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Cite as: [2001] ScotHC 97

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TULLIS RUSSELL & CO LTD v. EADIE INDUSTRIES LTD [2001] ScotHC 97 (31st August, 2001)

OUTER HOUSE, COURT OF SESSION
CA93/14/99	OPINION OF LORD MACFADYEN in the cause TULLIS RUSSELL & COMPANY LIMITED, Pursuers; against EADIE INDUSTRIES LIMITED, Defenders:   ________________

 

 

Pursuers: Kinroy; Dundas & Wilson, C.S.

Defenders: Sandison; Tods Murray, W.S.

31 August 2001

Introduction

[1] In this action the pursuers, who are paper manufacturers, aver that they purchased certain equipment for their paper mill in Markinch, Fife, from the defenders, that certain parts of that machinery supplied by the defenders were of defective quality, and that the defenders were in that respect in breach of contract. On that basis they seek various remedies.

[2] As the parties' pleadings developed, it became clear that, while the primary position of each party was that there had been a contract between them for the supply of the equipment, they were in dispute as to the terms on which they had contracted. In particular, there was an issue as to whether the contract incorporated the pursuers' Standard Terms and Conditions of Purchase ("the pursuers' Conditions") or the defenders' Terms and Conditions of Sale and Installation ("the defenders' Conditions"). The pursuers sought to have that issue resolved in their favour by declarator in terms of branch (i) of each of their first and third conclusions. Those conclusions, read together and somewhat paraphrased, are for declarator that the parties' contract was made in terms of the defenders' Quotation and Specification, Phases One and Two (references E3370-1 and E3370-2), and the pursuers' Purchase Order No. 3109210 dated 29 March 1996.

[3] At a preliminary hearing on 24 January 2000 I pronounced an interlocutor allowing a preliminary proof before answer on the issue of the constitution and terms of the contract.

The Documentation

[4] The issue between the parties falls to be determined partly by reference to various documents and partly by reference to the evidence of a considerable number of witnesses bearing on the negotiations between the parties, their contracting procedures and the circumstances in which the documents were created and transmitted between the parties. It is convenient, before examining the evidence of the witnesses, to set out the terms of the material documents. The order in which they were generated appears at first sight to be illogical, but I shall leave consideration of that problem until I come to discuss the evidence of the relevant witnesses.

[5] Although it appears not to have been the starting point of the negotiations between the parties, the first document which requires to be considered for present purposes is the defenders' Quotation E3370. That document was dated 27 November 1995, ran in name of MagnaVac Air Systems ("MagnaVac"), a trading division of the defenders, and was addressed to the pursuers. It was sent to the pursuers under cover of a letter of the same date from the defenders' Sales Manager, Mr Ostapjuk to Mr Hacket of the pursuers. The quotation and the covering letter together form No. 7/3 of process. The quotation bears to be in respect of a "Jagenburg Vari Winder [and] Trim Handling System". It contains a number of sections concluding with one headed "7.0 Commercial Conditions" which contains inter alia the following provisions:

	"Terms of Payment
	25%	Deposit payable with order.
	70%	Payable upon availability/delivery of goods.
	5%	Payable on completion of commissioning or 60 days from date of delivery invoice, whichever is the earlier.
	Validity
	... The receipt by Sellers of an order does not conclude a Contract to sell unless and until confirmed by Sellers in writing.
	...
	Terms and Conditions of Sale
	Any contract arising out of this quotation will be subject to Eadie Industries Limited Standard Terms and Conditions of Sale, of (sic) copy of which is enclosed."

[6] The Eadie Industries Limited Standard Terms and Conditions of Sale ("the defenders' Conditions"), which bore to be enclosed with quotation E3370, form No. 7/1 of process. Clause 1 defines "Seller" as the defenders trading as Fibre Flow Techniques or MagnaVac Air Systems. Clause 2 provides inter alia as follows:

	"BASIS OF THE SALE
	2.1	The Seller shall sell and the Buyer shall purchase the Goods in accordance with any written quotation of the Seller which is accepted by the Buyer, or any written order of the Buyer which is accepted by the Seller, subject in either case to these Conditions.
	2.2	Unless other terms and conditions are expressly accepted by the Seller by means of a specific written amendment hereto signed by a director of the Seller the Contract will be on these Conditions to the exclusion of any other terms and conditions (except those implied in favour of a Seller which are not inconsistent with these Conditions) whether or not the same are endorsed upon, delivered with or referred to in any purchase order or other document delivered or sent by the Buyer to the Seller or which the Buyer purports to apply under any purchase order, confirmation of order or similar document."

Clause 3 provides inter alia as follows:

	"GENERAL
		These Conditions shall be deemed to be incorporated in the Contract and in the case of any inconsistency with any order, letter or form of Contract sent by the Buyer to the Seller or any other communication between the Buyer and Seller whatever may be their respective dates, the provisions of these Conditions shall prevail unless otherwise agreed by the Seller in writing. ..."

Clause 4 provides inter alia as follows:

	"QUOTATIONS
	4.1	Any quotation is given by the Seller on the basis that no Contract will come into existence until the Seller despatches an order acknowledgement to the Buyer."

Clause 5 provides inter alia as follows:

	"ORDERS
	5.1	No order submitted by the Buyer shall be deemed to be accepted by the Seller unless and until the Seller despatches an order acknowledgement or it is otherwise confirmed in writing by a director of the Seller."

Clause 18 provides inter alia as follows:

	"GENERAL
	18.5	The formation, interpretation and operation of the Contract will be subject to English law ..."

[7] The next documents that require to be considered are dated 8 March 1996. They comprise a letter from Mr Ostapjuk to Mr Rintoul of the pursuers and three further quotations (E3370-1, E3370-2 and E3370-3). The letter and the first two quotations form No. 7/4 of process (only an incomplete copy of the third quotation being available - No. 6/3 of process). The letter of 8 March 1996 is in inter alia the following terms:

	"Dear Jim, COATING PLANT WASTE BALING SYSTEM
	Following our meeting on Tuesday 5 March 1996, we have now re-examined our costings for the Vari winder trim project and reorganised our quote and prices to prioritise the project as the following.
	Phase 1	:	Bale Press and modifications to existing edge trim system
	Phase 2	:	Provision of a waste shredder and trim conveying system
	Phase 3	:	Upgrade of the Vari winder trim system to accept 450mm of trim
	..."

On the file copy of that latter, a line has been drawn in manuscript between the passage dealing with Phase 2 and the passage dealing with Phase 3 and, in the left hand margin, the lines dealing with Phase 1 and Phase 2 have been bracketed and the annotation "Order 3109210" appears. Those quotations are in a somewhat different style from the original quotation E3370, and bear to have been written by Mr M. L. Slater rather than Mr Ostapjuk. The Phase 1 quotation (E3370-1) bears to have been in respect of "Powell 800/1100 Automatic Bale Press [and] Vari Winder Trim System Modifications", and the price stated was £103,150.00. The Phase 2 quotation (E3370-2) bears to have been in respect of "Powell PS 40 Heavy Duty Shredder-Hogger [and] Magnavac Waste Extraction System", and the price stated was £49,050.00. The Phase 3 quotation (E3370-3) bears to have been in respect of "Vari Winder Upgrade [and] Magnavac Waste Extraction System". Each of quotations E3370-1 and E3370-2 ends with a section headed "Price and Delivery Schedule". Each of those schedules provides inter alia as follows:

	"Terms:-	30% With Order
		60% On Delivery
		10% 30 Days From Delivery
	Our Standard Terms and Conditions Apply as per our previous ref E3370".

[8] An excerpt from the defenders' Works Order Log Book (No. 7/22 of process; a copy of the relevant part is No. 7/8 of process) contains the following entry:

Wo. No.	DAY	CLIENT	GOODS	Code	Eng	VALUE
20319		TULLIS RUSSELL Part Del. 1/7/96	BALER/SHREDDER AND TRIM SYSTEM			£152,200

There are additional notations in the three right hand columns, but their content is not material for present purposes. The "day" column is blank, but the last preceding entry in that column, three lines earlier, is "21/3", and three lines later the next date entry is "25/3". I shall return in due course to examine the evidence about the circumstances in which that entry was made.

[9] The next document is the defenders' file copy of what bears to be their order acknowledgement (No. 7/5 of process). The circumstances in which it came to be generated will require to be discussed in more detail later, and for the present I confine myself to recording its terms. It was on MagnaVac letterhead, bore to be dated 21 March 1996, carried the contract number 20319 and was addressed to the pursuers. It referred to the pursuers' order number 3109210, and gave the order date as 20 March 1996. It then referred to the goods ordered as:

	"1	Powell 800/1100 Auto Baler and Trim System Mods to our quote E3370 and E3370/1
			£103,150.00
	1	Powell PS 40 Hogger and Trim System as our quote E3370 and E3370/2
			£ 49,050.00
		TOTAL	£152,200.00"

It then set out the terms of payment as follows:

	"25%	Deposit payable with order
	70%	Payable on availability/delivery of goods
	5%	Payable on completion of commissioning or 60 days from date of delivery invoice, whichever is the sooner".

[10] The pursuers' records contain the top copy of a purchase requisition in respect of the equipment to be supplied by the defenders, although the relative purchase requisition book has not been traced. The copy is No. 6/14 of process. It is dated 28/3/96, bears the order number 3109210, describes the equipment by reference to the quotations E3370-1 and E3370-2, and makes reference to the 30/60/10% version of the terms of payment.

[11] There are two versions of the pursuers' formal written purchase order. What appears to have been the original version (No. 7/6 of process) is dated 29 March 1996 and stamped as received by the defenders on 4 April 1996. It bears the order number 3109210. It sets out the goods ordered by reference to quotations E3370-1 and E3370-2, and the terms of payment reflecting the 30/60/10% instalments mentioned in those quotations (see paragraph [7] above). That document bears across its face the manuscript annotation "REVISED", and the terms of payment are bracketed and marked: "To be amended to ours". The second version (No. 7/7 of process) is also dated 29 March 1996 but is stamped as received by the defenders on 10 April 1996. The order number and the descriptions of the goods ordered are unchanged, but the statement of the terms of payment reflects the 25/70/5% instalments mentioned in E3370 and in the defenders' order acknowledgement (see paragraphs [5] and [8] above). Both versions of the purchase order bear the following printed text:

"This Purchase Order is made solely on the Standard Terms and Conditions of Purchase of Tullis Russell and Company Limited which are set out in full on the reverse of this Order."

