Breach of contract case fails after Irish court rules general terms of contract didn't apply

The decision in the case (135 pages / 810 KB) “reaffirmed the application of the principles of offer and acceptance. The judgment also provides clarification as to when a document may be deemed a ‘quote’, rather than an offer, and circumstances in which a party’s general terms and conditions may or may not be incorporated into a contract,” said Nicola Seymour, litigation expert at Pinsent Masons.

The dispute centred around alleged defects in products supplied by Geurts International BV (Geurts), which Biomass Heating Solutions Limited (Biomass) claimed to have caused serious failures in their patented units designed to convert poultry manure into energy. The issues led to significant operational failures at customer poultry farms across the UK. Biomass accused Geurts of misrepresenting its expertise in designing heat exchange systems and sought damages for breach of contract, negligence and misrepresentation, as well as compensation for loss of profits.

The case involved a series of complex legal issues, including a ‘battle of the forms’ dispute over the applicable law and terms of the contract.

“The judgment makes it clear that labelling a document as a ‘quote’ does not necessarily preclude it from being deemed an offer capable of acceptance. The remainder of the wording within the document and the surrounding factual matrix must be considered, including correspondence in relation to the conclusion of the contract,” said Seymour.

For example, the courts will consider whether a ‘quotation’ was provided out of the blue or if it followed prior discussion between the parties. If a quote contains all the necessary components of an offer, such as the price, date of delivery and payment terms, it is capable of constituting an offer.

However, if the document contains wording such as “we quote to you” or “any questions regarding this quotation”, and the conduct of the receiving party indicates that it interpreted the document as a quotation rather than an offer, it is unlikely to constitute an offer. 

In this case, the receiving party’s response was framed as an order, rather than an acceptance of an offer, which indicated that the receiving party did not understand the sending party’s document to be an offer capable of acceptance.

The judgment also explored whether a mere reference - or even repeated references - to the existence of a party’s general terms and conditions is sufficient for these to be incorporated into the contract, notwithstanding the fact the general terms and conditions themselves were not made available.

The court found that there must be an appropriate reference to the general terms and conditions that make it clear that they govern the contract. Also, if the general terms and conditions themselves are not of common use in a relevant sector or industry, the court found that reasonable notice of the general terms and conditions must be given to the receiving party, such as printing them on the reverse of correspondence or documentation provided.

Finally, the judge clarified that onerous or unusual conditions must be brought to the attention of the party against whom they are sought to be enforced, even if it could be said that the general terms and conditions were otherwise incorporated into the contract.

Seymour said: “Simply referring to such terms in correspondence and asserting that a copy can be provided on request is unlikely to be sufficient. In addition, contracting parties should  be clear during negotiations whether a document is intended to be a quotation, invitation to treat, or an offer capable of acceptance by the receiving party. As the receiving party, it is important to ensure that the language used in negotiations properly expresses how documents are interpreted. For instance, a party should not refer to a document as a quote if it in fact wishes to rely on it as an offer to be accepted.”