Critical Analysis of Butler Machines V Ex-Cell-O Corporation.

It is this ‘mirror image’ rule which was applied by the majority (Lawton LJ and Bridge LJ) in the present case, with Bridge LJ holding that this “case is plainly governed by what I may call the classic doctrine” referring to Megaw J judgement in Trollope & Colls Ltd ‘v’ Atomic Power as an authoritative statement of the “130 odd year old rule.” They held that that upon application of this doctrine, the buyers order could not be construed as an acceptance of the sellers offer as it did not mirror exactly the terms if the sellers offer, but, as Bridge LJ emphasised the “terms and conditions of the buyer were contrary in a number of vitally important respects to the conditions of sale in the sellers offer” most notably that it did not make provision for a price variation clause. Thus it constituted a counter offer which “killed” the original offer and the sellers by completing and returning the acknowledgement form, duly accepted the buyers offer and thus the contract was concluded on the buyers terms as a fixed price contract. The sellers argued that the covering letter which accompanied the acknowledgement slip made it clear that the price variation clause contained in the original quotation was to remain part of the agreement and in this sense overruled the buyers terms and conditions. However this was rejected by the court, and it was held that this letter referred “only to the price and the identity of the machine” and “did not bring into the contract the small print conditions on the back of the quotation…these had disappeared from the story.” Bridge LJ emphasised that “the language was wholly equivocal and ineffective to override the plain and unequivocal terms of the offer.” Prof. Atyiyah criticises this, believing the sellers argument to be a valid one. He accuses the courts of having dismissed this vital piece of written evidence to bring the facts under established rules of offer and acceptance and achieve the desired result.

There appears to be some truth in this statement in the sense that practically it is often difficult to fit many every day transactions within offer and acceptance framework, especially where ‘battle of forms’ cases are concerned. This ‘battle of the forms’ is a problem which has emerged in the modern commercial world and is clearly exemplified in the present case as was conceded by their Lords. In an age where businesses prefer to make contracts on their own standard terms of business for the sake of simplicity and efficiency, it has become harder to achieve an exact coincidence of offer and acceptance yet the courts still strive to fit the facts under the traditional rule. This is especially desirable for the courts given that in doing so they resolve both the question of the existence of the contract and its precise terms since in deciding which form governs the parties relationship it determines the content of the contract. Although this ensures certainty and provides a standard which can be applied to every contract, it is excessively rigid and encourages businesses to engage in a ‘battle’ and exchange their terms of business in the hope of getting the ‘last shot.’ Thus the whole process can become highly arbitrary as Denning states “in some cases the battle may be won by the man who fires the last shot…in some by the man who gets the blow in first and other cases where the battle depends on the shots fired by both sides.” In this case, for instance, the contract was concluded on the buyers terms, with them having ‘fired the last shot’ in the battle. Therefore there is little room for compromise as the courts cannot pick and choose between respective sets of terms and conditions and this ‘all or nothing’ approach can produce unjust results.

Such problems have led some to reject this traditional approach and it was Lord Denning who spoke out against this orthodox approach and offered an alternative line of reasoning. He held that “our traditional analysis of offer, counter offer, rejection, acceptance and so forth is out of date. The better way is to look at all the documents 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 a difference between the forms and conditions printed on the back of them.” Therefore in his view, different terms should not necessarily lead to a denial of the existence of a contract provided there is agreement on all material points which preserves the requirement for an objective agreement to some extent. Even where terms are contradictory and cannot be reasonably reconciled, he held that “conflicting terms may have to be scrapped and replaced by reasonable implication.” However, in accordance with this, having considered the documents as a whole considered as a whole he came to the same conclusion viewing the acknowledgment form as the decisive document; “It makes it clear that the contract was on the buyers' terms and not on the sellers' terms.”

Despite reaching the same conclusion, this approach is refreshing, seeking to construct a more flexible framework which can potentially accommodate inconsistent terms and lack of consensus. However Denning’s enthusiasm was not echoed by all. Lawton LJ firmly held that “in my judgement the battle has to be conducted in accordance with set rules rather than looking at the minds of parties and making assumptions” placing emphasis on certainty rather than flexibility. This sentiment was shared by Bridge LJ and further, the traditional approach was more recently endorsed by Lord Diplock in Gibson ‘v’ Manchester, who although accepted there may be certain cases which do not “fit easily into the normal analysis” he firmly stated, “I can see no reason for departing from the conventional approach” and went as far as to speculate “I venture to think that it was by departing from this conventional approach that the majority of the Court of Appeal was led into error.”

It is also interesting to note that in their judgements both Bridge LJ and Denning LJ also considered another approach which may be adopted when determining the existence of a contract, highlighted by Schedule 2 to the Uniform Laws on International Sales Act 1967 Article 7 Paragraph 2 of which states that “a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance unless the offerer promptly objects to the discrepancy; if he does not so object, the terms of the contract shall be the terms of the offer with the modifications contained in the acceptance.”  Thus this places the burden on the offerer to object to additional or different terms. Denning observes it is likely that it was this approach, echoed in Anson, which the trial judge had in mind when he offered his erroneous decision but both conclude that this approach “goes too far.

Ultimately although many view Butler as an application of the traditional ‘mirror image’ rule, Collins approaches the case from a slightly different angle. He states that rather than being an endorsement of the orthodox approach, Butler departs from it as the court reached the conclusion that there was a contract in existence, albeit on the buyers terms, yet there was an “inexact correspondence in terms.” This view is valid in the sense that the sellers, when they accepted, did not agree to the exact terms presented by the buyers and the return of the acknowledgement slip was most likely nothing more than a tactical error, as well as the fact that it was accompanied by a covering letter which referred to the initial quotation. However clearly, in this case, the court dismissed this in order to achieve what they believed to be the ‘correct’ result within the offer and acceptance framework. However one must also not overlook the fact that this model is not always as rigidly applied as the courts do have some discretion in identifying the offer and acceptance and therefore it can be applied with some flexibility in certain factual contexts.