Nov. 19791
NOTES 01; CASES
715
inactivity on the part of the whole body of shareholders constitutes a
corporate acquiescence in the irregularity which precludes recourse to
the court~.~OThese alternatives are attractive because the actual
reasoning employed to decide the issue could encourage sharp practice.
As the Department of Trade investigations into, to take just a few
examples, Ferguson and General Investments,*’ Peachey Properties.22
L ~ n h r o London
.~~
and County S e c ~ r i t i e sand
, ~ ~ the Lowson group ’’
amply document, the paradigm for corporate pathology is a board
dominated by a chief executive whose own financial interests are
co-minded with his company’s. At present the breaches of duty which
occur in such circumstances stand to be revealed; Queenslund Mines
v. Hudson suggests that many such breaches can now be forestalled
or condoned by the simple expedient of obtaining the consent of
boardroom colleagues who are often little more than ciphers. This is
an unwelcome prospect at a time when statutory reform of the
institutional structure of public companies seems increasingly remote.
G. R. SULLIVAN.
THEBATTLEOF FORMS
IN Butler Machine Tool Co. Ltd. v. Ex-Cell-0 Corpn. (England) Ltd.‘
the sellers offered to sell a machine tool to the buyers, the offer
being on standard terms which “ shall prevail ” over any terms and
conditions in the buyers’ order and which included a price variation
clause for increased costs. The buyers’ order form contained standard
terms materially different a from those of the sellers and stated that
the agreed price was fixed. The form included a tear-off acknowledgment of order slip which stated “We accept your order on the
Terms and Conditions stated thereon.” The sellers signed and returned
the slip together with a letter stating that they were executing the
order on the terms of their own offer. The machine tool was
constructcd but before delivery the sellers sought to invoke the price
___
t o Re Bnlley H a y & Co. L f d . [1971] 1 W.L.R. 1357. It may be objected that
informed acquiescence ” is not a viable alternative basis of decision if, as has been
argued above, a majority in general meeting could not have gratuitously disposed of
the company’s intcrest in the licence. However, it may be thut subject to itlira vires,
shareholders can unanimously make a disposal which a majority could not forcc on
a minority. Furthermore “ informal acquiescence” may operate as a form of
ectoppel rather than as another mode of Corporate decision taking.
2 1 Inspcctors’ Report into Ferguson and General Invcstmcnts Ltd. (HMSO) 1970
(Dowgate Properties).
2 2 Inspectors’ Report into Peachey Properties Ltd. (HMSO) 1979.
2 3 Inspectors’ Report into Lonhro Ltd. (HMSO)1976.
2 4 Inspectors’ Report into London and Counties Securities Ltd. (HMSO) 1976.
26 Inspcctors’ Report into the Lowson Group (HMSO) 1975.
1 119791 1 W.L.R. 401; [1979] 1 All E.R. 965.
2 The buyers’ form stipulated that the agreed price include the cost of delivery
and installation, the sellers’ form did not. The buyers provided for delivery in 10-11
months, the sellers for 10 months. The buyers’ form allowed them to reject if the
goods wcre faulty in any rcspcct and to cancel for late delivery. The sellers’ form
did not allow of either.
“
THE MODERN LAW REVIEW
[Vol. 42
variation clause. The buyers protested, claiming that the contract
had been concluded on their terms. The Court of Appeal unanimously
reversed Thesiger J.3 and found for the buyers. The judgments are
interesting in that they betray different approaches to the Battle of
Forms.
Lawton and Bridge L.JJ. adopted the traditional4 approach of
offer and counter-offer. The buyers’ reply was a counter-offer which
was expressly accepted by the sellers when they signed and returned
the acknowledgment. The accompanying letter “ in business sense ”
only referred to the original offer as a means of identifying the
machine and its basic price. Lord Denning M.R.accepted that this
result would follow from the traditional analysis but opined that
in many cases such analysis was out of date.B The better approach
was to distinguish the issue of contractual formation from that of
content. The first step was formation. A court should: ‘
“ look at all the documents passing between the parties-and
glean from them, or from the conduct of the parties, whether
they have reached agreement on all material points-even though
there may be differences between the forms and conditions
printed on the back of them . . Applying this guide. it will be
found that in most cases when there is a “battle of forms”
there is a contract as soon as the last of the forms is sent and
rcceived without objection being taken to it.”
