Terms on the back of an invoice after the contract
Liffey Facilities Ltd provides cleaning services to an office landlord, Grand Canal Properties Ltd. After a tender, Grand Canal emails a purchase order for 12 months' cleaning at €6,500 per month, referring to 'your tender dated 4 April'. Liffey starts work. Each month Liffey sends an invoice; on the back, in small print, are terms including 'Liffey's liability for any loss or damage, howsoever caused, is limited to the value of one month's fees' and 'these terms prevail over any purchase order'. Grand Canal never signs or returns the invoices; its accounts department files them. In month eight, a Liffey employee leaves a floor polisher running overnight, causing a water leak and €140,000 of damage to the building. Liffey relies on the invoice term. Grand Canal says it never agreed to it. Advise Grand Canal.
1. Were Liffey's invoice terms incorporated into the contract? Consider signature, notice and course of dealing.
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Terms must be incorporated before or at the time the contract is made. A term introduced afterwards cannot retrospectively alter the bargain: Olley v Marlborough Court Ltd [1949] 1 KB 532. Here the contract was formed when Grand Canal accepted Liffey's tender by sending the purchase order, or when Liffey began work. The invoices came later. Grand Canal never signed them or returned them. The small print on the reverse was not drawn to Grand Canal's attention, and there is no evidence that Grand Canal knew of it. The mere filing of invoices by an accounts department is not acceptance of contractual terms. Course of dealing can incorporate terms only where there is a consistent prior course of dealings between the same parties on the same terms. Eight months of invoices after this contract began is not a prior course of dealing for this contract. The invoice terms were therefore not incorporated. Liffey cannot rely on the limitation clause, and Grand Canal can claim damages for negligence and breach of contract.
2. If the clause had been incorporated, how would a court construe the limitation wording in the light of the negligence?
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If incorporated, the clause would be construed contra proferentem, that is, against the party seeking to rely on it. The words 'howsoever caused' are wide, but a clause will not be read as covering negligence unless it clearly says so or the words are wide enough to cover negligence and there is no other head of liability to which they could apply: Canada Steamship Lines Ltd v The King [1952] AC 192. Here the clause limits liability 'for any loss or damage, howsoever caused'. That wording may be wide enough to include negligence, but the court would ask whether it clearly extends to the particular loss. A limitation to one month's fees (€6,500) against €140,000 of water damage is drastic. The court would also consider whether the clause is a genuine limitation of liability or effectively excludes liability altogether. For a business-to-business contract, the consumer unfair terms regime does not apply, so the clause would stand or fall on incorporation and construction. Grand Canal would argue that the clause does not clearly cover the negligent failure to supervise the employee, and that any ambiguity should be resolved in its favour.
3. Would the position differ if Grand Canal were a consumer?
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Yes. If Grand Canal were a consumer, the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 would apply. A term limiting a trader's liability for negligence causing death or personal injury would be void. A term limiting liability for other loss or damage would be subject to the fairness test, including the requirement of good faith and a significant imbalance in the parties' rights. A €6,500 cap against €140,000 of property damage would be vulnerable to challenge as unfair. The consumer would also have statutory rights in respect of the service, including that it be carried out with due care and skill. The invoice terms would not automatically bind the consumer merely because they appeared on an invoice. The same incorporation principles apply, but the consumer has additional protection. Grand Canal is a business landlord, so those protections are not available here; its case rests on the common law of incorporation and construction.