[12] A copy of the pursuers' Standard Terms and Conditions of Purchase ("the pursuers' Conditions") forms No. 6/15 of process. In those Conditions the pursuers are referred to as the "Buyer", and "Order" is defined as meaning the purchase order or other document to which the conditions are annexed. Clause 2 provides inter alia as follows:

	"2.1	The Order constitutes an offer by the Buyer to purchase the Goods subject to these Conditions.
	2.2	These Conditions shall apply to the Contract to the exclusion of any other terms and conditions on which any quotation has been given to the Buyer or subject to which the Order is accepted or purported to be accepted by the Seller.
	2.3	The Order will lapse unless unconditionally accepted by the Seller in Writing within 7 days of its date.
	2.4	No variation to the Order or these Conditions shall be binding unless agreed in Writing between the authorised representatives of the Buyer and Seller."

Clause 11 provides inter alia as follows:

"11.7

The Contract shall be construed and have effect in all respect (sic) in accordance with the Law of Scotland ..."

[13] Various invoices and credit notes were issued by the defenders in connection with the contract, but any attempt to record their terms would be confusing at this stage. I shall deal with them, so far as it is necessary to do so, in the context of the relative oral evidence (see paragraph [18] below).

Contracting Procedures and Negotiations

[14] General evidence about the procedure adopted by the pursuers in placing purchasing contracts was given by their Finance Director, Christopher Parr CA. He joined the pursuers in June 1994. He indicated that when a project involving capital expenditure was identified, the pursuers' engineers would carry out a cost/benefit analysis, would develop a detailed specification of what was required, would obtain at least two quotations and would have detailed discussions with suppliers. Only once a technical specification was agreed would the project go forward for Board approval. If the capital expenditure was authorised, the project manager would be informed and he would finalise delivery dates and arrange for the issue of a purchase order. The normal procedure was for a written purchase order incorporating the pursuers' Conditions to be issued. Occasionally an oral purchase order might be given, with the order number given to the supplier by telephone. That might happen if emergency supplies were required when the purchasing department was not available, but if it was done, it was on the basis that a formal written order would follow. Mr Parr indicated that he would not regard the oral intimation of an order number as the placing of an order. He would, however, expect the supplier to act on an oral order, but said that that would only occur either in an emergency or when the order was of very low value. For any large purchase a written purchase order would be issued.

[15] Mr Parr described his understanding of the function of an order number in the pursuers' procedure. It was, he said, the basis of a tracking system which would enable future paperwork to be allocated to the correct project. In 1996 there was in operation a computerised purchase logging system. Two departments were involved. The Purchasing Department was responsible for issuing purchase orders. The Purchase Ledger Department was concerned with handling incoming invoices from suppliers. The order number was the link by which deliveries and invoices could be related to orders in the logging system. By reference to No. 6/7 of process, a manual log sheet of order numbers kept by the Purchasing Department, he explained the system of allocation of order numbers. The first two digits of the order number indicated where the order was to be delivered. An order number beginning "31" was an engineering order. The remainder of the number was simply the next number in numerical sequence after the last number previously issued. Each engineer had a purchase requisition book, of which No. 6/6 of process was an example. The engineer would complete a purchase requisition identifying the goods to be ordered by reference to a detailed specification or the relevant quotation. The order number, for which a space was provided in the purchase requisition form, would be allocated to the order by the Purchasing Department. Mr Parr was not clear why the engineer would obtain the order number from the Purchasing Department to fill in the purchase requisition, rather than merely leaving it to the Purchasing Department to fill it in when the requisition was passed to it, but his evidence was that that was what was normally done. The top copy of the purchase requisition completed by the engineer would then be passed to the Purchasing Department. No. 6/14 of process was the top copy of the requisition in the present case. It had been recovered from the Purchasing Department, i.e. from its proper place. The purchase requisition book from which it came had not been found - there was no set policy regulating retention of used purchase requisition books. Once the Purchasing Department received the requisition, the purchase order would then be prepared by that department, and issued to the supplier over the signature of the appropriate member of staff (according to the value of the order). When a purchase order was issued against an order number, a tick would be entered against the number in the fourth column of the order number log (No. 6/7 of process). If after a certain interval (Mr Parr was not sure what it was) the Purchasing Department found that the log showed that an order number had been issued but no purchase order raised, it would "chase" the matter with the engineer (or other person responsible for requisitioning an order) whose initials appeared in the third column of the log. On that account of the system, it was possible for an engineer to be possessed of an order number, and to advise the supplier of it, before a written purchase order was raised or even requisitioned. Mr Parr said that there might be various reasons for an engineer advising a supplier of an order number prior to the issue of a written purchase order, but acknowledged under cross-examination that he could not be specific on the point. He said that his understanding was that the communication of an order number in that way was not the placing of an order capable of being accepted so as to form a binding contract. If no written purchase order was issued in respect of an order number, the computerised system would not recognise the order number and would treat it as invalid (see 6/13 of process). He accepted under cross-examination that he had no knowledge of the particular transaction with which that document was concerned. He said, however, that under the pursuers' system, an invoice could not be paid if it did not relate to a

[16] Mr Parr then explained his understanding of the system for handling incoming invoices. In the mail room, which was under his supervision although he did not work there, invoices would be separated from other incoming mail. They would then be passed to the Purchase Ledger Department. Each invoice would immediately be logged in the computerised system. When it was approved for payment, a second entry would be made which would transfer the item from the purchase log to the purchase ledger. An example of the system in operation could be seen by comparing No. 6/22 of process (an unrelated invoice from the defenders bearing a docquet signifying that it had been approved for payment by the relevant engineer) with the relative entries in a print-out from the computer (the first two sheets - pages 10 and 25 - of No. 6/21 of process). The invoice was dated 19 March 1996, was entered in the computer log on 22 March, was docqueted by the engineer as approved for payment on 25 March and entered in the computer for the second time on that date.

[17] Mr Parr was shown the file copy of the defenders' order acknowledgement (No. 7/5 of process). He said that he had searched for the principal in the pursuers' records, but had been unable to find it or any copy of it. He said that if it had been received it would have passed through the mail room, but would not have been logged on the computer system in the way an invoice would be. It would have been retained, either by the Purchasing Department or by the engineer concerned. It was possible that it had arrived and been lost, but his conclusion, in view of the pursuers' system of record keeping, was that it had never been received by the pursuers.

[18] Mr Parr also offered an explanatory analysis of the rather confusing sequence of invoices and credit notes issued by the defenders to the pursuers. The starting point was an invoice No. 8714 dated 21 March 1996 in the sum of £38,050 plus VAT bearing to be for an initial instalment "with order" of 25% of the contract price (No. 6/8 of process). That was, or was a copy of, what bore to be the second page of a fax sent by the defenders to the pursuers on 2 April 1996. No. 6/21 of process (page 62) showed that an entry was made in the pursuers' computer system, reflecting receipt of that invoice, on 2 April. If the principal of that invoice had been sent by post on or about the date which it bears (21 March) and received in the ordinary course of post, it would have been logged into the computer system earlier. No earlier logging was shown, and the computer system would not have allowed the same document to be logged twice. There was no other record of receipt before 2 April. The inference therefore was that no version of that invoice was received by the pursuers before the faxed copy was received on 2 April. No. 6/8 of process was docqueted in a way that suggested that it had been passed for payment on 3 April (although Jim Rintoul's initials had not been written by him, because he was not at work at that time), and page 18 of No. 6/21 of process reflected the resultant entry in the computer system transferring the invoice from the purchase log to the purchase ledger. That initial invoice was reversed by a credit note No. 146 dated 29 March 1996 (No. 6/11 of process), was replaced by invoice No. 8769 also dated 29 March (No. 6/10 of process) which was for an erroneous amount and was reversed on the same date by credit note No. 147 (No. 6/12 of process), and was finally replaced also on the same date by invoice No. 8772 (No. 6/9 of process). No. 6/9 of process bears to have been passed for payment on 16 April, and, as the analysis set out in No. 7/23 of process shows, it was paid on 17 April. No. 7/23 of process also shows the payment of the balance of the contract price on various dates between July and November 1996.

[19] Roy Spicer was at the material time the pursuers' chief engineer. He said that Jim Rintoul was the manager of the project which involved inter alia the installation of the equipment with which this action is concerned. The Board had authorised capital expenditure of £2.5 million. It was Jim Rintoul's responsibility to approach suppliers (the defenders and two others) and obtain quotations. Mr Spicer confirmed that he had countersigned the purchase requisition No. 6/14 of process prepared by Jim Rintoul. He did not recall the circumstances of his having done so, but explained that it was part of the normal authorisation procedure. Under cross-examination he said that there had been a change from general to personal purchase requisition books, and that, on the change, most of the old books had been destroyed. He confirmed that the practice was for the engineer completing an order requisition to telephone the Purchasing Department to obtain an order number for inclusion in the requisition, then to pass the completed requisition to the Purchasing Department. He stated that he had not seen the defenders' order acknowledgement (No. 7/5 of process) before, but then nor had he seen the pursuers' purchase orders (Nos. 7/6 and 7/7 of process). He had signed the various invoices and credit notes (Nos. 6/8-12 of process), but could not recollect what the problem that caused their generation had been. When asked in cross-examination about the practice in relation to the release of order numbers to suppliers in advance of the issue of a written purchase order, he said that the policy was to do so as infrequently as possible. He observed, however, that most suppliers would do nothing without an order number.

[20] Morris Butchart was the pursuers' purchasing manager. He described the purchase requisition as the initial step in the ordering cycle. It would be completed by the engineer and sent to the Purchasing Department. There the ordering cycle would be completed by the issue of a purchase order to the supplier. He confirmed that the order number would be generated by the Purchasing Department and provided by it to the engineer for inclusion in the requisition. He accepted in cross-examination that an order number might be obtained by an engineer for intimation to the supplier in advance of the purchase order, because suppliers were reluctant to do anything without an order number. He said that it was a regular occurrence for an engineer to issue an order number to a supplier in that way. That might be done, for example, to provide to the supplier confirmation that the pursuers would be going ahead with the purchase. He said that a written purchase order was issued for every purchase, and that no one thought, before doing so, about whether a contract had already been concluded orally. Even if it had been, a purchase order would be sent out. Mr Butchart identified his signature on the two purchase orders, Nos. 7/6 and 7/7 of process. He recognised that they stated different terms of payment. He could not, however, remember the circumstances in which they had been signed. At first he seemed to indicate that he thought the manuscript annotations on No. 7/6 were written by the engineers, but he retreated from that position in re-examination.

