and one which was relied on by the learned trial Judge herein is the decision in the case of Continental Tyre and Rubber Company Ltd. v. Trunk Taylor Company Ltd. [1985] S.C. 163. In that case, the delivery note which contained the phrase “All offers and sales are subject to company’s current terms and conditions of sale . . .” was a non-contractual document as it was “a document the only purpose of which was to record performance of a particular transaction with a view to payment”. Finlay Geoghegan J. placed particular reliance on the judgment in that case and accepted that the purpose of the delivery dockets herein was to record the supply of aggregate with a view to payment whilst acknowledging that the documents were crucial documents but in the execution of the contract already agreed. That case concerned the sale and delivery of tyres and a claim in respect of sums due in respect of those tyres. The tyres were alleged to have been rejected by customers of the defendants as not being of merchantable quality. The pursuers in the case, on the assumption that the warranty as to merchantable quality had been breached, pleaded that their liability was excluded by reference to their standard conditions of sale on a delivery note. They also relied on an argument that a recent and consistent course of dealing meant that the terms of the delivery note had been incorporated into the contract. Lord Brand, the Lord President at page 168 of his judgment stated:
“What has been called the ‘delivery note’ does not so describe itself. It is not and does not bear to be a contract note or ‘sold’ note of the kind considered in Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association [1966] 1 W.L.R. 287 . . . which purported to record the terms of the parties' agreement, and which was tendered before performance. It is not and does not bear to be, either, an acknowledgement of order form, of the kind considered in Grayston Plant Ltd. v. Plean Precast Ltd. 1976 SC 206, purporting to record the terms on which the supply is made or to be made. The signature of the defenders' employee is, as the form shows, required for one purpose and one purpose only. Opposite the box containing the signature are the following words: ‘Please note that your signature is proof that the quantity and description of the goods shown on this docket were received correctly’. There are not averments that the legend near the top left hand corner of the docket, referring to the pursuers’ ‘conditions of sale’, which is in small print and not in bold type, was ever drawn to the attention of the person who signed it, and it is not averred that signature of the docket was required before the delivery was made (cf. the very different circumstances in British Road Services Ltd. v. Arthur v. Crutchley & Co. Ltd. where the delivery note was overstamped, referring to the conditions upon which the warehouse keeper would receive the load, and handed to the plaintiffs’ driver before he brought his lorry into the premises; see the opinion of Lord Pearson at pp. 816 and 817).”
Reliance on a reference to terms and conditions said to be available on request was not sufficient to result in the incorporation of those terms and conditions into the contract between the parties in that case.
For completeness I should also refer to the decision in the case of Grogan v. Robin Meredith Plant Hire [1996] C.L.C. 1127, which was referred to in McMeel in the passage set out above and relied on by Finlay Geoghegan J. in the course of her judgment. That was a case in which the first named defendant, a plant hire company, approached Triact, a civil engineering contractor, seeking work. It was orally agreed that Triact would hire from the defendant a driver and a machine for an all-in rate of £14.50 an hour. Neither party mentioned any other terms. At the end of the first and second weeks, Triact’s site manager signed a timesheet recording the hours that had been worked by the first defendant’s driver. Toward the bottom of the timesheet was printed, “All hire undertaken under CPA conditions. Copies available on request”. Under the standard conditions of the Contractor’s Plant Association, if incorporated into the contract, Triact was bound to indemnify the first defendant against any liability incurred to third parties in the course of the hire. In the third week of hire the machine was involved in an accident in which the plaintiff was injured. The plaintiff issued proceedings against the first defendant and Triact seeking damages for personal injuries. There was consent to judgment by the defendants. The first defendant claimed that the CPA conditions were incorporated into the contract by the signing of the driver’s timesheet on Triact’s behalf. Triact was therefore liable to indemnify the first defendant in respect of its liability to the plaintiff. In the High Court it was held that the contract had been varied so as to incorporate the CPA conditions. The appeal was allowed. In the course of his judgment Auld L.J. said:
“I reject MT Turner’s proposition that the court should look only at the words of a signed document and disregard its nature or function. The central question, adopting and adapting the useful statement of principle in Chitty on Contracts (27th ed.), vol. 1, para. 12/008, is whether the time sheet in this case comes within the class of a document which the party receiving it knew contained, or which a reasonable man would expect to contain, relevant contractual conditions. Another way of putting it, as Kerr J did in Bahamas Oil Refining Co v Kristiansands Tankrederie A/S (‘The Polyduke’) [1978] 1 LI Rep 211 at pp. 215-216, is whether ‘the document purport[ed] to have contractual effect’. It has to be borne in mind too that the circumstance to which the question relates, the presentation and signing of a time sheet for work done under an existing contract, is one of alleged variation, not the initial making of a contract.”
