SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Carloway Lord Clarke Sir David Edward QC	[2009] CSIH. 95 CA11/09 OPINION OF THE COURT delivered by LORD CLARKE in the cause BAILLIE ESTATES LTD Pursuers and Respondents; against DU PONT (UK) LTD Defenders and Reclaimers: _______

Pursuers and Respondents: Borland; Morton Fraser

Defenders and Reclaimers: Gill; McGrigors, Solicitors, LLP

30^th December 2009

Introduction

[1] This commercial action relates to a transaction regarding the acquisition from the defenders by the pursuers of a large printing machine. It is averred the machine was ultimately made available to the pursuers for their use on or about 11 January 2007. The pursuers (the now respondents) claim that almost immediately thereafter they experienced fundamental problems with its operation. In the present proceedings, the respondents seek a declarator regarding the quality of the machine and certain other monetary orders. They also seek a declarator in the following terms:

"2. For declarator that the terms and conditions of sale of the defenders intimated to the pursuers under cover of an e-mail from the defenders to the pursuers dated 20 November 2006, were not effectively incorporated into the contract between the parties referred to in the first conclusion hereof, and form no part of that contract such as to affect the contractual relations between the parties to this action".

In terms of rule of court 18.2(b) the only defence to the action tabled by the defenders (and now reclaimers) is reflected in their sole plea in law which is in the following terms:

"The defenders not being subject to the jurisdiction of the court the action should be dismissed".

That plea in law is supported by averments to the effect that the contract between the parties included, as part thereof, the reclaimers' standard terms of conditions, clause 28 thereof being in the following terms:

"These conditions shall be subject to and shall be construed in accordance with the Laws of England. The Courts of England shall have exclusive jurisdiction over any dispute which may arise hereunder, unless the parties agree otherwise in writing".

[2] The Lord Ordinary, Lord Hodge, allowed the parties a preliminary proof before answer in relation to the question of jurisdiction. Having made avizandum, at the conclusion of the proof, he subsequently issued an interlocutor dated the 30 June 2009 repelling the reclaimers' plea of no jurisdiction and granting declarator in terms of the second conclusion of the summons. Against that interlocutor the reclaimers have reclaimed. We should say, at the outset, that we were not invited by either party to make any further findings beyond those which the Lord Ordinary had made nor to amend any of the findings he made.

The Factual Background

[3] The factual background to the transaction as found by the Lord Ordinary was as follows. In early June 2006 a representative of the reclaimers, Mr Geoff Lewis, approached the respondents in order to promote the possible purchase by the respondents of a UV printing machine manufactured by the reclaimers. He visited the respondents' premises in Edinburgh and there saw the location where any such machine might be installed. Mr Lewis followed up his visit by sending to the respondents an e-mail which contained an outline proposal for the sale of the UV printing machine. This proposal included the option of a finance package to allow the respondents to acquire the machine by payment on a monthly rental under a hire purchase or lease agreement. In the meantime another supplier approached the respondents with an offer to supply a rival machine to that of the reclaimers. On the 27 June 2006 Mr Lewis, having been requested to do so by the respondents, sent the respondents another copy of his proposal. The respondents, in furtherance of their interest in purchasing a UV machine, in October 2006, visited the premises of the reclaimers' rivals and inspected the rival machine. Thereafter on the 2 November 2006, a representative of the respondents, Derek Minto, sent an e-mail to Mr Lewis informing him that the respondents were tempted by an offer which the reclaimers' rivals had made in respect of a sale of their machine. Mr Minto asked Mr Lewis what was the best price and terms that the reclaimers could offer on their machine. Mr Lewis responded immediately on the same day by an e-mail to which was attached a paper entitled "High Cromaprint Lowest Cost". He agreed to give a demonstration to the respondents of the machine on the 16 November 2006. He went on to say that he would make "a final proposal covering all the points we find directly after our demonstration".

