- CASE NOTE -

Butler Machine Tool v Ex-Cell-O [1979] 1 WLR 401

Court of Appeal

 Material Facts

Butler Machine Tool Co Ltd. (hereon referred to as ‘Butler’) provided a buyer for their plane miller a
quote that included specified terms and conditions, including terms around delivery times and a
price variation clause. The buyers responded placing an order, but indicating it was on different
terms (and without reference to the price variation clause). The buyers also attached a slip to their
order requesting confirmation of acceptance of the order on the ‘terms and condition stated
thereon’. The sellers returned the slip signed but with a letter stating that the order has been
accepted ‘in accordance with our . . . quotation.’

 Decision
For the appellants (the buyers) that a contract was completed based on their terms and conditions.

 Ratio Decidendi

Based on a ‘traditional’ sequential analysis of offer and acceptance, the correspondence of May 23 rd
from the seller constituted an offer, and that the order by the buyers on May 27 th was not an
acceptance but a counter offer that ‘killed’ the original offer as there were ‘material differences’ that
could not be reconciled. The letter and signed slip sent by the seller on June 5 th acknowledging the
order constituted acceptance despite reference to the order being delivered ‘in accordance with our
quotation.’ As it was concluded that on the correct construction, this referred only to the price and
the machine in question, and not to all the terms and conditions included in the original offer which
was ‘killed-off’ after the buyers counter offer, and that any other interpretation would mean that the
parties were never at idem and would not have a contract at all.

 Obiter/Concurring/Dissenting

Lord Denning gave a concurring judgement, agreeing with the decision in favour of the buyers, but
providing different reasons for the correct mode of analysis. Rather than a strict sequential
offer/acceptance approach, Denning argued for an approach which took the correspondence as a
whole into consideration, acknowledging that a variety of points within the process of negotiation
could constitute the terms of the agreement. Referring to the judgment in New Zealand Shipping,
Denning stated that:

The better way is to 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. (406)

The following extract is of note in terms of the variety of ways in which Denning claims that
the terms in cases of the ‘battle of forms’ can be found:

In some cases the battle is won by the man who gets the blow in first. If he offers to
sell at a named price on the terms and conditions stated on the back: and the buyer
orders the goods purporting to accept the offer — on an order form with his own
different terms and conditions on the back — then if the difference is so material
that it would affect the price, the buyer ought not to be allowed to take advantage of
the difference unless he draws it specifically to the attention of the seller. There are
yet other cases where the battle depends on the shots fired on both sides. There is a
concluded contract but the forms vary. 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. (406)

 Legal Relevance

Concerns ‘battle of the forms’ types cases in which the parties both assert that they have a contract,
but do not agree on whose terms the contract was made. This type of case is associated with
commercial relations between businesses where both have standard terms on which they operate,
rather than contracts between businesses and consumers, for example. The question of identifying
an offer and acceptance is central to establishing whose terms the contract was agreed upon. The
legal relevance of Butler Machine Tool is that a ‘traditional’ offer/acceptance analysis will be used to
ascertain on whose terms the exchange was completed. Sometimes referred to as supporting a ‘last
shot’ approach because of the sequential nature of the analysis, it might be more correct to say it
provides an example of criteria considered for when acceptance occurred.

 Analysis/Issues

Relationship to the ‘last shot’ approach:

This case is often cited as an example of the ‘last shot’ approach. According to Denning, the ‘last shot
approach’ occurs when a party ‘puts forward the latest terms and conditions: and, if they are

not objected to by the other party, he may be taken to have agreed to them’ (405)
According to Chitty on Contracts, the last shot approach refers to:

where conflicting communications are exchanged, each is a counter-offer, so that if a

contract results at all (e.g. from an acceptance by conduct) it must be on the terms of the
final document in the series leading to the conclusion of the contract.’

Unlike in Brodgen v Metropolitan Railways, however, where acceptance of terms was based on
performance where the last communication was the offer, in this case, the question of whether it is
a last shot really turns on the question of whether the final communication was deemed acceptance
or a counter offer. This was decided on a question of interpreting that last communication, it seems,
in a way which could make the contract work. This suggests to me that the notion of a last shot is
somewhat misleading.

Denning and the Contextual Approach

In Denning’s consenting opinion he proposed that in cases of the ‘battle of the forms’ there was
scope for interpreting the communications as a whole to establish on which terms the contract was
concluded. This case was decided in April 1977 (not the same as when reported,) and Gibson v
Machester City Council was decided by the court of appeal in January 1978. In Gibson, Omrod agreed
with Denning’s approach for the majority ratio that offer and acceptance could be found through a
contextual approach looking to the correspondence as a whole - Geoffrey Lane dissenting on this
point. However, the House of Lords decided in Gibson in March 1978, and explicitly rejected
Denning’s ratio in which a ‘contextual’ approach was taken, and instead opted for the traditional
technical approach as the correct form of analysis on offer and acceptance. This presents an
interesting instance of an attempt by Denning to introduce a new way of thinking about contract
formation, which was rejected by the House of Lords.