Auld L.J. continued:
“A document may have a contractual purpose as a contract making document or in the execution of an existing contract. Documents such as a time sheet, an invoice or a statement of account are within the latter category. They do not normally have a contractual effect in the sense of making or varying a contract. The purpose of time sheets is not normally to contain or evidence the terms of a contract, but to record a party’s performance of an existing obligation under a contract.”
Auld L.J. went on to say:
“If, as appears, that was the common understanding of the purpose of the time sheets, the fact that they made reference to the CPA conditions, not previously part of the contract, cannot, in my view, be of any contractual significance. Certainly such a reference on an essentially administrative and accounting document raised in the execution of an existing contract, did not have the clarity of meaning and purpose required to effect a variation incorporating them into the contract. . . . The question in Chitty, to which I have already referred and have adopted, is whether the document purports to be a contract or to have contractual effect. The answer in each case requires consideration, not only of the nature and purpose of the document, but also the circumstances of its use as between the parties and their understanding of its purpose at the time.”
As I said previously, the learned trial Judge placed considerable reliance on the judgment in that case leading to the conclusion by the trial Judge that the delivery dockets in this case were crucial documents in the context of both the construction and quarrying industry. Their purpose was to record the amount and type of aggregate supplied, together with the date and place of delivery, with a view to payment. However, whilst accepting that they had a contractual purpose in the execution of the contract, they did not have contractual effect in the sense of making or varying a contract.
A number of points emerge from the authorities referred to above. First of all, 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. The next point to note, and one which seems to me to be of critical importance, is that the delivery docket or other document at issue must contain the relevant terms and conditions relied on or at the very least contain a reference to specific terms and conditions such as the AVC conditions relied on in the case of British Road Services Ltd. v. Arthur V Crutchley & Co. Ltd. referred to above. In that case, the plaintiff did not succeed in having its conditions of subcontracting incorporated into the contract even though those terms and conditions were stated to be available “upon application” while the defendant’s terms and conditions were incorporated by means of a stamp placed on the delivery note stating “Received under AVC conditions”.
In other words, a party contending that the terms of a previously negotiated contract have been varied by a document such as a delivery docket, must be able to show that the document concerned “comes within the class of a document which the party receiving it knew contained, or which a reasonable man would expect to contain, relevant contractual conditions”. This may be by reference to specific terms and conditions either set out on the document itself or reference on the document to terms and conditions well known in a particular industry, such as the AVC conditions referred to above. It is difficult to see how a bland reference to terms and conditions being available on request, without more, will suffice for the purpose of making a contract or varying a contract. Thus, in my view, the learned trial judge was correct in concluding that the delivery dockets were not contractual documents and did not have contractual effect. They did not contain terms and conditions of the contract. They made no reference to price. They were created for the purpose of recording the type and amount of aggregate delivered and whether that aggregate was collected or delivered on site. This view is given further support by the fact that the signature on the delivery dockets was placed in a box headed “Materials received on behalf of Customer”. In the circumstances, the fact that the delivery dockets were signed on behalf of Noreside by its site foreman, operative or haulier does not have the effect of incorporating Irish Asphalt’s terms and conditions into the contracts between the parties by way of signature.
Reasonable notice and course of dealing
Lewison in The Interpretation of Contracts at p. 127 commented:
“It is not necessary to the incorporation of trading terms into a contract that they should be specifically set out provided that they are conditions in common form or usual terms in the relevant business. It is sufficient if adequate notice is given identifying and relying upon the conditions and they are available on request. Clear words of reference suffice to incorporate the terms referred to. Other conditions apply if the conditions or any of them are particularly onerous or unusual. . . .”