[4] In the event, Mr Lewis sent further proposals by e-mail dated 10 and 13 November 2006. On the 13 November 2006 Marion Goodridge-Payne of the reclaimers forwarded to Mr Minto and his colleague Mr Mark Baillie, an internal reclaimers' e-mail in which Mr Lewis informed Mr Jim Walker, his supervisor "that he had backed away from his finance offerings in his final proposal and that he expected to have this closed end of this week/beginning of next week".

[5] On 16 November 2006 the operation of the printing machine was demonstrated to Mr Minto and Mr Baillie at the reclaimers' premises in Stevenage. On the 17 November 2006 Mr Lewis sent to Mr Minto an e-mail to which there was attached a further proposal. Mr Lewis apologised that the document was longer than had been planned and had taken longer to put together. He stated that he would call "in a couple of hours" but invited Mr Minto to telephone him if he had any questions. The Lord Ordinary, at paragraph 7 of his opinion, sets out the full terms of the proposal. It began in the following way:

"Thank you for visiting our facility yesterday. I hope you found the visit informative and useful. As discussed please find our revised proposal below to attempt to reconcile the phasing of payments for the Cromaprint 22UV.

We propose to supply the system to reach your price requirements as follows:

Principle £112,000"

[6] There then followed a detailed payment schedule in the body of which appeared the following:

"Target installation date: 4 December 2006 (to be confirmed following survey)".

The proposal provided for the supply of certain materials, sets of ink and rolls of substrates to be supplied without cost. The proposal then contained a detailed specification of what was to be supplied and covered by the price which included delivery and installation and on site or off site training for up to three operators plus a 12 months all inclusive warranty. Mr Lewis did not, apparently, await for a response to that proposal but telephoned Mr Minto who explained to him that he had to consult his colleague, Mr Baillie before responding. Having considered the proposal with Mr Baillie, Mr Minto contacted Mr Lewis, by e-mail on the 17 November, (some hours after the time of Mr Lewis' e-mail proposal), with what the Lord Ordinary described as a "terse message". The e-mail simply read "Go ahead".

[7] On Sunday 19 November, Mr Lewis e-mailed Mr Minto and stated:

"It's on the way. See you tomorrow. Thanks again".

The following day, Monday 20 November, Mr Lewis visited the respondents' premises at Edinburgh. He was shown where it was proposed the machine should be installed. He said that he would want one of his engineers to inspect the locus in question. Later on the 20 November Mr Lewis sent Mr Minto an e-mail, which was copied to his colleagues Michael Banks and Jim Walker, in which he stated that they were "all underway" and that they should have a site survey of the respondents' premises at the end of the week. The message addressed to Mr Minto continued:

"I need to send you our exciting standard terms and conditions of sale, which should help if you have any insomniac tendencies. These also feature on the back of all our invoices should you be unlucky enough to lose this set, and wish to refer to them".

He also thanked Mr Minto for the order.

The Dispute

[8] As has been seen, the dispute between the parties is as to whether or not those standard terms then became part of the contract between the parties for the supply of the machine. The reclaimers maintain that they did. The respondents contend that they did not, since they came too late, a completed and binding contract between the parties having been concluded prior to the 20 November.

[9] The reclaimers position is that, as at 20 November, there was no concluded contract between the parties since its conclusion depended on two suspensive conditions being fulfilled. The first of these was that a satisfactory site survey would be obtained. The second was the completion of a credit check on the respondents. Both sides agreed that there was a concluded and binding contract for the supply of the machine. The respondents' position was that the contract was concluded by the exchange of messages on the 17 November between Mr Lewis and Mr Minto, or alternatively, at the latest, when Mr Lewis e-mailed with the message: "It's on the way". It was a striking feature of the position of the reclaimers before the Lord Ordinary, as recorded by him, that they could not, with any precision, say when the contract between the parties was concluded and how it was concluded. That remained a feature of their position before this court.

[10] It is appropriate to have regard to the evidence in the Lord Ordinary's findings relative to the issues of a site survey and credit check. As a matter of fact, on the 20 November, Mr Lewis and a colleague visited the respondents' premises and carried out a site survey. The Lord Ordinary records that, by this time, the respondents had ordered the materials necessary for constructing the print room where the printer would be installed. After the survey had been completed, a copy of a survey report was sent by the reclaimers to the delivery company who were engaged to install the machine. Thereafter the parties corresponded by e-mail concerning the specification of a compressor for the printing machine and also, to assist the delivery company to plan the installation, they exchanged information about the height of the steps into the respondents' workshop.

