The recent High Court decision in Volac International Limited v. IEP Technologies Limited[1] should serve as a reminder to contracting parties to ensure they have effective procedures in place to avoid a ‘battle of forms’ as to whose standard terms have been incorporated.
Background
The claimant, Volac, operated a factory in Wales, which included a spray dryer protected by an explosion suppression system (ESS). The defendant, IEP, had maintained and serviced the ESS since 2013. In 2014, Volac engaged IEP to extend and upgrade the ESS. In 2015, the ESS activated, Volac alleged, due to various breaches of contract by IEP. Volac claimed damages of £40 million.
As IEP’s standard terms contained a significant limitation of liability, the question of which party’s standard terms had been incorporated was of central importance and, as such, was heard as a preliminary issue. This required an analysis of the correspondence between the parties leading up to the work being undertaken to determine when the contract was offered and accepted. In an all-too-familiar scenario, it was found that there had been a series of communications between the parties in which each referred to their own standard terms and failed to acknowledge the other’s terms:
- On 15 September 2014, IEP provided a quotation, which stated that IEP’s standard terms and conditions of sale apply.
- On 24 September, Volac emailed IEP to ask whether IEP needed a purchase order ‘to get things moving’.
- On 29 September, Volac emailed a purchase order, referencing IEP’s quotation but stating that Volac’s standard terms and conditions for the purchase of goods applied.
- Several emails between the parties followed in the days after regarding technical matters.
- On 22 October, Volac issued a further purchase order. That purchase order also stated that Volac’s standard terms and conditions applied.
- On 23 October, IEP replied by email: ‘Thank you for your purchase order’.
- On 28 October, Volac issued a further purchase order, which was stated to supersede the 29 September purchase order. Again, the purchase order stated that Volac’s standard terms and conditions applied.
- IEP responded by return: ‘Thank you for your purchase order. It is much appreciated’.
- On 31 October, IEP sent a letter: ‘Re your orders … this letter confirms receipt and acceptance of the above referenced order … Order placed in accordance with IEP Technologies Limited standard terms and conditions’. This was the last relevant piece of correspondence before the parties proceeded to perform the contracts.
Volac contended the contract was formed when IEP accepted Volac’s purchase orders by the 23 October and 28 October emails. IEP argued that its 31 October letter was a counteroffer, which Volac accepted by performance.
The High Court’s decision
The High Court began by reaffirming the orthodox principles of contract formation: A contract is formed when an offer is accepted, and the court must objectively assess the parties’ words and conduct to determine their intentions.
Undertaking this assessment, the judge concluded that the contract was in fact formed on or around 29 September, ‘when IEP undertook to carry out the work’ set out in the purchase order of that date. This is a somewhat surprising conclusion given that there was apparently no response from IEP to that purchase order, and certainly no explicit undertaking to carry out the work. The judge’s conclusion appears to have been based on the assumption that the parties had previously agreed that a purchase order would ‘get things moving’, as referenced in Volac’s 24 September email.
Moving on from 29 September, the judge dismissed the argument that the subsequent emails regarding technical details indicated that negotiations were ongoing. He considered these were the sorts of technical details and discussions which inevitably occur in a complex contract like this, but after the contract has been made.
As to the following purchase orders, the judge considered that the 22 October purchase order was an offer, which was accepted by IEP’s email. He rejected the argument that these were merely acknowledgements of receipt of the purchase order and not acceptance of its terms. He considered that, given the parties were already in a contractual relationship, the brief email response was an acceptance of the second purchase order.
Finally, in respect of the third purchase order, which was stated to supersede the first of 29 September, the judge considered that this was an offer to vary or rescind and replace the contract already on foot. He determined that IEP accepted that offer by the 28 October email.
As the contracts had already been formed, IEP’s 31 October letter added nothing to the analysis.
Key takeaways
This was a surprising result. Not only did IEP not respond at all to the 29 September purchase order, but the traditional analysis in battle of form cases is that it is usually the party who fires ‘the last shot’ before performance who is victorious. That would have been IEP, who incidentally also fired the first shot.
The fact that Volac came out on top should serve as a warning of how unpredictable these battles are and how important it is to put in place effective procedures for avoiding them. In this regard, the following should be kept in mind:
- It is not enough to send standard terms – they must be accepted.
- Do not rely on the last shot doctrine – the court may find that a contract was formed earlier in the communications.
- Ensure everyone in communication with the other party is conscious of the importance of not doing anything that may be interpreted as acceptance – that includes simply acknowledging emails.
- Be aware of the content of the other party’s communications: If there is any reference to their terms and conditions, this should be expressly rejected.
[1] [2025] EWHC 1490 (TCC).
Contributors
Alex Radcliffe