[21] Jean Forrester was the pursuers' purchasing supervisor. She said that on receipt of a purchase requisition the Purchasing Department would place the order by telephone, "if that had not already been done". They would then type and issue the "official" order. Her evidence about the issuing of order numbers was also somewhat different from that of the earlier witnesses. She said that normally the Purchasing Department would add the order number to the requisition when it was received from the engineer. The engineer would write the order number on the requisition only if he happened already to have it when writing out the requisition. Order numbers were given out in advance generally only for small items. Every order number was followed up by an official order. She echoed Mr Butchart's point that no thought was given to whether an oral contract had already been concluded when issuing a purchase order. Purchase orders were signed either by her or by Mr Butchart. The limit of her authority was lower. Mr Butchart generally dealt with larger orders. In relation to incoming invoices, she confirmed that they would be logged in the computer system (which she referred to as AS400) on receipt, and that the system would not permit the same invoice to be logged twice by mistake.

[22] James Rintoul was, in 1996, a senior project engineer with the pursuers. He left their employment in March 2000. His only involvement with the pursuers' purchasing procedure was in connection with engineering projects. In that context, he would invite up to three quotations, select the one that offered the best value, agree the specification and price with the supplier, and requisition a purchase order. The contract with which this action is concerned formed part of the Truflow Double Coating Project, in respect of which expenditure of £2.5 million had been authorised. The equipment to which the contract related was not originally within the project, but was later authorised to make use of surplus funds within the project budget. Mr Rintoul's own authority was normally limited to ordering goods to the value of £10,000, and it was because he followed his normal practice in the present case that his purchase requisition (No. 6/14 of process) was counter-signed by Mr Spicer. Mr Rintoul's evidence was that in writing a purchase requisition, an engineer had the choice of either obtaining an order number from the Purchasing Department and including it in his requisition, or alternatively leaving the order number space on the requisition blank to be completed by the Purchasing Department when it reached them.

[23] When asked about the pursuers' practice in relation to the release of an order number to a supplier in advance of a written purchase order, Mr Rintoul said that some companies would release components on receipt of an order number verbally. In the context of larger contracts, it was an act of good faith to give the salesman the order number, as confirmation that it was intended that an order be placed. It might be used as a means of pre-booking time in the supplier's manufacturing schedule. It served as a reference number for future communications. The provision of an order number was the equivalent of a letter of intent. It indicated a serious intention to place an order. At one stage in his evidence, Mr Rintoul went so far as to say: "In general terms, we regarded it [the provision of an order number] as binding us to a contract". Later he said that oral transmission of an order number would not commit the pursuers to the full value of the order, but it did incur a moral obligation to reimburse any abortive expenditure incurred by the supplier on the strength of it, if ultimately no written order was placed.

[24] In connection with the project that resulted in this action, Mr Hacket had the original contact with the defenders, and Mr Rintoul was brought in to the discussions to provide engineering input. The original quotation E3370 of November 1995 (No. 7/3 of process) was addressed to Mr Hacket, and he showed it to Mr Rintoul. At that stage it had the defenders' Conditions attached. There were then two meetings at which the pursuers were represented by Mr Rintoul and the defenders were represented by Mr Ostapjuk (for the MagnaVac division) and Mr Slater (for the Powell Baling Systems division). At the first of those meetings (the one on 5 March 1996 referred to in Mr Ostapjuk's letter of 8 March in No. 7/4 of process), which took place at Markinch, the defenders were asked to reconsider the November quotation. The second meeting followed receipt by the pursuers of the revised quotations (E3370-1, E3370-2 and E3370-3). Mr Rintoul thought they might have been hand delivered. No 7/4 of process contains E3370-1 and E3370-2 in the form in which Mr Rintoul first saw them. He confirmed, however, that No. 6/2 of process is an incomplete copy of E3370-3. Those revised quotations gave Mr Rintoul what he wanted. At the meeting, according to Mr Rintoul, he gave the defenders' representatives some indication that the pursuers could probably afford the first two phases (E3370-1 and E3370-2). He accepted that he might have led Mr Ostapjuk to think that a deal had been struck. He would have given him a verbal indication that the pursuers would place the order. He could not recall if he had a telephone call with Mr Ostapjuk after the second meeting. If so, it was Mr Ostapjuk who initiated the call. He had no recollection of issuing the order number orally to the defenders. He rarely did so for larger orders. He accepted, however, that he must have done so, since it appeared from their order acknowledgement dated 21 March 1996 (No. 7/5 of process) that they had it before he issued his purchase requisition dated 28 March 1996 (No. 6/14 of process). He had no record of faxing it to them. It was, however, the purchase requisition that was the first step in the procedure for placing an order. Until it was issued, it remained possible that no order would be placed. Someone else who required to approve the requisition might not do so, and in that case no purchase order would be issued. In the present case, the requisition was countersigned by Mr Spicer, because that was the practice where the value of the order exceeded the limit of Mr Rintoul's own normal authority, which was £10,000. The book from which No. 6/14 had come would have been destroyed a year or two later. The terms of the purchase requisition were reflected in the original version of the purchase order (No. 7/6 of process). He was aware of the change reflected in the second version (No. 7/7 of process). The original invoice (No. 6/8 of process) did not match the original purchase order (No. 7/6 of process). That invoice was signed off by others while he was on holiday (see No. 6/17 of process). There was oral communication on the subject, and the change reflected in the second purchase order was agreed to, on the view that the terms involving a deposit of 25% rather than 30% were more favourable to the pursuers. The Purchasing Department told him that they had agreed to the change.

[25] Mr Rintoul said that he had not seen the defenders' order acknowledgement (No. 7/5 of process) until shortly before he gave evidence. He was not sure how a document of that sort would be handled, if received in the pursuers' mail room. He thought it would be sent to the Purchasing Department. He said that he would have expected it to be sent ultimately to him. Although he had dealt with MagnaVac before, he was not aware of their internal procedures for handling orders. Invoices, however, normally arrived by post, not by fax, as No. 6/8 of process appeared to have done. He had heard that the original of the invoice had not been received.

[26] Such was the evidence of the pursuers' own staff and former staff. The remainder of the evidence led by the pursuers came from three former members of the staff of the defenders, Michael David (Mik) Ostapjuk, Melvin Slater and Alan Cresswell. At the material time Mr Ostapjuk was the Sales Manager of the MagnaVac division of the defenders. He left the defenders' employment in October 1997. His account of the defenders' normal contracting procedure began at the point where a customer made an initial inquiry. He would then make a site visit to obtain the information necessary for the preparation of a quotation. It was his practice to deliver the quotation to the customer by hand. Further discussion would then take place, and once all necessary agreement had been reached, he would ask for an order to proceed. He said: "A written order is normally what we are after." A written order acknowledgement would then be issued.

[27] Mr Ostapjuk identified No. 7/22 as the defenders' works order log book. Asked about its use, he said:

"...once we know we've an order, an order is to be placed, it's effectively a request for a contract number so that the contract can be logged into the project management side of the business so they are aware of what's coming along."

He said that the normal practice was for an entry to be made in the works order log book before an order acknowledgement was sent out, because the number in the first column in that book was the contract number that would appear on the order acknowledgement. When it was put to him that it was said on the defenders' behalf that only definite orders were recorded in the book, and asked if that was his position, he replied "No." He suggested that that there was another possibility, explaining: "... at the time the company was struggling for orders, there was pressure for people to put work in and get things moving through". He suggested that there were occasions when a contract number was taken out where orders were never received. He pointed to the immediately preceding entry in the works order log book which was marked "cancelled". He also cited another example of an entry being made in the book but no order ever being received.

[28] Dealing with the circumstances of the present case, Mr Ostapjuk explained that part of the equipment was to be supplied by MagnaVac and part by another division of the defenders, Powell Baling Systems ("Powell"). Melvin Slater was the person involved on behalf of Powell. The initial quotation (E3370) was put together following a site visit by Mr Ostapjuk to Markinch in the summer of 1995. At that stage he was dealing with Mr Hacket. After that quotation was submitted a meeting took place involving himself and Mr Slater for the defenders and Mr Rintoul and one Gary Park for the pursuers. Following that meeting the revised quotations (E3370-1, E3370-2 and E3370-3) were produced. He did not recall how they were delivered to the defenders; it might have been by post. He did not recall having a second meeting with Mr Rintoul and, having checked his car mileage records, he had found nothing there to suggest that he had visited Markinch in the period following 8 March 1996. He did not recall having any conversation with Mr Rintoul between 5 March and 28 March, but said that he might have had. He identified the entry in the works order log book (see paragraph [8] above) as being partly in his writing. He inferred from the entry in the "Day" column three lines earlier that the entry had been made on 21 March. He was then asked: "Why did you make that entry?" and answered: "Because we have received an order number [from] Tullis Russell". He was then asked: "As a layman did you understand that you had a contract from Tullis Russell then?" and replied: "...no". He explained that his engineering degree had included a course on contract law and that he understood that for a contract to be concluded there required to be inter alia an intention to create legal relations, and that that element was not present "until you have actually received the paperwork". Asked about how he had come by the pursuers' order number, he referred to the file copy of his letter of 8 March 1996 to Mr Rintoul in No. 7/4 of process. He identified the manuscript annotation on that letter (see paragraph [7] above), the note of the pursuers' order number, as being in his own handwriting. He interpreted the annotation as meaning that he was "given an order number to proceed with the first two phases". He said: "... my supposition can only be that will have been a conversation with Jim Rintoul ...". Under cross examination he acknowledged that he had no specific recollection of such a conversation. It was a matter of inference from the documents and his usual way of working. He acknowledged that there was nothing in the entry in the works order log book to suggest that the entry did not reflect a firm order, but insisted that it was not a firm order.