In the event that the delivery dockets were found not to be contractual documents and thus incorporated by signature into the contracts between the parties, Irish Asphalt contends that the delivery dockets provided on some 1,190 occasions to Noreside constituted reasonable notice of their terms and conditions and thus were incorporated into the contract between the parties. Generally, terms and conditions contained in an unsigned written document will not be incorporated into a contract unless the party to be bound had reasonable notice of those terms and conditions. The reason for this is straightforward. Terms and conditions relied on by a party in the context of an alleged breach of contract will often limit or exclude liability. They may provide for any contractual dispute to go to arbitration. There may be other important terms, for example, in relation to retention of title. It has been said that the more onerous an exemption clause contained in terms and conditions is, the greater the requirement for notice. This was graphically explained by Lord Denning M.R. in the case of Thornton v. Shoe Lane Parking [1971] 2 QB 163, at 170, where he stated of an exemption clause:
“. . . it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. . . . In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it - or something equally startling.”
Thus in a case such as this where the terms of Clause 8 of Irish Asphalt’s terms and conditions could only be described as onerous, it follows that in order to rely on the provisions of Clause 8 it is necessary for Irish Asphalt to demonstrate that it had given reasonable notice of those terms and conditions to Noreside.
It is not disputed that Mr. Regan of Noreside checked the delivery notes carefully for the purpose of ensuring that the amounts due by Noreside to Irish Asphalt on foot of invoices received by Noreside accurately reflected the goods supplied. Mr. Regan, in his evidence, confirmed that he checked the quantity, date and delivery docket number against invoices. Insofar as the phrase “The material is sold subject to our terms and conditions available on request” is concerned he said that he could not say with force that he had seen that phrase but when asked if he was aware that it was on the delivery dockets, he said “Possibly, yes”. It was never alleged before the High Court that the actual terms and conditions relied on by Irish Asphalt had been provided in any way to Noreside. The critical point emphasised by Irish Asphalt was that each delivery docket contained the proviso referred to above as to the terms and conditions being available on request. The essence of the case made by Irish Asphalt is that Mr. Regan, a person of authority within Noreside, saw the delivery dockets; therefore, he knew of the existence of terms and conditions relied on by Irish Asphalt and was willing to contract on that basis. He chose to turn a blind eye to Irish Asphalt’s terms and conditions and thus he took the risk of not actually ascertaining the specific terms and conditions. Put simply, he knew there were terms and conditions but chose not to find out what they were.
In the course of the written submissions reference was made to McMeel op. cit. at page 287, where the author explained the concept of incorporation by reasonable notice in the following terms:
“The second alternative route of incorporation is by reasonable notice. This is the principal mode of incorporation for unsigned printed documents. It first came to prominence in the nineteenth century ‘ticket cases’ as the industrial revolution and the railway age made standard terms a feature of everyday life. In the leading case of Parker v. South Eastern Railway Company, Mellish L.J. distinguished the case of incorporation by signature and continued:
‘The parties may, however, reduce their agreement into writing, so that the writing constitutes the sole evidence of the agreement, without signing it; but in that case there must be evidence independently of the agreement itself to prove that the defendant has assented to it. In that case, also, if it is proved that the defendant has assented to the writing constituting the agreement between the parties, it is, in the absence of fraud, immaterial that the defendant had not read the agreement and did not know its contents. Now if in the course of making a contract one party delivers to another a paper containing writing, and the party receiving the paper knows that the paper contains conditions which the party delivering it intends to constitute the contract, I have no doubt that the party receiving the paper does, by receiving and keeping it, assent to the conditions contained in it, although he does not read them, and does not know what they are’.” - See 1877 2 CPD 416, 420.
This passage suggests that in the ordinary case it is sufficient to prove that a document containing terms was provided by one party to or sent to the other and was retained without demur. As with incorporation by signature, Mellish L.J. was emphatic that reading or familiarity with the terms was irrelevant.
In Circle Freight International Limited v. Medeast Gulf Exports [1988] 2 Lloyd’s Rep. 427, CA, the invoices each stated in small print at the bottom:
“All business is transacted by the company under the current trading conditions of the [IFF] a copy of which is available on request.”