[11] As regards the issue of a credit check, the position, as found by the Lord Ordinary, was that on the 20 November 2006, the reclaimers instructed Dun & Bradstreet to carry out a credit check on the respondents. The delivery and installation of the printing machine was postponed by the reclaimers, from the proposed delivery date to 4 December 2006, in order that they might demonstrate it to another potential customer at their own premises. The machine was then installed in the respondents' premises on the 13 December 2006. On the same day, Mr Minto, on behalf of the respondents, completed a credit account application in which it was stated that the estimated monthly spend would be £20,000. On the reverse side of that application form was printed the reclaimers' standard conditions of sale.

[12] The Lord Ordinary heard evidence from Mr Minto of the respondents and Mr Lewis of the reclaimers as to their understanding of how the contract came to be concluded. Mr Minto gave evidence to the effect that he did not respond to Mr Lewis's e-mail of the 20 November, with its reference to the reclaimers' standard terms, as he thought that these were irrelevant because they came too late. As the Lord Ordinary puts it "To his mind Baillies had done a deal with Du Pont to purchase the printing machine at cost price as Du Pont were very keen to break into the Scottish market with their product" (at paragraph 15). At paragraph 30 of his opinion the Lord Ordinary states:

"I accept Mr Minto's evidence that he did not respond to Mr Lewis's sending of Du Pont's standard terms on 20 November because he thought he already had a deal and that the terms were therefore irrelevant. I consider that the reasonable business man would have taken a similar view".

[13] The Lord Ordinary records that Mr Minto was aware that the reclaimers were to carry out a site survey before installing the printing machine but Mr Lewis had already seen the premises in June 2006 and had formed the view that they could accommodate the machine and had informed Mr Lewis that that was the case. The planned survey was requested only to ensure that the doors of the building would be wide enough to allow the machine to be installed.

[14] Mr Minto's position with regard to the question of a credit check was that, had he applied his mind to this question, at the time, he would have "considered this was appropriate because there were deferred payments of the price". He understood that the application form to open a credit account, which he completed on the 13 December, related to the purchase of the ink and other consumables and not to the machine itself.

[15] Mr Lewis gave evidence that it was the reclaimers' invariable practice to carry out credit checks on customers and for customers to apply to open a credit account with the reclaimers if they were to supply goods other than for cash in advance. There was also a necessity for a site survey in every case, to avoid discovering, too late, things on the site which would prevent installation on a planned date. Under the reclaimers' procedures they could not install a machine until their European Business Manager had approved the credit check on the customer and their engineer had inspected and approved the site.

[16] The Lord Ordinary records also, (at paragraph 17 of his opinion) that Mr Lewis' understanding of the deal was that there would not be a binding agreement between the parties for three months after the delivery of the machine since his understanding was that the respondents had a right to return the machine within that period if they were not satisfied with it. Mr Lewis maintained that when he said "it's on the way" he intended to say that the reclaimers were taking the steps necessary to provide for the installation of the machine, that is the credit check and the site survey. He maintained that the respondents' instruction to "go ahead" was signifying an assent to these matters.

[17] As identified by the Lord Ordinary (at paragraph 23 of his opinion) the principal issue in the case was:

"Whether the parties had entered into a binding contract on November 2006, before Mr Lewis sent Mr Minto Du Pont's standard terms".

In addressing that question, the Lord Ordinary, observed that while the evidence which the parties adduced included the subjective views of the persons directly involved with making the deal, namely Mr Minto and Mr Lewis, one party's views were not relevant to the task which the court had to perform, except to the extent that they were communicated to the other party or cast any light on factual circumstances which were known to both parties. The Lord Ordinary, in reaching his decision, noted (at paragraph 28 of his opinion) that:

"It was also common ground between the parties that the 17 November proposal contained the essential elements of a contract of sale. Prima facie it was an offer which was open for acceptance. Against that background, the e-mail exchanges of 17 and 19 November 2006, while informal, were the only vouching of the contract, other than, on Du Pont's approach, the e-mail of 20 November by which Mr Lewis intimated their standard terms".

