Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd. [1977] EWCA Civ 9 (25 April 1977)

In a 'battle of the forms', a seller offered a machine tool with a price variation clause. The buyer replied with their own terms, lacking the clause. The seller returned the buyer's tear-off acknowledgement slip, which was deemed acceptance of the buyer's counter-offer.

Facts

On 23 May 1969, the sellers, Butler Machine Tool Co Ltd, offered to sell a machine tool to Ex-Cell-O Corporation for £75,535. The offer was made on Butler’s standard terms and conditions, which were printed on the reverse of the quotation. These terms included a price variation clause, allowing the price to be increased if there were cost increases before delivery. The quotation also stated that Butler’s terms would ‘prevail over any terms and conditions in the Buyer’s order’.

On 27 May 1969, the buyers, Ex-Cell-O, replied by placing an order for the machine but on their own standard terms, which did not include a price variation clause. The buyer’s order form included a tear-off acknowledgement slip at the bottom which read, ‘We accept your order on the Terms and Conditions stated thereon’.

On 5 June 1969, Butler signed and returned this acknowledgement slip to Ex-Cell-O. Attached was a covering letter stating that the order was being entered ‘in accordance with our revised quotation of May 23’.

When Butler delivered the machine, they invoked the price variation clause and claimed an additional £2,892. Ex-Cell-O refused to pay the extra amount, arguing the contract was on their terms.

Issues

The central legal issue was which set of standard terms governed the contract. This case presented a classic ‘battle of the forms’ scenario, where two parties exchange communications based on their own conflicting standard terms. The court had to determine whether a contract was formed on the seller’s terms (with the price variation clause) or the buyer’s terms (without it). This required an analysis of the sequence of communications through the lens of offer, counter-offer, and acceptance.

Judgment

The Court of Appeal unanimously held that the contract was concluded on the buyer’s terms, and therefore the price variation clause did not apply. The seller’s appeal was dismissed.

Lord Denning M.R.

Lord Denning argued that the traditional ‘mirror image’ rule of offer and acceptance was outdated. He suggested a broader approach of looking at all the documents to see if the parties had reached an agreement on all material points. If so, the terms could be reconciled, or conflicting terms could be discarded and replaced by a reasonable implication. He stated:

The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonised 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.

However, he also concluded that the case could be resolved using the traditional analysis. The buyer’s order on 27 May was a counter-offer, which destroyed the seller’s original offer. The seller accepted this counter-offer by signing and returning the acknowledgement slip on 5 June. The covering letter referring to the original quotation was not specific enough to override the explicit acceptance of the buyer’s terms on the slip. He found the acknowledgement slip to be the ‘decisive document’.

Lawton L.J.

Lawton L.J. preferred a strictly traditional approach, finding it provided a clear and well-understood framework for resolving such disputes. He analysed the exchange chronologically:

1. The seller’s quotation of 23 May was an offer.
2. The buyer’s order of 27 May, with different terms, was a counter-offer that ‘killed’ the original offer.
3. The seller’s action of signing and returning the buyer’s acknowledgement slip was a clear acceptance of the buyer’s counter-offer.

He noted:

I am of the opinion that the buyers’ order of the 27th May, 1969, was a counter-offer which destroyed the offer made in the plaintiffs’ quotation of the 23rd May, 1969. The plaintiffs’ letter of the 5th June, 1969, and the enclosed acknowledgment of order… was an acceptance of that counter-offer.

Bridge L.J.

Bridge L.J. agreed with Lawton L.J.’s orthodox analysis, finding it to be the correct one. He focused on the objective interpretation of the documents. In his view, the seller’s return of the buyer’s tear-off slip was the ‘conclusive’ moment of acceptance.

…the sellers’ acknowledgment was on its face a plain and unequivocal acceptance of the buyers’ order on the buyers’ terms and conditions.

He reasoned that any attempt by the sellers to reintroduce their own terms in their covering letter was ineffective because it was not explicit enough to be a new counter-offer and could be read simply as identifying the subject matter of the contract.

Implications

Butler v Ex-Cell-O is a landmark authority in English contract law regarding the ‘battle of the forms’. It affirmed the ‘last shot’ doctrine, where the party that puts forward the latest set of terms, which are not explicitly rejected by the recipient, will find their terms governing the contract. While Lord Denning’s holistic approach was influential, the majority’s reliance on the traditional offer and counter-offer analysis has remained the dominant legal method. The case serves as a critical lesson for commercial parties to carefully review and manage correspondence, as signing an acknowledgement slip can have decisive contractual consequences.

Verdict: The appeal was allowed. Judgment was entered for the defendants (Ex-Cell-O Corp).

Source: Butler Machine Tool Co Ltd. v Ex-Cell-O Corp (England) Ltd. [1977] EWCA Civ 9 (25 April 1977)