This was in the words of Bingham L.J. both “clear and legible” and “placed immediately below the price where the eye would naturally alight on it”. The exporters never requested a copy and none was sent. Having reviewed the authorities, Taylor L.J. concluded:
“. . . it is not necessary to the incorporation of trading terms into a contract that they should be specifically set out provided that they are conditions in common form or usual terms in the relevant business. It is sufficient if adequate notice is given identifying and relying upon the conditions and they are available on request.” [1988] 2 Lloyd’s Rep. 427, 433.”
A number of points emerge from the passages referred to above. First of all, although one can be bound by terms and conditions that one has not read, the document relied on by the party asserting the terms and conditions should actually contain either the conditions themselves or in some other way identify the terms and conditions relied on. As Taylor L.J. concluded in Circle Freight, it is not even necessary for the conditions to be set out specifically. He pointed out that it would be sufficient if adequate notice was given identifying and relying upon the conditions. In that case, there was a clear reference to the IFF terms on invoices created for the purpose of the contracts between the parties. Taylor L. J. added in the course of his judgment (at p. 433) the following observation:
“Here, the parties were commercial companies. There had been a course of dealing in which at least eleven invoices had been sent giving notice that business was conducted on the IFF terms at a place on the document where it was plain to be seen. Mr. Zacaria knew that some terms applied. He knew that forwarding agents might impose terms which would frequently be standard terms and would sometimes or frequently deal with risk. He never sought to ask for or about the terms of business. The IFF conditions are not particularly onerous or unusual and, indeed, are in common use. In these circumstances, despite Mr. Gompertz's clear and succinct argument to the contrary, I consider that reasonable notice of the terms was given by the plaintiffs. Putting it another way, I consider that the defendants' conduct in continuing the course of business after at least eleven notices of the terms and omitting to request a sight of them would have led and did lead the plaintiffs reasonably to believe the defendants accepted their terms. In those circumstances it is irrelevant that in fact Mr. Zacaria did not read the notices.”
Thus, it was held that the IFF conditions were incorporated in the contract. It is noteworthy that the invoices relied on made specific reference to IFF conditions. Therefore, the plaintiffs had, in the view of the Court, given adequate notice identifying the conditions they relied on.
A further authority referred to in the submissions on behalf of Irish Asphalt was the case of Baden v. Societe Generale S.A. [1993] 1 WLR 509 which was relied on in relation to the concept of knowledge. Peter Gibson J. in the course of his judgment described knowledge as follows:
“(i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.”
That case concerned the question of knowledge in the context of constructive trusteeship. It seems to me that there is a significant distinction between the type of knowledge a person can be said to have in the context of a constructive trust and the requirement to give reasonable notice of a particular state of affairs to another person. Knowledge in the manner explained by Gibson J. cannot be a substitute for the requirement of a party to give reasonable notice. It is for the party relying on an exemption clause to give reasonable notice of its terms and conditions and not for the party to be bound to be put on enquiry as to whether or not there may be terms and conditions containing an onerous exemption clause. I am not of the view that the case relied on assists the argument of Irish Asphalt on the question of reasonable notice.
The essence of the argument of Irish Asphalt is that the proviso on the delivery dockets, “This material is sold subject to the terms and conditions available on request”, was reasonable notice of the terms and conditions applicable. I cannot agree. At no stage was Noreside ever provided with a copy of Irish Asphalt’s terms and conditions. The terms and conditions were not identified in any shape or form or specified by reference to any known industry-wide terms and conditions. The position could have been otherwise if the proviso had identified some specific terms and conditions such as the IFF conditions referred to in the Circle Freight case. However that did not happen in this case and, accordingly, in my view, Irish Asphalt failed to give reasonable notice of its terms and conditions to Noreside.
Further, this is not a case in which the course of dealing between the parties could be relied on by Irish Asphalt to incorporate its terms and conditions into the contracts between the parties. The fact that the proviso is contained in a large number of delivery dockets does not assist Irish Asphalt in circumstances where Irish Asphalt has never given any reasonable notice of its terms and conditions to Noreside. Obviously, if Irish Asphalt had on numerous occasions supplied copies of its terms and conditions to Noreside but on a particular occasion had failed to do so, then in the context of a breach of contract on that occasion, it would be very difficult for Noreside to argue that it was not aware of the terms and conditions. The fundamental problem in this case for Irish Asphalt is that over the entire period of dealing between the parties, Irish Asphalt never supplied its terms and conditions to Noreside and in those circumstances I fail to see how it could be said that Irish Asphalt’s terms and conditions could have been incorporated into the series of contracts between the parties by a course of dealing.