[29] Asked about the defenders' order acknowledgement (No. 7/5 of process) Mr Ostapjuk said that he had seen it before, although he could not be certain whether he had seen it otherwise than in connection with the litigation. It was for him to instruct the issue of an order acknowledgement. He would do that by preparing a hand-written version and sending it for typing. The typed version would be posted out without further reference to him. The catalyst for the issue of an order acknowledgement was normally the receipt of a written order. He would not normally prepare an order acknowledgement until a written order had been received. He might, however, prepare a draft acknowledgement before receiving a written order, and hold it back from typing until the written order was received. (By the time he was being cross examined, he said that that happened "often".) He had no recollection of instructing the particular order acknowledgement, No. 7/5 of process. Although it was dated 21 March (which, in cross examination, he said he had no reason to doubt was the true date of issue), he was aware of no order placed by the pursuers, written or oral, by that date. He said that the fact that the order acknowledgement referred to the 25/70/5% version of the payment terms made it "highly likely" that he had been the author of it. On the other hand he could offer no reason for No. 7/6 referring to the 30/60/10% terms if it was sent on 29 March and the pursuers had by then received the Order Acknowledgement No. 7/5 of process. There were, he suggested, occasions when office staff would generate order acknowledgements from the works order log book and computer records, without reference to him. His evidence on that point struck me as at least exaggerated. Eventually when asked: "... does that mean that it did happen sometimes?" he replied: "Some times? It happened nearly every time. On large contracts we were an absolute unmitigated disaster 99% of the time." Under cross examination he put the point more moderately. He said that there had been instances of an order acknowledgement going out although no written order had been placed. He was unable to be specific about the occasions when that had happened. Mr Ostapjuk said that there were conflicting views in his mind as to whether he had drafted No. 7/5 of process. On the one hand, the payment terms suggested that he wrote it. On the other hand, while others might possibly have issued an order acknowledgement on a misinterpretation of the entry in the works order log book, he would have no reason to issue one before a written order was received.

[30] In relation to the pursuers' purchase orders, Mr Ostapjuk said that he saw them on about the dates shown by the defenders' receipt stamps on them. No. 7/6 of process was passed to him from Alan Cresswell. The payment terms were in his view incorrect, because they split the price into three instalments of 30, 60 and 10%. MagnaVac's usual terms were 25/70/5%. The annotation "to be amended to ours" was in his handwriting. He thought he would have telephoned Jim Rintoul to procure the revised purchase order. There was "a lot of to-ing and fro-ing" about correction of the payment terms. He recognised that although the payments terms in E3370 had been 25/70/5%, E3370-1 and E3370-2 had substituted 30/60/10%. He attributed the latter version to Melvin Slater, who was used to the Powell terms rather than the MagnaVac ones. He said that he was probably unaware of the change when he challenged the payment terms in No. 7/6 of process. He sought the change effected in No. 7/7 of process because at the time he thought (mistakenly, as he now accepted, having seen No. 7/4 of process) that No. 7/6 of process did not correctly reflect the defenders' quotation. Under cross-examination he claimed to have a clear recollection of speaking to Jim Rintoul to obtain the "corrected" version of the purchase order.

[31] Mr Ostapjuk accepted that following the issue of No. 7/7 of process, the goods and services referred to were provided. The ordinary procedure would be that after issue of the order acknowledgement and the invoice for the deposit, the matter would be handed over to an engineer. He assumed that in this case the engineer (Anthony Platt) would handle the matter in the usual way. The goods and services would not be supplied unless the defenders believed there was a concluded contract.

[32] Although he has now left the employment of the defenders, Melvin Slater was at the material time general manager of their Powell Baling Systems division. He confirmed that he worked with Mr Ostapjuk in procuring the contract with the pursuers. He described the general contracting system as involving first a quotation, then a written order, and finally an order acknowledgement. He said that generally quotations for large items of capital plant were accepted by written order. Although he generally saw a copy of the order acknowledgement, he did not do so in this case. Nor did he have access to the works order log book - he was not involved in taking incoming orders. He had input into the bale press element of the original quotation E3370, but the quotation was prepared and sent out by Mr Ostapjuk. It was sent to Mr Hackett, and he had no personal dealings with him. Although there were "several" site visits, he did not remember the detail of them. At them they had dealt with Mr Rintoul. He agreed that while the practice of MagnaVac was to split the price into three instalments of 25/70/5%, he in Powell tended to use a 30/60/10% split. He prepared the revised quotations E3370-1, E3370-2 and E3370-3 in Mr Ostapjuk's absence on holiday or on other business. He included his usual split of the price, simply drawing that part of the quotation from a standard computerised form. Although the copy of the covering letter (No. 7/4 of process, page 1) bore to have been written by Mr Ostapjuk, he (Mr Slater) had in fact signed it on his behalf. He had no recollection of speaking to anyone at the pursuers on or about 20 March. No order was ever communicated to him. He did not know when or by whom the order acknowledgement (no. 7/5 of process) was instructed.

[33] Alan Cresswell, who left the defenders' employment in August 1996, was until then a director and the general manager responsible for Magnavac, Powell and a third division of the defenders' business. He had some involvement in early discussion of the pursuers' requirements. Shown No. 7/4 of process (the revised quotation) he said that he assumed that he saw it in about March 1996. He thought he had seen No. 7/5 of process (the order acknowledgement) before, but said that he would not have seen it at the time it was issued. There was, he said, no reason for him to see the purchase orders (Nos. 7/6 and 7/7 of process). Shown 7/8 of process (the works order log book), he referred to it initially as the "order acknowledgement book", and described it as a "central record of all incoming orders". An order, he said, ought to be booked in there on receipt of a purchase order. Under cross examination, he accepted that the procedures were not cast in stone. A telephone order from, for example, a regular customer for rectification work worth £500 to £5000 might be booked in and proceed on that basis, but that was a breach of the system. They would not proceed with a major contract on a telephone order. They might on that basis make a site visit, or do some design work, but they would not "cut steel". Only a small contract might proceed on the basis of the oral intimation of an order number.

[34] The evidence led by the defenders was given by (1) Steven Waters, who was in 1996 a sales engineer with Magnavac, and is now its co-owner, having, with a partner, purchased the business from the company which purchased it from the defenders; (2) Linda Owen, who at the material time was the secretary in the sales department of the defenders; (3) Michael Unwin, who is the defenders' group financial controller; (4) Colin Seymour, who in 1996 was IT manager with the defenders; and (5) Harold Michael Green, who was formerly managing director of the defenders' holding company, Eadie Holdings plc. I have omitted from that list, Alison Smith, who gave expert evidence of English law. I shall return to her evidence in due course.

[35] Steven Waters (who dealt with machinery for the textile industry, while Mr Ostapjuk dealt with the corresponding business with the paper industry) said that on receipt of an inquiry from a customer, the defenders' salesman would make a site visit, then put together a scheme to implement the customer's requirements, and submit a quotation. Since much of the equipment which the defenders used was standard, his method in composing a quotation was to dictate it, calling up standard paragraphs where he could, and dictating those parts that required to be specific to the particular contract. He went through the original quotation (No. 7/3 of process) identifying which paragraphs were in standard form and which were composed ad hoc. He thought that the payment terms would be written ad hoc. Looking at the revised quotation (No. 7/4 of process) he offered the view that it appeared to have been typed by Melvin Slater on his own laptop computer. The defenders conditions, he said, would invariably be attached to a quotation. The quotation was sometimes posted to the customer, but usually presented at a meeting.

[36] Turning to the defenders' practice with respect to orders, Mr Waters said that there could be an oral intimation of an order number, or there could be a written purchase order - in his experience both happened. Oral order numbers were accepted. They were regarded as "the green light". The intimation of an order number meant that the contract had been won. For that reason, people did not give out order numbers lightly. Having said that, he indicated that "for established customers" the defenders would accept an oral order number. An order would come to the salesman and would be entered in what he referred to as the "order day book" or the "log of sales order numbers". That would result in the issuing of paperwork that would bring about the involvement of other parts of the company. The notification of an order number could relate to the lead time required for buying in equipment - a lot of the equipment used by the defenders in their systems was bought in from other manufacturers. Mr Waters said that he was not aware of anything other than an order (albeit it might be an oral order) being entered in No. 7/22 of process (the works order log book). There had previously been a practice of recording "verbal" orders without an order number, but that practice had been stopped. That was because without an order number the invoice would be difficult for the customer to allocate. Under cross examination, Mr Waters said that a lot of spares work was done on the basis of the oral communication of an order number. Getting an order in writing "was not a criterion". Intimation of an order number was an acknowledgement that the quotation had been accepted. An order number was not merely the equivalent of a letter of intent. Work on an order would be commenced on the basis of an order number. The issue of an order acknowledgement was to acknowledge receipt of an order, and pass information to the relevant departments (see paragraph [37] below). Receipt of an order number orally would therefore prompt the issue of an order acknowledgement. It was therefore not surprising, he suggested, to find a formal written purchase order being issued after the issue of an order acknowledgement. If a sales engineer made an entry in the works order log book, he had taken an order. It would be a departure from practice to make an entry in the order book when there was no order. He therefore inferred from the entry in the works order log book and the subsequent documentation that Mik Ostapjuk must have been given an order. Asked whether it was the practice of sales staff to allow certain work to be done in the expectation that an order would in due course be placed, Mr Waters said that it depended how serious the project was for the customer. He could not think of a situation where an order was carried out on a speculative basis. There was no procedure in place to categorise work done after receipt of an order number but before receipt of a written order. No alarm bells would ring to stop such work being done, unless and until the deposit was not paid.

[37] With regard to order acknowledgements, Mr Waters explained that a five-part form was used. Normally a draft would be prepared by the sales engineer. It would then be sent for typing. Once typed, it would be seen by the engineer who had drafted it, then sent to the departmental manager for signature. One copy would then go to the customer, and other copies to various departments. One copy would prompt the raising of the invoice for the deposit. No 7/5 of process was a photocopy of a file copy of an order acknowledgement. It had been signed by Mike Green. Mr Waters did not know who instructed the issue of No. 7/5 of process.