The second step was that of content for the “ difficulty is to decide
which form, or which part of which form, is a term or condition
of the contract.” Lord Denning suggested * three possible solutions
to this difficulty. First, there might be the traditional analysis of
acceptance, express or impIied from conduct,@of the last form sent.
Secondly, the offeree’s reply might contain a difference “ so material
that it would affect the price.” Here “the buyer ought not to be
.
_ _ _ ~ _ _
__
Unreportcd.
4 For thc application of the traditional analysis to the Battle of Forms sec
e.g. Kirigsley and Keith Ltd. v. Glynn Brothers (Chemicals) Ltd. [1953] 1 Lloyds’s
Rep, 211; British Road Services v. Crutchley (Arthur V.) Ltd. 119681 1 All E.R.
811; Davies (A.) & Co. (Shopfitters) V. Old (William) (1969) 67 L.G.R. 395.
6 [1979] 1 W.L.R. 401, 406 per Lawton L.J.
6 Ibid. at p. 404. Lord Denning referred to the famous statement to this effect
by Lord Wilberforce in New Zealand Shippfng Co., Ltd. v. A . M . Sutterthwufte &
Co. Ltd. (19751 A.C. 154, 167. In Gibson v. Munchester City Council [I9791 1 All
E.R. 972, 974 Lord Diplock said that “ there may be certain types of contract,
though I think they are exceptional, which d o not fit easily into the normal
analysis of a contract as being constituted by offer and acceptance; but a contract
alleged to have been made by an exchange of correspondence between the parties
in which the successive communications other than the first are in reply to one
another is not one of these.” It is slfpgested that Lord Diplock dif, not intend to
include the Battle of Forms in his exchange of correspondence. Gibson itself
dealt with the question of whether thc parties, in the process of personalised
correspondence, had ever agreed on the sale of a council house.
7 [1979] 1 W.L.R. 401, 404.
Ibid. at pp. 404-405.
9 As in Brogden v. Melropoiilarr Rnilwoy (1877)2 App.Cas. 666.
3
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716
NOTES 01‘ CASES
717
allowed to take advantage of the difference unless he draws it
specifically to the attention of the offeror.”
Thirdly, there might be “ a concludcd contract but the forms vary.”
Then
“the terms and conditions of both parties are to be construed
together. If they can be reconciled so as to give a harmonious
result, all well and good. If differences are irreconcilable, so that
they are mutually contradictory, then the conflicting terms may
have to be scrapped and replaced by a reasonable implication.”
In the event, Lord Denning found express acceptance from the
return of the acknowledgment of order.
Given that the practical effect of Butler may be to further encourage
businessmen to send back acknowledgments restating their own
ferms.’O the question arises as to the preferable approach in such
circumstances. The traditional approach would deny contract, the
acknowledgment constituting a counter-counter offer. Contract would
only occur if the counter-counter offer was subsequently accepted.”
But Lord Denning would find a contract and then go on to divine
its content.
The attraction of the traditional approach is its relative simplicity.
Formation and content are one issue since there can be no contract
unless and until the content is agreed. No distinction need be taken
between different types of terms; the court identifies differences in
reply and draws the appropriate conclusions. But criticisms have
been made of this analysis.” First, it may encourage businessmen to
fire salvoes of standard forms at each other for each may hope to
fire the last shot and induce express or implied acceptance. Secondly,
assuming an absence of such salvoes, it puts the party receiving the
acknowledgment (usually the buyer) in an invidious position. If the
seller does not deliver at all. therc is no contract and the buyer has
no claim. If the seller does deliver but a dispute then arises, the
buyer may have impliedly accepted the seller’s terms by taking
dclivcry. Thirdly, it has been argued that the parties enjoy an
unjustifiable locus poenifentiae in that either can renege until the time
of implied acceptance even though one party may have substantially
10 Field research suggests that such restatements are already the common practice
and that in an exchange of forms the standard terms inevitably conflict. See Beale
and Dugdale. “ Contracts between businessmen : planning and ,the use of contractual
remedies ” (1975) 2 British Journal of Lnw atid Society 45, 48.