His Lordship continued:

"In the circumstances I am not persuaded that the informal nature of the e-mail communications of 17 and 19 November 2006 points towards an intention to postpone the formation of a contract. On the contrary, the instruction to go ahead and the response that it's on the way would suggest to reasonable persons that the parties were agreeing a binding deal".

It was noted, by the Lord Ordinary, that the 17 November proposal did not state that there were any suspensive conditions which required to be satisfactorily performed before the agreement to sell became binding. His Lordship also found that there was nothing in the evidence to establish that there had been discussions, far less agreement, that the outcome of any site inspection might be "a deal breaker". Moreover there was nothing in the evidence to suggest that anyone from the reclaimers had ever told the respondents that there could be no concluded deal until there had been obtained, by them, a favourable credit check. Having regard to all these matters, the Lord Ordinary's conclusion was that the parties entered into a binding contract for the supply of the printing machine on the 19 November 2006, before Du Pont intimated the standard terms and conditions. Accordingly those terms and conditions were not incorporated into the contract of sale.

The Reclaimers' Case

[18] Before this court, counsel for the reclaimers accepted, as had been the reclaimers' position before the Lord Ordinary, that Mr Lewis' e-mail of the 17 November contained within it all that was required for a valid offer to sell the particular machine. Counsel for the reclaimers informed us that, in attacking the Lord Ordinary's decision, he did so under three broad headings. The first was that the Lord Ordinary had erred in holding that the parties had intended, by their exchange of e-mails on the 17 November 2006, to be immediately bound, because he had failed to place sufficient weight on evidence that demonstrated that there was no such intention. The second proposition was that the Lord Ordinary had erred in failing to hold that, even if those exchanges demonstrated an intention to be bound, the need for a site survey and credit check was of such significance that neither party would have expected to be bound until these matters were satisfactorily addressed. The satisfactory outcome of these conditions were suspensive of the whole contract coming into operation. The third proposition was that the Lord Ordinary had failed to give enough weight to the response to Mr Lewis' e-mail of the 20 November enclosing the standard terms, from which response it was reasonable to infer an agreement by the respondents that the standard terms should be incorporated into the contract between the parties. The terms had been accepted by reason of the respondents' silence and, accordingly, acquiescence in the matter. When pressed by the court as to when, and how, the reclaimers contended that the contract had been concluded, counsel for the reclaimers informed the court that this was "sometime after the e-mail of the 20 November". That then became "sometime after the credit check and site survey had been completed".

[19] Counsel's first proposition was expanded by him on the basis that the terms of the correspondence of the 17 and 19 November were so informal and ambiguous that it did not manifest an intention by the parties to be bound immediately to a contract. Reference in particular was made to the expressions "go ahead" and "it's on the way". The cases of Aisling Developments Ltd v Persimmon Homes Ltd & Another (2008) CSOH 140 and Fletcher Challenge Energy Ltd v Energy Corporation of New Zealand Ltd (2002) NZLR 433 were referred to.

[20] The second proposition advanced by counsel for the reclaimers relied on what he repeatedly referred to as the "shared knowledge of both parties as to the necessity of having a satisfactory site survey and credit check". Reference was made to various passages in the evidence of Mr Lewis and Mr Minto about these matters. The submission appeared to be that such was the nature of this "knowledge" that there was implied into the agreement, brought about by the exchange of the e-mails of the 17 November, a condition suspensive of it becoming final until a satisfactory survey and credit check were obtained. Reference was made to passages of the evidence where it was said the parties did acknowledge that a site survey and a credit check would be carried out. These matters imported conditions, it was said, which were suspensive of any contract coming into effect. Reference was made to McBryde: The law of Contract in Scotland (3^rd Edition) at para 5-36 and to Chisholm v Wardrope 2005 SCLR 530 for an example of an implied suspensive condition.