[38] Linda Owen identified the original quotation E3370 as a document that she had typed to Mr Ostapjuk's dictation. Parts of it were standard text already stored on the computer. The draft would have been printed and sent to Mr Ostapjuk for checking. She would then make up the document for signature by him before it went to the customer. In doing so she would include a set of the defenders' Conditions (No. 7/1 of process). That was the normal procedure, and she had no reason to suppose it was not followed on this occasion. With regard to order acknowledgements, the procedure was that "once Mik got an order" he would prepare a manuscript draft acknowledgement and send it to her for typing. She was the only person who ever typed order acknowledgements. She had no reason to suppose that No. 7/5 of process was typed on a date other than the one it bears (21 March 1996). Under cross examination, she acknowledged that she had no recollection of receiving a draft of No. 7/5 of process from Mr Ostapjuk, but said that she would not have typed it without a draft from someone. Such drafts only ever came from salesmen. She thought she would have got the draft from Mr Ostapjuk, since he had done the quotation. When it was put to her that it might have come from Melvin Slater, she thought not in light of the style of the document; a draft by Mr Slater would be less detailed, and would have been on Powell letterhead. An order acknowledgement would be signed, either by Mr Ostapjuk, or by someone senior to him. No. 7/5 of process was signed by Mike Green. She thought that Mr Ostapjuk would have seen the typed acknowledgement. She normally showed a typed order acknowledgement to him. Once it was signed, the various copies would be separated. The white copy would go to the customer. The pink copy would return to her in the administration department to enable her to raise an invoice for the first instalment of the price. She was the only person who did invoicing. Normally the customer's copy of the order acknowledgement and the invoice for the first instalment of the price would be posted to the customer in the same envelope. Although the pursuers' address appeared in the original invoice (No. 7/9 of process) in a different form from their address on the order acknowledgement, that was because the invoice was computer generated. There was nothing about the documents to suggest that the order acknowledgement and the invoice had not, in the usual way, gone out in the post together. In relation to the works order log book, she identified Mr Ostapjuk's handwriting in the entry against the number 20319. The pencil additions in the right hand columns were in her writing. She said, "Mik would write the order in when he got an order number from the clients". She understood that when a sales engineer got an order number, that normally meant he had got the order.

[39] The evidence of Mr Unwin and Mr Seymour was largely formal. Mr Unwin confirmed that it was normal for the invoice for the initial deposit to be sent out with the order acknowledgement. He identified the account summary (No. 7/23 of process) as having been compiled from the material on file. The purpose of Mr Seymour's evidence was simply to explain the date on the document which is No. 7/24 of process. The date it bears is the result of a computer program which alters the date each time a document is printed. The true date of the document was 2 April 1996. The document therefore vouches that on that date Powell were ordering machinery to fulfil the pursuers' order.

[40] Mr Green gave general evidence about contracting procedures. A quotation would be requested by a customer and provided by the sales engineer. If it was acceptable, the customer would place an order, and the defenders would issue an order acknowledgement. He confirmed that copies of the acknowledgement served to prompt the issue of the first invoice and the ordering of materials. His evidence was that the order acknowledgement would be signed by Alan Cresswell or someone senior to him, and definitely not by the salesman. No. 7/5 bore Mr Green's own signature, although he did not specifically remember signing it. He had no reason to suppose that the date it bore was not its true date. The reason for the practice of having order acknowledgements signed by senior employees rather than by salesmen was that in terms of the defenders' Conditions it was the issue of the order acknowledgement that bound the defenders contractually. In relation to the works order log book, Mr Green's evidence was that an entry was made when an order was received. He said that in principle oral orders ought not to be accepted, but in practice they were "when it was commercially viable". Mr Green knew nothing about the particular entry in the works order log book. He expressed himself as sure, however, that the entry would not have been made before the customer had placed an order. He confirmed Ms Owen's evidence that the order acknowledgement and the deposit invoice would be raised at the same time by her. Under cross examination, he said that he would be very surprised if Mik Ostapjuk signed order acknowledgements. He also said he would be surprised if an entry was made in the works order log book on the strength merely of intimation of an intention to purchase; as he put it, it was an "orders received" book. Asked about the significance of a written order following an oral one, he said that it would be confirmation, to "put the paperwork correct".

Discussion of Submissions

[41] It is possible to summarise quite briefly the main components of the submissions made on each side of the case. Both parties maintain, as their primary position, that a contract was formed between them by offer and acceptance. They differ, however, as to what documents or other circumstances played the roles of offer and acceptance. For the pursuers, the contention is that their purchase order (No. 7/6 of process, superseded by No. 7/7 of process) constituted the offer. That offer incorporated by reference the defenders' quotations E3370-1 and E3370-2 (No. 7/4 of process). Those quotations in turn incorporated by reference the defenders' Conditions (No. 7/1 of process), which had been attached to and incorporated in the original quotation E3370 (No. 7/3 of process). The purchase order, however, also incorporated the pursuers' Conditions (No. 6/15 of process), clause 2.2 of which had the effect of stipulating that the defenders' Conditions would not apply to the contract. The effect, therefore, was of an offer to contract for the goods identified in quotations E3370-1 and E3370-2 on the pursuers' Conditions to the exclusion of the defenders' Conditions. The pursuers' further contention is that that offer was accepted by the defenders by their actings in negotiating the substitution of No. 7/7 of process for No. 7/6 of process, and in thereafter supplying the goods and accepting payment for them. On the pursuers' analysis, the defenders' order acknowledgement (No. 7/5 of process) formed no part of the contract. The defenders' contention, on the other hand, is that the terms of the contract are to be found in the quotations E3370-1 and E3370-2, incorporating by reference the defenders' Conditions, an oral order by the pursuers intimated on 20 or 21 March 1996, and the order acknowledgement (No. 7/5 of process). On the defenders' analysis the purchase orders are post-contractual documents, and are therefore not effective to incorporate the pursuer's Conditions into the contract.

[42] One ramification of the defenders' position is that they maintain that the existence and validity of the contract falls to be determined by the law of England. That, they submit, is the consequence of the application of the Contracts (Applicable Law) Act 1990. Section 2(1) of the Act provides that the Rome Convention (as defined in section 1(a) and set out in Schedule 1) shall have the force of law in the United Kingdom. Article 1 of the Convention provides that:

"The rules of this Convention shall apply to contractual obligations in any situation involving a choice between the laws of different countries."

Section 2(3) provides that the Convention shall apply in the case of conflicts between the laws of different parts of the United Kingdom. Article 8(1) provides that:

"The existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Convention if the contract or term were valid."

Since clause 18.5 of the defenders' Conditions provided that the formation, interpretation and operation of the contract would be subject to English law, it followed that, if those Conditions were part of the contract, its existence fell to be determined by English law. In that connection, as I have already mentioned, the defenders led the evidence of an expert in English law. I shall deal with her evidence in the individual contexts in which it requires to be considered.

[43] There is, in my view, no difficulty in analysing the first stage of the contractual communications between the pursuers and the defenders. The original quotation E3370 was largely superseded by the subsequent revised quotations E3370-1 and E3370-2, but it remains of significance as the means by which the defenders' Conditions came to be incorporated in the later quotations. There was no real dispute that, by virtue of (a) the attachment of the defenders' conditions to E3370 and (b) the provision that any contract arising from the quotation would be subject to the defenders' Conditions, those conditions formed an integral part of the original quotation. When the revised quotations E3370-1 and E3370-2 were submitted, they may not have had the defenders' Conditions physically attached to them, but they contained the provision: "Our Standard Terms and Conditions Apply as per our previous ref E3370". In my opinion the effect of that cross-reference was that the defenders' Conditions formed part of their quotations E3370-1 and E3370-2. That is, in my view, so if the matter is judged by reference to Scots law. I accept Ms Smith's evidence that the same would be so if the matter were to be judged by reference to English law.

[44] The next stage, it seems to me, is to consider the nature and effect of the quotations E3370-1 and E3370-2. In my opinion they cannot be regarded as offers to supply the equipment in question. That is because their terms precluded the possibility that a binding contract might be formed by acceptance of them. The provisions which bring about that state of affairs are the part of section 7.0 "Commercial Conditions" sub-headed "Validity", and clause 4.1 of the defenders' Conditions. The quotations were therefore of the nature of invitations to treat, inviting the pursuers to place orders. Any orders so placed would play the role of offers, and the contract would be constituted by the defenders' acceptance of them. I take that view of the nature of the quotations, judging the matter by reference to Scots law. I again accept Ms Smith's evidence that the same view would be taken if English law fell to be applied.

[45] The first critical issue therefore comes to be when and how the pursuers did in fact place orders for the equipment mentioned in the quotations E3370-1 and E3370-2. On the one hand the pursuers contend that they did so by sending to the defenders their formal written purchase order (No. 7/6 of process) on 29 March 1997. The defenders maintain, on the other hand, that by the time that purchase order was sent, a contract had already been concluded in terms of an oral order and the defenders' order acknowledgement (No. 7/5 of process). It is necessary to examine in detail the evidential basis on which the defenders contend (a) that an oral order was placed, and (b) that it was accepted by the order acknowledgement so as to conclude a binding contract prior to the issue of the pursuers' purchase order.

[46] In making his submissions about the oral order allegedly placed by the pursuers, Mr Sandison for the defenders referred to certain evidence given by Ms Smith to the effect that generally in assessing the words or conduct of a party (or a party's representative) in order to determine whether those words or conduct resulted in the constitution of a binding contract, it was necessary to view the words or conduct objectively. The question (in the case of words) was not what the person using the words intended to convey, but rather what the words would reasonably be understood to convey (Food Corporation of India v Antclizo Shipping Corporation (The "Antclizo") [1987] 2 Lloyd's Rep 130, per Bingham LJ at 134, col. 1, and Nicholls LJ at 146, quoting from the speech of Lord Reid in McCutcheon v David MacBrayne Ltd 1964 SC (HL) 28 his Lordship's approval of the observation in Gloag on Contract at 7 that, "The judicial task is not to discover the actual intentions of each party; it is to decide what each was reasonably entitled to conclude from the attitude of the other"; Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601, per Bingham J at 610). Although in her evidence Ms Smith discussed circumstances in which regard might require to be had to the subjective intention of the parties, it was not Mr Sandison's submission that that was necessary or appropriate in the circumstances of the present case. I accept that in general the proper approach is to assess the significance of what was said by the parties by way of offer or acceptance objectively. That is, in my view, so whether the matter is determined by reference to English law or by reference to Scots law. It is, however, necessary to consider first what the parties have been proved to have said or done, then to assess the contractual significance of their words and deeds objectively.