11 I n Butler Lawton L.J. thought that had the acknowledgement been a counteroffer, there would have been n o contract. “ It cannot be said that the buyer accepted
the counter-offer by reason of the fact that ultimately they took physical delivery
of the machine. By the time they took physical delivery of the machine, they
had made it clear by correspondence that they were not accepting that there was
any price escalation clause in any contract which they had made with the plaintiffs ’’
119791 1 W.L.R. 401, !06. Bridge L.J. thought that the seller would be in
“ considerable difficulties
in showing subsequent acceptance. Ibid. a t p. 408.
1 2 See e.g. Duesenberg and King, Sales and Bulk Transfers under the Uniform
Commercinl Code (1966) at 6. 3-02; Waddnms, The Law of Cotitracts (1977) at
pp. 49-50; Nordstrom, The Law o f Sales (1970) at pp. 92-93, 100.
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Nov. 19791
THE MODERN LAW REVIEW
[Vol. 42
performed13 and even if the reason for escape bears no relation
whatsoever to the discrepancies in re~1y.I~
The scope of this argument must be made clear for a similar
criticism might conceivably be made of any stage of any contractual
negotiation. The argument is in fact confined to the Battle of Forms,
it being claimed that there is something special about this particular
situation which warrants the prevention of such renegation. This claim
rests on two assumptions. First that businessmen pay no attention to
fine print and second that they consider their deal concluded when
the major terms have been agreed. It is then argued that the courts
should take cognisance of thcse commercial realities and expectations
and find a contract even if the forms do in fact diverge,
Whilst the first two criticisms of the traditional approach carry
some weight, it is submitted that courts should be sceptical of the
assumptions underlying the third criticism. For there is no empirical
evidence in England to support these assumptions and the only
evidence existing suggests their falsity. Beale and Dugdale I5 interviewed representatives of 19 firms of engineering manufacturers.
From this limited sample two relevant pieces of evidence emerge
about commercial attitudes to Battles of Forms. First, there was
“ considerable awareness of the fact that in many cases an exchange
of conditions would not necessarily lead to an enforceable contract.” l o
Secondly. businessmen do not always ignore fine print. Rather, whilst
certain items such as price and subject matter were always agreed
expressly. the incidence of actual negotiation over standard conditions
varied substantially. But “in the majority of cases at least a few
of the more important terms dealt with in the standard conditions
would be discussed and agreed.” I’
Clearly more research is required before the assumptions can be
accepted. But, even if the empirical evidence did support these
assumptions, it is suggested that Lord Denning’s approach, which goes
at least some way towards fulfilling them, is fraught with counterbalancing difficulties. It will not discourage the firing of salvoes since
each party may still hope for implied or express acceptance of his
last form. Morover, since almost any term could potentially affect
price, it is suggested that Lord Denning’s requirement of specific
notice is impractical. It is doubtful whether the placing of pictures
of red hands against a large number of terms in a mass of standard
forms will really produce heightened awareness of each and every
13
14
As in Butler where the sellers had had constructed the machine tool.
For instance where the market price has fallen; see e.g. Poel V. Bruwfck-Balke-
Collender Co. (1915) 216 N.Y. 310, 110 N.13. 619.
15 See anre, n. 10.
16 Ibld. at p. 48. Indeed Waddams h The Law of Corttrucfs (1977) at pp. 41-42,
50, suggests that this may reflect the deliberate choice of many businessmen. Thus
whilst businessmen exchange forms in the hope that their own terms will prevail in
subsequent disputes, Waddams argues that they are not so anxious to achieve this
result as to run the risk of losing business. They thus choose not to secure the other’s
signature to their own terms for fear of scaring him off.
1 7 See mite, n. 10
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718
NOTES OF CASES
719
term, Yet what more can the user of standard forms effectively do?