[21] In advancing the third of his propositions, counsel for the reclaimers submitted that, whilst Mr Lewis' offer did amount to a valid offer to sell, it did not contain provisions for certain matters which one might have expected to have found in a contract of the kind in question. For example, nothing was said about retention of title. Such omissions were filled by the provisions of the reclaimers' standard terms. That is what the respondents would have anticipated as being the normal course of things. Mr Minto's conduct was reflective of that being the position. He did not object to the standard terms and conditions being referred to by Mr Lewis in his e-mail of 20 November. He simply remained silent. In the context of a situation where the parties had been, as here, in a prolonged course of negotiations, silence amounted to acceptance of the conditions - reference was made to Gloag Contract 2^nd Edition at page 29. For all the foregoing reasons, counsel for the reclaimers moved the court to allow the reclaiming motion, to repel the respondents' fourth plea in law and to sustain the reclaimers' plea of no jurisdiction.

The Respondents' Case

[22] The key question which the court had to determine, it was submitted by counsel for the respondents in reply, was whether, on viewing matters objectively, there was a concluded agreement between the parties on the 17 November 2006 or, at the latest, on 19 November 2006. The basic rule was that, in deciding such questions, the court did not look into the minds of the parties but assessed matters on an objective basis, having regard to what the parties had said, or done, at the relevant times. For that reason it was questionable, perhaps, as to whether there had been any need for a proof in this case. Be that as it may, the key document was the reclaimers' e-mail of the 17 November 2006. Contrary to what had been contended for, on behalf of the reclaimers, the e-mail exchange of the 17 November was not of an informal character. The proposal of the reclaimers was set out in a detailed three page document. It followed the demonstration to the respondents of the machine in question and was intended to be a final proposal in terms of which the reclaimers made a offer to sell the machine to the respondents at a stipulated price. As the reclaimers, themselves, accepted, it contained all the essential elements of an offer for the sale of this machine, which, the Lord Ordinary held, was prima facie open for acceptance. The Lord Ordinary was correct in concluding that the reply e-mail of 17 November stating "go ahead" was in the circumstances a clear indication of the respondents' acceptance of that offer. That that was the position, it was submitted, was confirmed by the reclaimers' e-mail response of the 19 November 2006 stating "it's on the way", "it's" referring to the printer. The reclaimers were intimating that the printer was in the course of being delivered. That was consistent with a contract having been concluded by, at the latest, 19 November 2006. The construction of the parties' communings, which the reclaimers argued for, went beyond what the words used conveyed. There was no indication in the reclaimers' proposal that a site survey and/or a credit check required to be carried out before a contract between the parties would be concluded. There was no evidence that the reclaimers' representative gave any such indication in negotiation and discussion with the respondents' representatives.

[23] The reclaimers argued that that it might have been expected, in the circumstances, that the contract would include standard terms covering certain specified matters. But that was completely beside the point. The proposal of the 17 November 2006 was an offer containing all the essential elements for a contract of sale, which was open for acceptance. It was a final proposal or offer from the reclaimers. It was accepted by the respondents that other matters might have been addressed in the standard terms in the present case but the parties had concluded their contract without these matters being dealt with by the incorporation of the standard terms. Had the reclaimers wished to incorporate the standard terms, before the conclusion of the agreement, they could have done so by making them an essential part of the offer. They did not do so.

[24] The reclaimers' alternative approach to matters, namely, that any agreement entered into on the 17 November 2006 was subject to suspensive conditions regarding the obtaining of a satisfactory site survey and/or credit check was also misconceived. There was no mention of these in the offer, nor was there any evidence that the reclaimers' representatives had given an indication to the respondents' representatives, prior to the communings of the 17 November, that such matters were to be so regarded. There was evidence from the respondents Mr Minto that, as far as he was concerned, there was no issue as to the site survey because the reclaimers', Mr Lewis, had already visited the respondents' premises on June 2006 and had indicated that there was no problem with the premises as far as any installation of the printer was concerned. Mr Minto's evidence was to the effect that Mr Lewis indicated that the respondents' credit worthiness was satisfactory as the latter had already carried out a credit check on the pursuers. Mr Minto, it was submitted, was entitled to ignore the reclaimers' standard terms and conditions when they were sent on the 20 November 2006 because, as he said in evidence, "the deal had been done". Moreover, the reclaimers e-mail of 20 November was quite consistent with that being so. It concluded by Mr Lewis thanking Mr Minto for the respondents' order, the order having been placed on the 17 November by the respondents. For these reasons the reclaimers' motion, it was submitted, should be refused.

