Thursday, 6 May 2010

Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401

Facts

The Butler Machine Tool Company quoted a price for a machine with specific terms and conditions for purchase outlined on the back. These terms included a price variation clause which allowed the seller to increase the price if there was an increase in the manufacturing costs.

The purchaser sent back an order form outlining their own terms and conditions, which did not include a price variation clause. Attached to this order form was a tear off slip to be signed by the seller acknowledging their acceptance of the buyer’s terms.

The seller’s returned the signed slip but when the machine was delivered in November 1970 they claimed an additional £2,982 under the price variation clause. The buyer disputed this arguing there was no price variation clause in the final contract.

Held
Appeal allowed.

Issues
1. The main legal issue was to determine the effect of a counter-offer on an original offer thereby establishing whether the seller (Butler Machine Tool Co) could rely on a price variation clause which was present in the standard form.

Here the last offer rule was said to prevail. This rule was developed in Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 and states that the effect of a counter-offer is to kill the original offer.

This case is said to be an example of the “Battle of Forms”, a situation that
• Arises when both parties, for example a buyer and seller of goods exchange inconsistent standard forms during contract negotiations and reach an agreement without deciding whose standard forms should prevail.
• Standard Form Contract = a contract that is not individually negotiated by the parties but contains the same terms for all transactions of that type.
• In approaching this issue, the court suggested two methods; the conflict and the synthesis approaches.

The conflict approach required the court to determine which set of terms prevail. This was generally held to be the party who had the last say in the negotiation.

The synthesis approach required the court to build a contract from both sets of terms, including the terms common to both and those terms upon which the parties were agreed.

• Two questions
1. Has a contract been concluded at all?
2. If there is a contract, whose terms prevail?

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