The greatest difficulty is caused because Lord Denning’s analysis
requires the categorisation of three different types of terms. First,
there are “material points,” agreement on which is required for
formation. Secondly, there are “ material differences ” affecting price.
Agreement on these terms is not required for formation but a reply
cannot incorporate them unless it contains specific notice of their
existence. Thirdly, there are those residual terms which do not fall
into either of the first two categories. These then are terms which
do not affect the isssue of formation and which do not require
specific notice. Eventually they may be replaced by reasonable
implication. Leaving aside the difficulties of reasonable implication.18
it is submitted that this categorisation of contractual terms must be
essentially arbitrary and liable to produce much litigation. Such, it
is suggested, is the history of subsections 1 and 2 of section 2-207 of
the Uniform Commercial Code. Section 2-207 attempts to deal with
the Battle of Forms by adopting a threefold classification of
contractual terms very similar to that of Lord Denning. Section 2-207
provides :
(1) A definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time operates as an
acceptance even though it states terms additional to or different from
those offered or agreed upon, unless acceptance is expressly made
conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for
addition to the contract. Between merchants such terms become part
of the contract unless :
(a) the offer expressly limits acccptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is
given within a reasonable time after notice of them is received.
Thus there must be a “definite and seasonable” acceptance of
the offer for section 2-207 to apply. Clearly this expression requires
less than traditional contractual acceptance since otherwise section
2-207 would add nothing. There is a lack of authority on the meaning
of the expression but certain writers1B have suggested that definite
and seasonable acceptance would be found in assent to the principal
terms of the offer. Such terms would include the names of buyer and
seller, the price, quantity and description of the goods and the
delivery date. Presumably this list corresponds closely to Lord
Denning’s “ material points ” and is meant to represent those terms
which factually the parties will always consider in each transaction.
Subsection (2) (6) requires the division of material and non-material
18 See e.g. Liverpool C
ity Councll v. Irwin I19771 A.C. 239; Shell U . K . Ltd. v.
Lostock Garage Ltd. 119761 1 W.L.R. 1187.
18 See e.g. Nordstorm, The Law of Sales (1970) at pp. 96-97;
Calamari and
Perillo, Contracts (2nd ed., 1977), p. 71.
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Nov. 19791
THE MODERN LAW REVIEW
[Vol. 42
terms and this division has produced a huge amount of litigation.
For instance, on arbitration provisions alone there is a mass of
conflicling decisions as to whether they should be regarded as material
or non-material or be left as a question of fact for the jury to decide.2o
The existence of this litigation probably stems from the crucial fact
that varying importance is attached to different terms by different
businessmen.21Once this is grasped, it is submitted that any attempt
to impose a fixed categorisation of terms breaks down. For courts
adopting such a categorisation would either run the risk of distorting
commercial expectations or else produce a flood of litigation arising
from consideration of the subjective importance attached to each
term in every case.
Three other solutions were considered in Butler. At first instance
Thesiger J. held that by stating that their terms “ shall prevail,” the
sellers had acted so emphatically as to cause all future dealings to
be subject to those terms. such that the buyers must be taken to
have agreed to them. It is submitted that this solution was properly
rejected on appeal. It would encourage the offeree also to insert a
prevailing clause.22 But in such circumstances it seems unfair to
allow the offeror to impose his terms. The second suggestion, that
o f Professor Guest,23was that whilst any divergence in reply would
produce a counter-offer, acceptance of that counter-offer might be
implied from subsequent silence. In Butler Bridge L.J. and, apparently,
Lord Denning, felt that this approach went too far.24This is probably
correct. Suppose that in Butler the difference had been one of basic
price, the offer being €72,000 and the counter-offer €60,000. It is
suggested that sellers of machine tools would not expect to have to
reply to such counter-offers. Here, at least, the traditional approach
may mirror commercial expectations. The third solution considered
was that contained in Article 7 of Schedule 2 to the Uniform Laws
on International Sales Act 1967. I n respect of certain international
sales of goodsz8 Article 7 seeks to avoid the criticism made of
~-
~
See Waddams, The Law of Contracts (1977), pp. 53-54.
2 1 Anfe, at n. 17.
