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Henry Kendall & Sons v William Lillico & Sons Ltd

[1969] 2 AC 31, House of Lords

Overview

This case dealt with the issue of incorporation of terms as a result of prior dealings. In this case the issue was whether an exclusion clause formed part of the contract.

The parties had dealt with each other via oral contract regularly over a number of years in relation to the supply of feed to Hardwick's pheasant farm. Following each transaction the supplier sent a contract note. The note post-dated the oral contract with the result that any terms contained in the note would not have been part of the original contract. However, the question was whether as a result of regular dealings over a number of years (all involving the issue of a contract note) the terms contained in that note could be said to form part of the contract.

The court held that they did form part of the contract. Based on the regularity of dealings and the fact that the terms had been 'continuously made known' it is reasonable to hold that when an order was placed it was with knowledge and acceptance of those terms.

Pheasants

Facts

KendallHardwick Game farm claimed breach of contract by SAPPA in supplying it with defective animal feed. SAPPA joined Lillico and Grimsdale as third parties to that proceeding (as parties that had supplied it with the ingredients for the feed).  Those parties joined Kendall and Holland Colombo, who were their suppliers. Hardwick succeeded against SAPPA. This gave rise to these proceedings concerning SAPPA’s claim against Lillico and Grimsdale and their claim against the Kendall and Holland.

SAPPA succeeded at first instance and on appeal against Lillico and Grimsdale and they succeeded against Kendall and Holland Colombo. The extract below concerns only the claim made regarding whether SAPPA could rely on an exclusion clause contained in a ‘contract note’ sent by Grimsdale to SAPPA shortly after the contract of sale was entered into.

Held

Lord Morris

Noted there were three oral contracts between Grimsdale and SAPPA and there had been frequent prior transactions (three to four per month for several years). For each transaction Grimsdale would send a contract note to SAPPA after the oral contract.  The back of the note contained terms or conditions of which SAPPA was aware (although they had not read them).  These included an exclusion clause.  Were they incorporated into the contract?  Lord Morris considered that they were incorporated:

‘Over the course of a long period prior to the three oral contracts which are now in question SAPPA knew that when Grimsdale sold they did so on the terms that they had continuously made known to SAPPA. In these circumstances it is reasonable to hold that when SAPPA placed an order to buy they did so on the basis and with the knowledge that an acceptance of the order by Grimsdale and their agreement to sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.’

Lord Pearce

Also noted that more than 100 such contract notes had been received by SAPPA from Grimsdale over a period of three years and that SAPPA were aware of the existence of the conditions on the note.  Also, they had not raised any query or objection to these conditions in the past. 

‘The only reasonable inference from the regular course of dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound by, the printed conditions of whose existence they were well aware although they had not troubled to read them. Thus the general conditions became part of the oral contract.’

Lord Guest and Lord Wilberforce

Agreed