Incorporation of terms by reference or by custom and practice
Very little needs to be said in relation to the argument that Irish Asphalt’s terms and conditions were incorporated into the contract between the parties by reference to the proviso contained on the delivery dockets. If it was the case that reference had been made to terms and conditions well known within the industry and identifiable as such, for example, as in the Circle Freight case by reference to the IIF conditions, I would be of the view that such terms and conditions could be incorporated into the contracts between the parties. If the reference was to some other document - for example - if the proviso made reference to “our terms and conditions as set out on our invoices”, the terms and conditions could be incorporated by such reference if the terms and conditions were, in fact, set out on the invoices. However, nothing of that kind happened here and the mere reference to terms and conditions without either specifying them in any way or otherwise identifying them is not, in my view, sufficient to incorporate the terms and conditions into a contract or series of contracts by reference. The basis on which terms and conditions could be incorporated by reference into a contract in any given case would clearly turn on its own facts and circumstances.
Finally, it was submitted on behalf of Irish Asphalt that the terms and conditions relied on by them were incorporated into the contracts by custom and practice. Lewison in Interpretation of Contracts 2007 referred to the principles governing incorporation by way of custom and practice in the following terms at page 221:
“A trade usage producing a customary meaning is a trade custom which must be proved as clearly and definitely as any other trade custom. In a market where buyers and sellers meet together habitually, they get into the habit of assuming that certain conditions or usages apply to all contracts they make. A usage grows up because everybody in the market, knowing the usages, tacitly assumes the contract he is making, whether as buyer or seller, is subject to the usage. The binding character of that usage is born of innumerable individual transactions entered into by the parties to them in the knowledge that certain usages are in practice habitually followed in that market. For a practice to amount to a recognised usage, it must be certain, in the sense that it is so well known in the market in which it is alleged to exist, that those who conduct business in the market contract with the usage as an implied term; and it must be reasonable.”
In making the argument that the terms and conditions were implied into the contract between Irish Asphalt and Noreside, Irish Asphalt relied on the evidence of Mr. Kennedy, a witness called by Irish Asphalt. Mr. Kennedy was a director of Roadstone and was responsible for a number of quarries and gravel operations. In the course of his evidence, he was asked if it was custom and practice within the industry to limit liability and he responded:
“Yeah, there are a number of reasons for that. At a macro level, obviously, there is the management of the risk in the business. In terms of proportionality, this business is a commoditised business. A commodity business, low value, high volume transactions, low value. So, for instance, in terms of a load of Clause 804, your typical cost delivered to site is, maybe €200. A profit margin for a business in the aggregates game, well run, is about €60. So where you are delivering material like that to a multimillion pound project you have to limit your risk. The second thing I would suggest is that, in relation to the industry, quarry companies or supply companies, they are not construction companies. And, again, if you look at it, they are at 21% VAT, the higher rate of VAT, which proves that they are a deliverer of materials, not a supplier of services, not a supplier of labour. So that’s a very distinguishing factor and that’s very important for people in the quarry industry. Because their customer base, typically, is in the construction industry and that customer base tends to be contractual. So the industry has to protect itself. . . .
Well, as said in my witness statement, I believe it to be custom and practice. My own experience is that all the major international players would have, either, a limited liability or a rejection of consequential loss. And I think a number of the larger family owned businesses in Ireland would have similar type statements.”
He went on to discuss Noreside’s terms and conditions and stated that he would never have accepted them:
“Question: “Why is that?
Answer: Because risk reward. It is a fundamental of our business that you can’t accept risk in the context of the type of reward you are getting in your business. Because it is a supply business. There are a number of reasons. One, just being practical about it, I may, you have no control over your product. You have certainly no control over your product if it is collected by the customer. You’d have no control when it gets to site. You have no control in terms of how it is used. So the industry, in general, in my experience, in my view, has always sought to protect itself as a result, we are not contractors, we are suppliers.”