Decision
[25] Unsurprisingly it was not suggested by counsel for the reclaimers that the conventional means of identifying that a mutual contract has been concluded by reference to an acceptance meeting an offer was inapplicable in the present case. Moreover, as noted, it was accepted, on behalf of the reclaimers, that the terms of their proposal of the 17 November were such that it was capable of being accepted immediately, without further ado, following as it did discussions and negotiations between the parties. That concession was clearly correctly made, in particular having regard to the background of the length of time the parties had been in discussion, the previous proposals which had been put forward and the fact that the reclaimers were clearly anxious to conclude a deal as soon as possible against their rivals. There was nothing informal or ambiguous, in our view, in the proposal. The brevity of the response thereto, that is "go ahead", (particularly standing the previous dealings between the parties) did not, in our judgment, bring with it any ambiguity. It was a totally apt communication of an acceptance of the proposal. As noted, the reclaimers attempted to make something of the informality of language employed but there is no requirement for formality of language in a contract of this sort and commercial contracts are regularly concluded in a similar way, particularly where the parties have been in detailed discussion and negotiations beforehand. Accordingly we are of the clear view that the communings of the parties of the 17 November were capable of amounting to a concluded unconditional contract between them for the sale and purchase of the printer and that, moreover, in choosing to use the language they did, against the background in which it was used, the parties, looking at matters objectively, must be held to have intended to have reached a binding and concluded agreement by those communings. Not a word is said in the proposal or in the e-mails of 17^th November either about their terms being qualified by reference to any standard terms and condition, or that any agreement arising from them would be conditional on the obtaining of a satisfactory site survey and/or credit check. There was no finding by the Lord Ordinary that, at any time, prior to the exchange of correspondence on the 17 November, the reclaimers' representatives had made it clear to the respondents that any subsequent dealings, with regard to the purchase of the printer, would be conditional on such matters. We were not invited to make any additional or substitute findings to that effect.

[26] With regard to both the question of the incorporation of the reclaimers' standard terms and the alleged requirements of a satisfactory site survey and/or credit check, counsel for the reclaimers based his argument, as has been noted, for much of the time on the idea of these factors fell within "the shared knowledge" of the parties. Quite apart from the fact that we do not consider that the findings of the Lord Ordinary support the nature and extent of such knowledge, which was being argued for, it was a concept which was left hanging in the air in that the counsel was unable to demonstrate how it had been converted into legal rights and obligations under the principles of the law of contract, at the stage at which the parties made their deal. Assumptions, beliefs or understanding do not, by themselves, translate into contractural rights and obligations. The reclaimers were unable to demonstrate on the facts found, how any such things, (if they existed) came to be translated into legal rights and obligations by virtue of what the parties had said or done.

[27] With specific reference to the reclaimers' position regarding the incorporation of their standard terms and conditions, as counsel for the respondent pointed out, however common-place it might be for such standard conditions to find their way into such a contract they can only form part of a contract by virtue of silence and acquiescence when it has been proposed that they should be part of the contract before the contract is concluded. The problem for the reclaimers, in the present case, was that the standard terms and conditions were proffered too late. The deal had been struck and its terms already agreed. We should, furthermore, add that the provisions of the reclaimers' standard conditions, as proffered, are in conflict in certain respects with the terms of the final proposal, eg with regard to payment of the price and delivery terms. Counsel for the reclaimers, when that was brought to his attention, never explained how that difficulty was to be resolved if his submissions were otherwise to be accepted.

[28] For all the foregoing reasons we conclude that the Lord Ordinary was correct in reaching the decision he did. We shall, therefore, refuse the reclaiming motion and adhere to the Lord Ordinary's interlocutor of 30 June 2009.