A recent Court of Appeal decision in Septo Trading Inc x Tintrade Ltd  EWCA CIV 718 has provided helpful guidance on the approach to inconsistencies between bespoke terms and the terms of standard forms within a given contract.
The issue in this appeal was whether a "certificate of quality" issued by an independent loadport inspector was binding on the parties on matters of quality and prevented the buyer from claiming damages.
The case is of interest to contractors and sub-contractors who often enter into contracts where standard T&C’s are bolted on to standard form construction contracts.
The buyer, Septo, claimed for damages arising from alleged defective quality of fuel oil and claimed that the goods were not in accordance with the contract specification. The seller, Tintrade, argued at trial that Septo was precluded from advancing a breach of quality claim by reference to the issued certificate of quality. This certificate declared the product to be within the contractual specification and Septo argued it was contractually binding on the parties.
The contractual terms exchanged between the parties by email (referred to in the judgment as the “Recap”) said that the certificate of quality would be binding on the parties in the absence of fraud or manifest error. However, in addition to the terms in the Recap the parties had also entered into the transaction using standard terms which included the words “where not in conflict with the above” and also that the certificate would only be binding for invoicing purposes.
Septo argued that as a matter of interpretation, the certificate of quality was not intended to be binding for all purposes, only for invoicing purposes.
Initially, the judge agreed with Septo, finding that the terms could be read together and the certificate of quality was indeed only binding for invoicing purposes. Septo was therefore entitled to bring its claim, and the claim succeeded.
Tintade appealed the decision, arguing that the standard terms were not incorporated into the contract because they were in conflict with the content of the Recap. Tintrade argued the certificate of quality would accordingly be binding for all purposes and Septo could not bring its claim. The question was therefore whether or not the terms were inconsistent.
The Court of Appeal agreed unanimously with Tintrade that there was an inconsistency between the terms concerning the effect of quality certificates issued in regard to the fuel oil. As such, the terms could not fairly or sensibly be read together. The printed term did not merely qualify or supplement the Recap term but rather deprived the Recap term of all practical effect.
The court found that a regime in which a certificate of quality is binding is fundamentally different from one in which it is not. It was found that the provision in the Recap for the quality certificate to be binding for all purposes was a central feature of the contractual scheme and defined the seller's obligation with regard to the quality of the product. It was unlikely that the parties would want to substantially detract from that by means of the printed terms.
Finally the court deemed it was necessary to stand back and consider the parties' intention as practical business people operating in the real world. The court found that while it is perfectly reasonable for parties to choose a contractual scheme in which the quality certificate is not binding but merely carrying evidential weight, it is appropriate to ask whether that is a commercially reasonable interpretation of what they have done in this case. In the court’s view, on this occasion it was not.
As the contract, on its true construction, provided that the quality certificate issued at the load port would be binding, the consequence was that the buyer was precluded from bringing its claim, and there was no entitlement to damages.
The case serves as a useful reminder of the importance of ensuring any potential conflicts between contract terms are dealt with at the drafting stage. When determining whether or not the terms are inconsistent with one another, it is key to consider whether the terms can fairly and sensibly be read together. Where inconsistent terms do arise, a practical approach must then be taken, having regard to the true intention of the parties and commercial common sense.