[47] In the present case the evidence of what was actually said is scant. The oral order is alleged to have been given by Jim Rintoul on the pursuers' behalf to Mik Ostapjuk on the defenders' behalf. The order is alleged to have been made by the release by Mr Rintoul to Mr Ostapjuk of the pursuers' order number, 3109210. I am satisfied, on the evidence, that Mr Rintoul did release the order number to Mr Ostapjuk on or about 20 or 21 March 1996. Mr Rintoul had no actual recollection of doing so, but accepted that he must have done. His basis for accepting that he must have done so was the existence of the defenders' file copy of the order acknowledgement (No. 7/5 of process) dated 21 March 1996, but that reasoning is in my view reinforced by the entry in the defenders' works order log book (No. 7/22 of process), since it appears that that entry must have been made between 21 and 25 March (both of which dates preceded the date - 28 March - on which Mr Rintoul completed his purchase requisition). Mr Ostapjuk likewise had no specific recollection of the conversation, but he inferred that he had had such a conversation from the entry in the works order log book and from his annotation on the file copy of his letter of 8 March 1996 (No. 7/4 of process). Notwithstanding the absence of direct recollection of the conversation on the part of either participant, I am satisfied that they did communicate on or about 20 or 21 March, and that in the course of the conversation Mr Rintoul released the pursuers' order number to Mr Ostapjuk. I would emphasise, however, that I am unable to make any more specific finding as to what was said on that occasion. While the evidence supports the inference that the order number was released at that stage, there is no evidence about what was said by Mr Rintoul when he did so.

[48] It therefore remains for consideration whether the proper inference from the fact that the order number was released orally on or about 20 or 21 March is that an oral order in terms of the quotations E3370-1 and E3370-1 was placed on that date. It seems to me that in coming to a conclusion on that issue I am entitled to have regard to the evidence of Mr Rintoul as to what he thought he was doing, the evidence of Mr Ostapjuk as to what he understood Mr Rintoul was doing, the evidence of other employees of the pursuers as to what the pursuers' practice was with regard to the issue of order numbers, and the evidence of other employees of the defenders as to the way in which their paperwork was ordinarily kept. Although some of these lines of evidence might, if viewed alone, be regarded as disclosing only a subjective view of the significance of what occurred, none of them can in my view be left out of account a priori in seeking to determine the objective significance of the mere fact that an order number was released by Mr Rintoul to Mr Ostapjuk.

[49] There were aspects of Mr Rintoul's evidence that might, in isolation, be construed as acceptance on his part that by issuing the order number he had placed an order. At one stage he said: "In general terms, we regard [the issue of an order number] as binding us to a contract"; but it seemed to me that in expanding on that evidence he made it clear that what he meant was that he would regard the issuing of an order number as incurring a moral obligation to reimburse any expense incurred by the supplier in reliance on the order number in the event that subsequently no formal written order was placed. At another stage of his evidence he accepted that he might have led Mr Ostapjuk to believe that a "deal had been struck", as in a commercial sense it no doubt had. Other aspects of Mr Rintoul's evidence, however, were that small orders might be fulfilled on the strength of an order number in the first instance, but that for larger projects the issue of an order number was but an act of good faith, a reassurance to the salesman that it was intended that on order should be placed, perhaps a basis for booking time in the supplier's production schedule, or simply a reference number for future communication. All of that suggests to me that while there may indeed have been circumstances in which the issue of an order number was tantamount to the placing of an order, that was far from being the case in all circumstances. If that was so, the mere issue of the order number is an insecure basis for an inference that it was intended to operate as an offer capable of being converted by acceptance into a binding contract. It seems to me that an important aspect of Mr Rintoul's evidence related to the order value. This was an order for goods the contract price of which was £152,200. The ordinary limit of Mr Rintoul's authority was £10,000. That was reflected in the fact that the purchase requisition was counter-signed by Mr Spicer. It was Mr Rintoul's evidence that until the purchase requisition was issued, it was possible that no order would be placed. While no doubt Mr Ostapjuk and the defenders had no precise knowledge of the limit of Mr Rintoul's authority, I am of opinion that the relatively large value of the contract is a factor which militates against the inference that the release of the order number was by itself an order intended to be contractually binding if accepted.

[50] If Mr Ostapjuk's evidence had been that when Mr Rintoul issued the order number, he understood him to be placing an order there and then, that would have been significant evidence in support of the defenders' position, not because Mr Ostapjuk's belief as to the legal effect of what Mr Rintoul said or did is directly relevant, but because his evidence of the actual impact which Mr Rintoul's words and deeds had on him would be relevant to the assessment of the objective significance of those words and deeds. Mr Ostapjuk's evidence was, however, to a different effect altogether. His position was that he did not regard the issue of the order number as itself constituting an order. He explained that position by reference to his understanding that the law required an offer to be made with the intention of creating legal relations, and that that element would only be present when the order came in written form. Whether his evidence to that effect is acceptable involves consideration of a number of factors to which I shall return, including the significance of the making of the entry in the works order log book and of the generation of the order acknowledgement.

[51] Mr Rintoul's evidence requires to be placed in the context of the evidence of the other members of the pursuers' staff about the placing of orders. It is in my view clear that the procedure ordinarily involved (i) the raising of an order requisition by the engineer or other person responsible for generating the order, with a counter-signature by a more senior member of staff if that was required to authorise a purchase of the particular value involved; (ii) the provision by the Purchasing Department of a sequential order number, either to the engineer for inclusion in his requisition before submission, or by inserting it in a blank left in the requisition by the engineer; and (iii) the issue by the Purchasing Department of a formal written purchase order incorporating the pursuers' Conditions. (I also note that the pursuers' computer system would reject as invalid an order number in respect of which no written purchase order had been issued, which would create an obstacle to payment of an invoice rendered by a supplier which referred to such a number.) It is also clear, however, that the pursuers' staff did not always adhere to the full rigour of that system. It was accepted by the witnesses that order numbers were sometimes released to suppliers in advance of the issue of a written purchase order. Unsurprisingly, the witnesses differed in detail in their accounts of when and to what effect that was done. Moreover, it seems to me to be clear that, as some of the witnesses acknowledged, no real thought was given to whether the oral release of an order number might itself constitute an order. The practice was to follow the oral release of the order number with a written order. There were, no doubt, cases where the order number was given out orally by way of placing an oral order. That would, it seems to me, readily be seen to be so in the cases mentioned in evidence where orders for goods of small value urgently required were placed by telephone and implemented before the paperwork caught up. But the evidence also indicated that there were cases of a different category, where the purpose in giving the order number to the supplier was to reassure the salesman that the decision in principle to place the order had been taken and that the order itself would follow in due course. Examples were given in evidence of issuing the order number to persuade the supplier to order materials, or to reserve a time slot in a production schedule. Whether the release of an order number in that way would amount to an order would, in my view, require to be determined on a case by case basis. It seems to me, however, that a supplier might well be prepared to act to a limited extent in reliance on the issue of an order number in advance of the issue of a formal written order, without being under the impression that the order had actually been placed. The evidence in No. 7/24 of process that the defenders ordered parts on 2 April, before receipt of the original purchase order (No. 7/6 of process) on 4 April, is, in my view, capable of being explained on that basis.

[52] If it were clear that the defenders' practice was for an entry to be made in the works order log book only when a firm order was placed, the entry which Mr Ostapjuk acknowledged making in that book on the strength of the order number issued to him by Mr Rintoul might be regarded as undermining the acceptability of his evidence that he did not understand the release of the number as constituting the placing of an order. There was, however, a conflict in the evidence about when such entries were made. Mr Cresswell regarded the book as a record of orders. At one stage in his evidence he said that a telephone order might be put in the book if it was of relatively small value, although strictly that was a breach of the system. At another stage he said that only a small contract might proceed on the basis of the oral intimation of an order number. It is not clear to me that he was alive to the possible distinction between placing an order orally, and intimating an order number orally in advance of placing an order. Mr Waters' evidence was that so far as he was concerned the issue of an order number meant that the order had been won; it was an acknowledgement that the quotation had been "accepted". An oral order would be entered in the works order log book. He said, however, that he was not aware of entries being made in respect of anything less positive than an oral order. Mr Green's evidence was that an entry would only be made in the works order log book on receipt of an order, although in practice oral orders were sometimes accepted. Despite the differences of nuance in that body of evidence, it does, it seems to me, tend to support the defenders' contention that an entry in the works order log book ordinarily indicated that an order had been received, and that the fact that Mr Ostapjuk made that entry tended to conflict with his evidence that he did not regard the release of the pursuers' order number as constituting an order. Mr Ostapjuk's evidence was that he made the entry in the works order log book because he had received the order number from Mr Rintoul, but he did not accept that when doing so he understood the release of the order number as itself constituting an order. He spoke of the commercial pressure to process an order number as if it were an actual order. I found the generality of that evidence understandable, but Mr Ostapjuk's attempts to vouch the generality by examples were much less convincing. He suggested that the fact that entries might be made which never became actual orders was vouched by the preceding entry in the book, which was marked "cancelled", but that suggestion failed to distinguish between, on the one hand, the deletion of an entry because it had been made prematurely and no order actually eventuated, and, on the other hand, the cancellation of an order after it had been placed. In my view the cancellation entry provides no support for the generality of Mr Ostapjuk's evidence on this point. The absence of identifiable examples of entries made then deleted because no order was placed does not, of course, demonstrate that Mr Ostapjuk's evidence was untrue - an entry made on the strength of an intimation of an order number would become undetectable as such if a written order did follow.

