When standard T&Cs lack contractual force

By Kay Yong, Counsel, JTJB Lawyers, Singapore

Delivery orders and invoices are ubiquitous commercial documents issued by suppliers in business, the functions of which primarily serve to verify the work done by the supplier and to request payments from customers for goods / services sold.

Given the nature of delivery orders and invoices, do standard terms and conditions (“T&Cs”) contained in such documents have any contractual force as between the supplier and customer? This issue was recently considered by the Singapore Court of Appeal (“CA”) in the case of Nambu PVD Pte Ltd v UBTS Pte Ltd and another [2021] SGCA 98.

The case: Nambu v UBTS

The case involved a dispute over whether standard T&Cs containing liability exclusion clauses in favour of the supplier, was incorporated into the contract between the supplier and its customer and could therefore be relied on by the supplier. The main issue laid in the fact that the T&Cs were contained in delivery orders and invoices, issued by the supplier to the customer after the contract for the supply of services had been concluded between parties.

The CA noted an important point at the outset as a clarification on the law surrounding incorporation of terms. If it can be proven that the document containing the particular term sought to be incorporated into the contract is intended merely as a receipt and not as a contractual document as such, that term will not be incorporated into the contract. This is linked to the specific issue of the timing in which the contract is entered into – if it can be demonstrated that the term concerned is contained in a document that is produced after the contract has been concluded, then that term would not be incorporated into the contract as it is contained in a non-contractual document.

The CA also held that invoices and delivery orders issued by the supplier to the customer during prior business dealings (which also contained the T&Cs) could not amount to a previous course of dealing from which the T&Cs could be incorporated into the subject contract underpinning the case. The invoices and delivery orders were not meant to have contractual effect. Rather, their purpose was to secure payment for services already supplied. As a matter of principle, permitting non-contractual documents to give rise to a course of dealing would amount to allowing terms which have been consistently treated by parties as non-binding to take on contractual effect, which is not tenable.

Suppliers beware – examining your business practices

For suppliers, having T&Cs in place that serve to protect their interest in a business transaction is not the be-all and end-all; crucially, suppliers should also examine their existing workflow employed in concluding an agreement with their customers for the supply of goods / services, to ensure that any T&Cs do indeed form part of the contract agreed to with the customers. This assessment would have to be considered in light of trade practices and course of dealings with customers.