In considering this issue, it is helpful to look at McDermott on Contract Law at para. 7.07 in which the author set out a number of requirements that must be fulfilled before a custom would be implied into a contract, namely:
(1) The custom must have acquired such notoriety that the parties must be taken to have known of it and intended it should form part of the contract.
(2) The custom must be certain.
(3) The custom must be reasonable, and the more unreasonable it is the harder it will be to prove that it exists.
(4) Until the Court takes judicial notice of a custom it must be proved by clear and convincing evidence.
(5) The custom must not be inconsistent with the express contract.
The case of O’Reilly v. Irish Press [1937] ILTR 194, considered this issue. Maguire P. commented:
“. . . a custom or usage of any kind is a difficult thing to establish . . . it must be proved by persons whose position in the world of journalism entitles them to speak with certainty and knowledge of its existence. I have to be satisfied that it is so notorious, well known and acquiesced in that in the absence of agreement in writing it is to be taken as one of the terms of the contract between the parties.”
The learned trial judge reviewed the evidence of Mr. Kennedy, that of Mr. Tuite on behalf of the defendant and the evidence of Mr. Regan. Mr. Regan, on behalf of Noreside, disputed the evidence of Mr. Kennedy and Mr. Tuite as 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. Finlay Geoghegan J. concluded as follows at para. 50 of the judgment:
“In my judgment the evidence adduced by the defendant falls short of establishing a custom of a type which would permit the Court to find that where a contractor operating in the construction industry, such as the plaintiff, enters into a contract with a quarry operator for the supply of aggregate for a construction contract, it could be objectively determined that both parties must be taken to have known of it and intended that it should form part of the contract. On the evidence, I find that there may well have been a standard practice amongst the larger quarry owners of inserting, in their standard conditions of sale, a clause limiting liability to replacement of defective product, or excluding consequential loss and being unwilling to deviate therefrom. Nevertheless, in particular in the evidence of Mr. Kennedy, it appears to be acknowledged that a purchaser from the construction industry might well seek, albeit, perhaps, unsuccessfully, to obtain an indemnity against loss arising from defective product. 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.”
The learned trial Judge was not satisfied on the evidence 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. Indeed, as she noted, the practice, on the contrary, appears to have been to include such an express contractual term. Looking at the evidence of Mr. Kennedy overall, it seems that the height of his evidence was that he believed it to be custom and practice. He referred to his experience that all the major international players would have either a limited liability or a rejection of consequential loss clause. He added that a number of the larger family owned businesses would have similar type statements. This suggests to me that the practice varies between quarry operators who have a clause that relates to limited liability and those who have a clause rejecting liability for consequential loss. Thus even within the evidence of Mr. Kennedy himself there is a degree of inconsistency as to the approach taken. Further, it seems that not all those involved in the business operate on the basis of seeking to limit their liability in that way. Thus, having considered the evidence and the finding of the learned trial Judge on this issue, I cannot see any basis for arguing that there was any error in her conclusion on this topic. Accordingly, I am satisfied that the terms and conditions relied on have not been incorporated by reference or by custom and practice.
Conclusions:
(1) There was a master contract between the parties concluded on the 26th March, 2003 which fixed the terms and conditions on which the parties would trade for the duration of Noreside’s Griffith Avenue project.
(2) Thereafter, there were separate and distinct contracts in respect of each supply of aggregate.
(3) The delivery dockets, whilst important documents in the execution of the contracts, were not contractual documents.
(4) Irish Asphalt’s terms and conditions were not incorporated into the contracts by the signature of Noreside’s site foreman or other operatives on the delivery dockets.
(5) Irish Asphalt’s terms and conditions were never provided or made known to Noreside.
(6) Irish Asphalt did not provide reasonable or adequate notice of the terms and conditions to Noreside by means of the proviso on the delivery docket or otherwise.
(7) Irish Asphalt’s terms and conditions were not incorporated into the contract by reference.
(8) Irish Asphalt did not establish in evidence that there was a custom and practice in the industry such that its terms and conditions could be implied or incorporated into the contract between the parties.
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.
In the circumstances, I would dismiss the appeal.
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