2 2 Beale and Dugdale found that even before Bufler it was usual for both parties
to insert prevailing clauses, (1975) 2 Brlfish Journal of Law and Sociery 45, 48.
It appears that in Bicfler the buyers had no such clause.
23 In Atison’s Law of Confracf (24th ed. 1975), pp. 37-38, See also Benlarnin’s
Sale of Goods (1974) pp. 84-85. This approach runs counter to the conventional view
of Felthouse v. Blndlcy (1862) 11 C.B.N.S. 869. Felfltouse was applied to a Battle
of Forms counter-offer In Kirigsley and Keifh L f d . v. Glynn Brofhers (Chentlcals)
Ltd. 119531 1 Lloyd’s Rep. 211.
24 In the report of Butler in [!?79]
1 All E.R. 965, 968 Lord Denning comments
that Professor Guest’s analysis may however go too far.” This statement does
not appear in the report of Bufler in 119791 1 W.L.R. 401. Howevqr in both reports
Bridge L.J. in referring to Professor Guest’s analysis states that I entirely agree
with Lord Denning M.R. that it goes too far.” (19791 1 W.L.R. 401, 407; [1979]
1 All E.R. 965, 970.
2 5 The Uniform Law on the Formation of Contracts for the International Sale
of Goods.
26 Article 7 only applies to a transaction if it is an international sale of goods
and the parties havc chosen the Uniform Law as the law of their contract. Article
7 had no direct effect in Butler because the case concerned a domestic sale of goods.
20
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720
NOTES OF CASES
72 1
Professor Guest’s approach by differentiating between material and
and non-material changes in the reply.a’ A material change evokes
the traditional approach whilst a non-material alteration is subjected
to Professor Guest’s analysis. In Butler Bridge L.J. left open 28 the
question of whether Article 7 reflected the present law. It is suggested
that arguments analogous to Article 7 should be resisted. For they
would raise a similar problem of categorisation to that considered
in relation to Lord Denning’s analysis. Indeed present indications are
that developments akin to Article 7 would do little to solve Battles
of Forms. For the scope of non-material terms in Article 7 appears
to be extremely limited. Thus it probably does not encompass
conditionsa9 nor, for two members of the Court of Appeal, the
differences apparent in Butler.
In conclusion it seems that the real strength or weakness of the
traditional approach to the Battle of Forms will only be known when
more research has been done into the attitudes and expectations
of the belligerents involved. It is submitted that meanwhile the
traditional analysis should be retained. Although that analysis suffers
from certain drawbacks, it is suggested that the deficiencies of
alternative solutions should preclude those solutions from adoption
by the courts.
RICKRAWLINGS
DAMAGES
FOR SERIOUS
PERSONAL INJURlES
IN Lirn Poh Choo v. Caniden and Islington A.H.A.’ Lord Scarman
advocated a radical re-appraisal of the law of damages for personal
injuries. although he felt that the social, financial, economic and
administrative repercussions of such a reform meant it was a task
better suited to the legislature than the courts. Before the House of
Lords a challenge was made to almost every element (as well as the
total) of the award made to Dr. Lim, the victim of catastrophic brain
injuries suffered following a routine operation for which the defendant
authority admitted vicarious liability. This meant that, in spite of
Lord Scarman’s caution, a number of important points arose for
thorough consideration.
Article 7 provides:
1. An acceptance containing additions, limitations o r other modifications shall
be a rejection of the offer and shall constitute a counter-offer.
2. However, a reply to an offer which purports to be an acceptance but which
contains additional or different terms which d o not materially alter the terms of
the offer shall constitute an acceptance unless the offeror promptly objects to the
discrepancy: if he does not so object, the terms of the contract shall be the terms
of the offer with the modifications contained in the acceptance.
2s ri979i 1 W.L.R. 401.407.
29 Graveson, Cohn and Graveson, The Uniforttr Laws on International Sales
Act 1967 (1968) at p. 117.
3O [1979] 1 W.L.R. 401, 406 per Lawton L.J.; at pp. 407-408 per Bridge L.J.
1 [I9791 3 W.L.R. 44.
27
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Nov. 19791