[53] In considering whether the issue of the order number amounted to an oral order, it is in my view also necessary to consider the significance of the defenders' order acknowledgement, No. 7/5 of process. Aside from the question of whether that document was effective as an acceptance of the oral order, if one was made - a question to which I shall return - it seems to me that the mere generation of it may yield an inference as to how the release of the order number was understood by Mr Ostapjuk. In my view the proper conclusion on the evidence is that the order acknowledgement was generated on the date it bears, 21 March, and was generated on the basis of a draft provided by Mr Ostapjuk. I accept the evidence of Linda Owen that she typed all order acknowledgements, and that she had no reason to suppose that this one was typed on a date other than the one it bears. I also accept her evidence that she would only type such a document on the basis of a draft provided by a salesman. I reject Mr Ostapjuk's evidence that sometimes the office staff generated order acknowledgements without reference to him. As I have recorded in paragraph [29] above, I found his hyperbolic evidence on that point unacceptable. Accepting the view that it must have been drafted by a salesman, the only candidates were Mr Ostapjuk and Mr Slater. Ms Owen's reasons for concluding that it was in fact drafted by Mr Ostapjuk - that he had prepared the original quotation, and that the style was his rather than Mr Slater's - strike me as cogent. I have, moreover, no reason to reject Mr Slater's evidence that he did not know who instructed the order acknowledgement. Mr Ostapjuk, too, accepted after some vacillation that he had probably drafted the document - his reason for doing so, namely that the payment terms were those he had stated in E3370 rather than those stated by Mr Slater in the revised quotations, also seemed to me to be persuasive. Although Mr Ostapjuk said that he sometimes drafted the order acknowledgement in advance of receipt of the written order, and held it back from typing until the written order arrived, that does not adequately explain why, if he is right that he did not regard the release by Mr Rintoul of the order number as amounting to an order, the order acknowledgement reached the stage of being typed.

[54] In my view the likelihood is that, notwithstanding his evidence that he did not regard the release of the order number as amounting to an order, Mr Ostapjuk did in fact treat the release of the order number as if it were a firm order and entered it in the works order log book, and drafted the order acknowledgement and sent it to Linda Owen for typing. It does not, however, in my view, follow that the evidence as a whole supports the conclusion that the mere release of the order number should in this case be regarded objectively as constituting the placing of a firm order. It seems to me to be likely that in the cases where an oral order was placed, more would be said to identify that an order was being placed than the mere communication of the order number. That would, in my view, be likely to be so even in the examples referred to in evidence where oral orders were given for items of small value or parts urgently required. Between two parties, both of whom employed standard terms and conditions of employment which contemplated the conclusion of a contract in writing, and who were on this occasion negotiating a contract for the provision of a major item of capital equipment at a price of £152,200, I do not consider that the fact that the order number was processed by the supplier's salesman as if an order had been placed is sufficient, without more, to yield the inference that (despite the fact that neither he not Mr Ostapjuk remembered his doing so) Mr Rintoul must, as well as releasing the order number, have spoken words expressing the immediate placing of an oral order. I am therefore of opinion that the circumstances do not lead to the conclusion that the proper objective inference is that on 20 or 21 March 1996 Mr Rintoul placed an actual order for the equipment that was capable, on acceptance, of constituting a legally binding contract.

[55] If I am right that the defenders have failed to prove that an oral order was placed by the pursuers on 20 or 21 March 1996, the question of whether the order acknowledgement constituted an effective acceptance of such an order does not arise. It is, however, appropriate that I should nevertheless consider the evidence on that issue. Several questions require to be considered. The first is whether the order acknowledgement was received by the pursuers. The second is whether, even if not received by the pursuers, it was posted by the defenders and is in the circumstances to be treated on that account as an effective acceptance. The third is whether the fact that the order acknowledgement referred to different payment terms from those specified in the revised quotations prevents the order acknowledgement from operating as an effective acceptance of any oral order.

[56] In my opinion the proper conclusion to be reached on the evidence is that the order acknowledgement, of which No. 7/5 of process is the defenders' file copy, never reached the pursuers. The evidence was that there is no record that it was received by them. Mr Parr had searched their records and had been unable to find it. I accept his evidence to that effect. Neither Mr Spicer nor Mr Rintoul had seen it, and the latter said that he would have expected it to reach him if it had reached the pursuers. Given the defenders' witnesses' evidence that ordinarily the order acknowledgement and the deposit invoice were sent to the purchaser together (which I accept), evidence that a deposit invoice had been received shortly after 21 March would have tended to suggest that the order acknowledgement had been received at that time by the pursuers and had gone astray within their offices. In the present case, however, the only copy of the deposit invoice to be found in the pursuers' records is not one sent by post in the usual way, but a faxed copy. That faxed copy (No. 6/8 of process), although dated 21 March, bears to have been sent on 2 April and was logged into the pursuers' computer system on the latter date. The evidence is that that could not have happened if an earlier copy of the same invoice had been previously logged into the system. Despite the fact that the first page of the fax (the cover sheet?) appears to be missing, notwithstanding Mr Rintoul's evidence that it was his practice to retain fax cover sheets, it seems to me that the reasonable inference from the evidence is that no invoice was received at a time which would have been consistent with receipt in the ordinary course of post following transmission on or about 21 March. It is, of course, correct that the evidence is that the pursuers' computer system would have rejected an invoice which could not be related to an order number reflected in a purchase requisition, but it does not seem to me to be likely that an invoice received in such circumstances would have disappeared without trace. In the whole circumstances, the absence of receipt of the deposit invoice within a few days after 21 March seems to me to support the inference that the order acknowledgement likewise did not reach the pursuers in the ordinary course of post after posting on that date. The terms of payment mentioned in the pursuers' purchase order (No. 7/6 of process) also suggest that by the date of issue of that document the pursuers had not received the defenders' order acknowledgement. I therefore find that the pursuers did not receive the defenders' order acknowledgement.

[57] It does not follow from the fact that the pursuers did not receive the order acknowledgement that that order acknowledgement would not have taken effect as a valid acceptance of the oral order, if one had been placed. Mr Sandison for the defenders relied on the rule of law which was referred to in argument as the "postal acceptance rule". Since it arises in the context of the defenders' contentions, which proceed on the basis that the applicable law is the law of England, it was put forward as a matter of English law on the basis of evidence given by Ms Smith. The proposition was that where postal acceptance was within the contemplation of the parties, the acceptance was complete and effective on posting (see Ms Smith's opinion, No. 23 of process, pages 6-7). It was argued that postal acceptance was what the parties contemplated (see clause 4.1 of the defenders' Conditions - "despatches an order acknowledgement"; and clause 2.3 of the pursuers' Conditions - "accepted by the Seller in Writing"). If the postal acceptance rule applied, a finding that the order acknowledgement did not reach the pursuers did not preclude the conclusion that the oral order was thereby accepted. That argument is, in my view, sound so far as it goes. I accept Ms Smith's evidence as to the existence of the rule in English law. (I do not think that any different result would be reached by the application of Scots law.) I accept that, since both parties' Conditions contemplated the sending of a written acceptance or order acknowledgement, acceptance by post was within the parties' contemplation. Mr Kinroy for the pursuers did not dispute that that was so. Before the rule can apply, however, there must in my view be a sufficient evidential basis for a finding in fact that the order acknowledgement was committed to the post by the defenders. The only evidence on which such a conclusion could be based was the evidence, principally of Linda Owen, that the practice was that an order acknowledgement, once typed, would be posted to the customer. There was no specific evidence that the particular order acknowledgement was in fact posted to the pursuers. In my opinion, although I have no reason to doubt the general evidence given by Ms Owen as to practice, that evidence is an insufficient basis for a finding that the particular order acknowledgement was actually posted to the pursuers. If the postal acceptance rule is to be relied on so as to establish that an offer was accepted and a contract concluded, despite the fact that the acceptance did not reach the offeror, it is in my view necessary to have clear and specific evidence that the particular document was posted. I am therefore of opinion that the evidence in the present case is insufficient to found reliance on the postal acceptance rule.

[58] The other possible difficulty in the way of holding that a contract was concluded by (a) an oral offer by the pursuers and (b) the defenders' order acknowledgement lies in the fact that the order acknowledgement did not match the terms of the quotation to which the oral order must be taken to have referred. The defenders' argument assumed that the oral order was an order in terms of the revised quotations E3370-1 and E3370-2. Those quotations provided for a 30/60/10 percentage split of the purchase price. In the order acknowledgement, on the other hand, the terms of payment were that the price would be paid in instalments of 25/70/5%. It is, in my view, clear how that came about. The revised quotations were drafted by Melvin Slater, who introduced the price split which he was accustomed to incorporate in Powell contracts. The order acknowledgement was drafted by Mik Ostapjuk, who (without noticing Melvin Slater's innovation) incorporated in it the price split which he was accustomed to incorporate in MagnaVac contracts and which had been incorporated in the original quotation, E3370. But an understanding of how the discrepancy arose does not necessarily deprive it of significance. On one view, the order acknowledgement falls to be characterised as a qualified acceptance or counter-offer which would in turn require to be accepted before a contract could be held to have been concluded, rather than as a simple acceptance capable of bringing about the immediate conclusion of the contract. Mr Sandison argued to the contrary, submitting that the provision regulating the particular instalments into which the purchase price was to be split was not an important or essential term of the contract, failure to reach agreement on which precluded the conclusion of the contract. He referred in that context to the following passage in the judgment of Lloyd LJ in Pagnan SpA v Feed Products Ltd at 619:

"It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail that can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true; the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later."

Mr Sandison referred to the evidence of Mr Rintoul and Mr Ostapjuk that the percentage split of the purchase price had never been the subject of discussion between them, and to the fact that the pursuers readily agreed to accept Mr Ostapjuk's proposed "correction" of the payment terms mentioned in their original purchase order (No. 7/6 of process) and the substitution of those mentioned in the second version (No. 7/7 of process). Those considerations, he submitted, pointed to the non-essential nature of the terms of payment, and permitted the conclusion that a contract was concluded by the exchange of the oral order and the order acknowledgement, notwithstanding the fact that they proceeded on differing terms of payment. I am not persuaded that that argument is sound. The terms of payment are not "essential" in either of the first two senses discussed by Lloyd LJ. This is not, however, a case where the parties have left a particular detail of the contract to future agreement. On the contrary, the defenders were at pains to state their terms of payment in their original quotation, and in the revised quotations. The fact that Mr Slater inadvertently changed them in the revised quotations does not detract from the inference that the defenders regarded the terms of payment as a matter of significance. The fact that there had been no active negotiation on that matter likewise does not in my view relegate the payment terms to the status of an insignificant detail. The argument that the payment terms were something that could be left unresolved when the contract was concluded sits uneasily, in my view, with the fact that Mr Ostapjuk's immediate reaction to noticing the discrepancy was to take the matter up with the pursuers and to ask them to re-issue a corrected version of their purchase order. In my view the evident intention of the parties was that, for a concluded contract, the payment terms were one of the matters that required to be agreed. Accordingly, if I had held that an oral order had been placed, and that the order acknowledgement had been received or at least sent in circumstances in which it might have constituted an effective acceptance, I would nevertheless not have held that a binding contract had thereby been concluded. The discrepancy as to the terms of payment would, in my view, have resulted in the order acknowledgement having the character of a qualified acceptance or counter-offer, so that, for the conclusion of a contract, acceptance of it by the pursuers would have been necessary. I should add that, in my opinion, that view of the payment terms issue would preclude the possibility of applying the postal acceptance rule to the order acknowledgement, since that rule applies only to an unqualified acceptance.

