Offer, acceptance, two wrongs, but is anyone right?

Offer, acceptance, two wrongs, but is anyone right?

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S11Steve

Original Poster:

6,374 posts

183 months

Friday 27th November 2015
quotequote all
One of my customers and one of my suppliers are currently at loggerheads, and neither is backing down at the moment. We have been asked to mediate, and give what we think is a workable solution, but neither want to move. We are not involved in the transaction, but we are mutual to both parties and considered independent.

In June, the customer orders 3 "widgets", and adds a "doofer" onto each one. The supplier only has widgets, so buys in the doofer but gives the customer a quotation for a total price. Customer is happy, pays invoice, has 3 widgets with doofers delivered. Each combined widger/doofer unit is around £25k

4 Months later, customer asks for "another 5 like the last ones please" - literally those words.

Supplier raises a quote for 5 widgets, and 5 doofers, but this time the doofers he buys in are more expensive.
Customer doesn't notice this, but supplier doesn't highlight it either. Customer accepts and signs quotation.

The first widget with doofer is available for delivery, and supplier sends across an invoice, BUT it is at the same price as the June invoice, not the higher quotation price.

Customer pays this invoice as it is the same as the June invoice, but supplier spots the error after the payment was made and is now refusing to release the widget, but is also refusing to return the money and cancel the sale. The difference between June price and new price is about £1500 per widget.


I can see that both parties have made an error at different points, but neither wish to back down.
In the terms of invitation to treat and acceptance, where does the incorrect paid invoice lie within contract law?








Durzel

12,232 posts

167 months

Friday 27th November 2015
quotequote all
So supplier doesn't highlight at the point of quoting the higher cost of the doofers AND invoices for the original cost of the doofers at a later date... Sounds like the supplier is pretty hopeless?

IANAL so can't comment on the invitation to treat and so on - but the customer surely has been misled? On the face of it it would seem that the supplier just wanted to squeeze them for more money out of the blue? Withholding their money and the stock seems particularly objectionable, to put it mildly.

Mill Wheel

6,149 posts

195 months

Friday 27th November 2015
quotequote all
OP said:
Customer doesn't notice this, but supplier doesn't highlight it either. Customer accepts and signs quotation.
Seems to me that the customer, although not specifically informed of the higher spec/price doofer, accepted the higher price.
The invoice error has been spotted, and rectified - the customer has to pay up?

Durzel

12,232 posts

167 months

Friday 27th November 2015
quotequote all
Whoops yeah, I misread that as the quote having the original figure on. Customer should've read it properly then before signing. The invoicing (imo) is an administrative mistake.

S11Steve

Original Poster:

6,374 posts

183 months

Friday 27th November 2015
quotequote all
Durzel said:
Whoops yeah, I misread that as the quote having the original figure on. Customer should've read it properly then before signing. The invoicing (imo) is an administrative mistake.
I agree that the customer should have been more vigilant when signing the quote (which did have the higher price, although this wasn't made clear to him), but is the supplier right to withhold paid funds for the invoice, even though it was incorrect?



JustinP1

13,330 posts

229 months

Friday 27th November 2015
quotequote all
From what you've said:

1) The request for 5 'more of the same' - there is nothing implicit in that offer that the price would be the same, or that the request was only valid if the price was the same. Hence, of course the need for the quotation.

2) The quotation was not only sent, but formally accepted by the customer. That *is* the supplier formally bringing the attention to the customer the new price. Whether or not in hindsight this was a mistake if the customer signs it is not an issue - they have formally accepted this price.

3) The terms of the agreement I guess would be on the forms supplied with the quotation, which, again, seem to be accepted.

4) Invoicing is an admin mistake. If you invoice by mistake for £10 on a £1000 bill, it does not mean that the contract is for £10. In the same way, if you invoice for £10,000 and it's paid - that's also an admin mistake - it doesn't make the contract for £10,000

5) The supplier has received part payment for the goods. He's not withholding the customer's monies - (currently, and unless things change) the money is his.


Legally, IMHO as not a lawyer but someone who has studied contract law and used it for exactly this type of snafu for 20 years is that it is as simple as that.

From what you've said, there is a binding agreement in place for the supply at the new price based upon the terms of the accepted quote. The lack of diligence of the customer is not the supplier's problem, legally, or morally.

If both parties believe the right outcome lies with the law, I would say that it is above. However, there are other commercial decisions at play, and a business relationship that could be mutually beneficial if it continues.

If it were me mediating, I would put to the customer:

"If you were given an invoice that was £1500 more expensive than agreed, and you paid it by mistake, would you expect £1500 back?"

The answer is of course you would. The customer also needs to accept that even if they don't agree with the new price in hindsight, then formally put forward that they did and the supplier bought in goods to satisfy the purchase. The supplier should not fund the customer's mistake in law, but they might want to for the profit from future deals. smile


Edited by JustinP1 on Friday 27th November 17:21

Mill Wheel

6,149 posts

195 months

Friday 27th November 2015
quotequote all
S11Steve said:
I agree that the customer should have been more vigilant when signing the quote (which did have the higher price, although this wasn't made clear to him), but is the supplier right to withhold paid funds for the invoice, even though it was incorrect?
This comes down to how much each party values the others part in the chain.
The supplier has presumably paid out for Doofers which they may get stuck with if the customer goes elsewhere.
I can see why they would want payment for that, even though the customer has decided he will cancel the order.
Will they get cheaper widgets and doofers elsewhere, and will the supplier be able to shift the doofers elsewhere?

