Sterling Hydraulics Ltd v Dichtomatik Ltd [2006] EWHC 2004

Acknowledgement of order; whether amounted to counter-offer incorporating new terms

Facts

Sterling Hydraulics Ltd (SHL) manufactured hydraulic valves and custom manifold blocks for use in trailers. SHL ordered seals from Dichtomatik Ltd (DL) stipulating they had to be made from a specific material which was suitable for use with brake fluid. DL’s acknowledgement of the order stated delivery was subject to their standard terms of sale, but these terms were not supplied until after the seals had been delivered. The seals were not made from the stipulated material, and they failed. SHL brought a claim for breach of contract.

Issues

DL contended the acknowledgement of order documentation amounted to a counter-offer incorporating their own terms into the contract. Their terms contained a clause which limited their liabilities to the value of defective goods. They argued this clause was incorporated into the contract when SHL accepted the terms of the offer by accepting delivery of the seals. SHL argued the placing of the order amounted to the material offer, and DL’s acknowledgement of the offer amounted to the requisite acceptance on SHL’s terms. SHL contended DL’s order acknowledgement did not amount to a counter offer because there had been insufficient notice provided for the terms to have been incorporated into the contract. They sought damages for the cost of the seals and the cost of compensating their purchaser.

Held

DL had not successfully incorporated its terms into the contract. DL failed to make it sufficiently clear in the acknowledgement documentation what the proposed terms were, and the contract was formed when the order was acknowledged. Had DL’s terms been successfully incorporated, apart from the requirement that hidden defects should be reported within a week of delivery, DL’s terms were reasonable for the purposes of the Unfair Contract Terms Act 1977.