[59] I have thus reached the conclusions (1) that it has not been proved that the pursuers placed an oral order for the equipment specified in the revised quotations E3370-1 and E3370-2; and (2) that if such an order had been placed, the order acknowledgement relied on as constituting acceptance of it (a) was not received by the pursuers, (b) has not been proved to have been sent by post to the pursuers, and therefore could not be treated as constituting an effective acceptance despite the fact that the pursuers did not receive it, and (c) was in any event, because of the discrepancy as to the payment terms, only a qualified acceptance, and therefore not capable effecting conclusion of the contract. I am therefore of opinion that the defenders' primary contention as to the manner in which a contract between the parties was concluded fails.

[60] If there was no oral order placed on or about 21 March, and no effective acceptance of such an oral order, there is no basis for holding that a contract was concluded prior to the issue of the pursuers' formal written purchase order (No. 7/6 of process) on 29 March. There is therefore no basis for regarding the purchase order as a post-contractual document. The way is therefore open to consider the effect of that document as a written order. The purchase order bears to be an order for the purchase of the equipment described in the revised quotations E3370-1 and E3370-2, at prices which reflect those stated in the revised quotations, and on payment terms which echo what was proposed in those quotations. The purchase order bears to be made "solely on the [pursuers' Conditions] which are set out in full on the reverse of this Order". Those conditions provided that they would apply to the exclusion of any terms and conditions on which the quotations had been given (clause 2.2). The effect, according to Mr Kinroy's submissions, was therefore an offer to purchase the goods identified in the revised quotations at the price and on the payment terms specified, but subject to the pursuers' Conditions to the exclusion of the defenders' Conditions.

[61] If the pursuers' argument is accepted thus far, the next question is what the effect was of the revised version of the purchase order (No. 7/7 of process). It is, in my view, clear on the evidence what happened. The original purchase order simply reflected the payment terms contained in the revised quotations. As I have already indicated, I accept that those payment terms were different from those in the original quotation simply because Melvin Slater, in drafting the revised quotation, included the payment terms which he was used to including in Powell quotations, probably without realising that he was thereby departing from the payment terms proposed in the original quotation. When Mik Ostapjuk saw the first version of the purchase order, he saw that the terms mentioned in it were not the ones he expected. He did not realise at the time that the source of the difference was Mr Slater's revision of the quotation. He did, however, take the matter up with the pursuers. The discrepancy in the evidence as to whether he spoke to Mr Rintoul on the subject does not, in my view, matter. It is clear that the pursuers agreed to adopt the payment terms which Mr Ostapjuk preferred, namely those mentioned in the original quotation. To reflect their acceptance of that change, the pursuers issued the revised version of the purchase order. It is in my view understandable that the revised purchase order bore the same date as the original one, but the fact that it was issued later than the original one and in substitution for it is reflected in the different date stamps recording the date of receipt of them by the defenders. No. 7/6 of process was received on 4 April, whereas No. 7/7 of process was received on 10 April. I am therefore of opinion that the effect of these events was that the pursuers withdrew the purchase order No. 7/6 of process and substituted for it the purchase order No. 7/7 of process.

[62] The next question which requires to be considered is whether that substituted purchase order was accepted by the defenders so as to result in a concluded contract. It is not, as I understand it, disputed that there was no written acceptance or acknowledgement of the revised purchase order. Equally, however, it is not disputed that, without any further contractual communication, the defenders (a) after some confusion invoiced the pursuers in accordance with the terms of payment set out in No. 7/7 of process, and in due course received and accepted payment of the sums due under those invoices (see No. 7/23 of process); and (b) supplied the equipment which had been ordered. Those circumstances, Mr Kinroy maintained, amount to an unqualified acceptance of the pursuers' purchase order, including their Conditions incorporated in it.

[63] Mr Sandison advanced a number of arguments against the conclusion argued for by Mr Kinroy. His submission was that if the defenders' primary contention was rejected, the proper conclusion was that no contract had been concluded at all. That was, he submitted, a competent result (Mathieson Gee (Ayrshire) Ltd v Quigley 1952 SC (HL) 38). I accept that in appropriate circumstances it is open to the court to hold, in a case in which one party contends that there has been a contract on certain terms, and the other contends that there has been a contract on different terms, that the parties have not actually reached consensus in idem. It is therefore necessary to consider the merits of Mr Sandison's submissions on this point.

[64] Mr Sandison's first contention was, in effect, that in this case the "battle of the forms" had resulted in stalemate. Both parties had put forward standard terms as the basis for the contract. The defenders' Conditions, incorporated in their quotations, stipulated that any contract arising out of the quotations would be subject to their conditions (see No. 7/3 of process, section 7.0, sub voce "Terms and Conditions of Sale"). Clause 2.2 of the defenders' Conditions stipulated that, in the absence of "a specific written amendment hereto signed by a director of the [defenders]", the defenders' Conditions would be incorporated in the contract to the exclusion of any conditions proposed by the buyer. Clause 3 further stipulated that the defenders' Conditions would prevail over any others. Similarly, clause 2.2 of the pursuers' Conditions sought to stipulate that those conditions would apply to the exclusion of any terms and conditions attached to the quotation or stated in an acceptance. In that situation, Mr Sandison submitted, the effect of the incompatible stipulations was that no consensus was reached (Chitty on Contracts, pages 104-5, paragraph 2-034).

[65] In my opinion, that submission is not well founded. On the view which I have taken of the nature of the defenders' quotations, they were not offers, but merely invitations to treat. They were therefore not themselves part of the contract, except to such extent as they were adopted as part of a subsequent offer or acceptance. The pursuers were the party who made the offer, in their purchase order incorporating their Conditions. Clause 2.2 of the pursuers' Conditions had, in my view, the effect that the pursuers' order was placed on the basis that their Conditions would be incorporated in the contract, and the defenders' Conditions would be excluded from it. It was, of course, perfectly possible for the defenders to decline to accept an offer couched in those terms, and if the defenders had responded to the purchase order with an order acknowledgement that sought to reiterate the incorporation of the defenders' Conditions to the exclusion of the pursuers' Conditions, the situation might have been different. Where, however, there was no re-assertion of the primacy of the defenders' Conditions, but there were actings on the part of the defenders from which acceptance of the pursuers' order might be inferred, I am of opinion that the proper conclusion is not that there has been failure to reach consensus, but that the defenders (notwithstanding the vigour with which their pre-contractual quotations asserted their position) have in the event yielded to the incorporation of the pursuers' Conditions.

[66] Mr Sandison's final submission was that there was no consensus because the requirements stated by the pursuers in clause 2.3 of their Conditions were not satisfied. Clause 2.3 provided that the offer would lapse unless it was unconditionally accepted by the seller in writing within seven days of its date. If No. 7/7 of process was the order, it was never accepted in writing. It therefore lapsed on the expiry of the period of seven days from its date, and there was nothing that could be regarded as having been accepted by the defenders' actings. It was not open to the pursuers to argue that they had waived compliance with clause 2.3, because (a) the provision was not conceived exclusively in their favour and was therefore not capable of being waived by them (Manheath Ltd v H J Banks & Co Ltd 1996 SLT 1006); and (b) there was no conduct on the part of the pursuers ascribable to waiver of the clause, and no acceptance of such waiver by the defenders (James Howden & Co Ltd v Taylor Woodrow Property Co Ltd 1999 SLT 841 per Lord Kirkwood at 851D).

[67] I do not consider that that submission is well founded. It is no doubt correct that there was no compliance with clause 2.3, and that the pursuers would therefore, if nothing more had happened, have been entitled to treat their offer as having lapsed on the expiry of seven days from its date without written acceptance. But more did happen. Notwithstanding the non-compliance with clause 2.3, the defenders, for their part, invoiced the pursuers for the ordered goods, and proceeded in due course to supply them. The pursuers for their part did nothing to invoke reliance on clause 2.3, and paid for the goods and accepted delivery of them to, and installation of them in, their premises. In circumstances in which both parties proceeded to act unequivocally as if there was a concluded contract, it would in my view be wholly unrealistic to hold that, for want of compliance with clause 2.3, there had been no consensus in idem. Moreover, I doubt whether Mr Sandison's reliance on the concept of waiver is, in the circumstances, appropriate. That concept is in my view concerned with the identification of circumstances in which a party may be held to have unequivocally abandoned a right. Here the question is not whether a provision or condition of a concluded contract has been waived, but rather whether the parties have reached contractual consensus. If it were necessary to do so, however, I would in the circumstances hold (a) that clause 2.3 was conceived in the pursuers' favour, and (b) that there was ample ground for holding that both parties accepted that, notwithstanding non-compliance with clause 2.3, a binding contract was concluded between them.

Result

[68] My conclusion therefore is that a contract was entered into between the parties for the supply by the defenders to the pursuers of the equipment described in the revised quotations E3370-1 and E3370-2, at the price mentioned there and in the pursuers' revised purchase order 3109210 (No. 7/7 of process), on the terms as to payment set out in that revised purchase order, and on terms incorporating the pursuers' Conditions but excluding the defenders' Conditions.

[69] It does not seem to me that that result would be adequately expressed by my granting decree of declarator in the terms formulated in part (i) of each of the first and third conclusions. The course which I propose to take is to put the case out By Order to give parties an opportunity of considering how best to give effect to my decision. It seems to me that one possible course would be for the pursuers to propose an amended conclusion for declarator, in terms of which decree could then be granted. I shall, however, hear any further submissions that parties wish to make on the question of giving effect to my decision.

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