Given the cost of the item (based on the £1500 difference) then did the customer pay a deposit?
I would suggest that the customer offers to cover the COST of the doofer that was incorrectly invoiced so that the supplier is not out of pocket, and that the supplier then either return the money or supply the goods that were invoiced. As to the rest, I wouldn't like to guess.

S11Steve

Original Poster:

6,374 posts

183 months

Friday 27th November 2015
quotequote all
@Mill Wheel - no deposit was paid, but strangely enough there is rarely a deposit taken in these type of transactions. Neither parties are dependent upon the other, the customer and supplier have a relatively well-established relationship, but we have a strong relationship with both, hence why we have been asked to mediate.

With regards to being stuck with the widgets, our company has offered to find another buyer for them, at the full price, if the order is cancelled. I think that this has been rejected, but I'm not sure right now. Alternative widget/doofer combinations are available, and at varying prices, but it depends on lead times and how desperate the customer is to get hold of them as they are generally all built to order.

@JustinP1 - Thank you for the clarity. It's good to know what the black and white/legal view is on this, but we are aware of the commercial decisions as well. I fear that is not what the customer wants to hear, but whether it is worth them spending £xxxxx on legal fees to get their £25k back, only they can make that call.

I think this may rumble on for a few more days...




Mojooo

12,668 posts

179 months

Friday 27th November 2015
quotequote all
I think it is pretty straightforward (and I presume this is B2B).

The customer has created a new contract when signign the quotation - presumably the quotation was a firm agreement/contract.

new deal on new terms - although the supplier has been an idiot, I think you would argue in a B2B scenario the buyer should treat individual transacton as new and be vigilant.

Unless there is more to it, I am not sure you could argue misrepresentation.

S11Steve

Original Poster:

6,374 posts

183 months

Friday 27th November 2015
quotequote all
Correct - B2B sale.

I think the customer is pushing towards misrepresentation, and I can sort of see his point, as maybe the supplier should have been more open/clear about the change in price.

I'll have a conversation with both on Monday, a few of us are mulling over possible solutions this weekend so maybe we can keep both parties feeling they have won over on the other, even if they never speak to each other again!

TooMany2cvs

29,008 posts

125 months

Friday 27th November 2015
quotequote all
Six of one, half a dozen of the other.

The customer accepted the quote, so should have been expecting the higher price.
The supplier invoiced at the old price, so should deliver.

Billsnemesis

817 posts

236 months

Friday 27th November 2015
quotequote all
Just adding a gloss to Justin's breakdown, presumably with the quote there would have been standard terms and conditions and they might address the issue of who is entitled to part payment and any cancellation terms.

The basic position is that a price was quoted and accepted and that is the contract. In the absence of any right to cancel then the buyer IS obliged to accept the widgets and doofers at the quoted/accepted price.

Assuming there is enough margin to cover the cost it might be worth seeing if the supplier accepts the invoiced price for the first one so long as the buyer pays for the others at the full cost. When you factor in the time taken to resolve matters and the lost opportunity of doing something more profitable then £1500 might evaporate quite quickly.

CaptainSlow

13,179 posts

211 months

Friday 27th November 2015
quotequote all
Strictly speaking the contract is formed when the customer's order is accepted by the supplier.

Quote--Order--Order Acceptance


As has been said the customer would need to pay the agreed amount as per the above. Commercially, the supplier may wish to strike a deal if they wish to continue with the relationship.

Cyberprog

2,186 posts

182 months

Friday 27th November 2015
quotequote all
Billsnemesis said:
Assuming there is enough margin to cover the cost it might be worth seeing if the supplier accepts the invoiced price for the first one so long as the buyer pays for the others at the full cost. When you factor in the time taken to resolve matters and the lost opportunity of doing something more profitable then £1500 might evaporate quite quickly.
You might also consider suggesting they split the difference on this first one. Taking a longer term view may be a good idea from the suppliers point of view.
I think if there hadn't been a higher quotation the customer would be on better ground, but clearly if the quotation was higher, and they had been invoiced at a lower price, it is the supplier who has made an error, and the customer should accept that.

JustinP1

13,330 posts

229 months

Friday 27th November 2015
quotequote all
S11Steve said:
@JustinP1 - Thank you for the clarity. It's good to know what the black and white/legal view is on this, but we are aware of the commercial decisions as well. I fear that is not what the customer wants to hear, but whether it is worth them spending £xxxxx on legal fees to get their £25k back, only they can make that call.
They should only make that call after speaking to a solicitor for this very good reason:

For a £100k deal, I am almost certain that the terms of the agreement will be outlined in great detail on the quotation paperwork - hence the reason a signature is required - not just to agree a price, but to agree to the terms.

I've only seen scant facts, and of course have no idea of the terms, however, I simply cannot see how a claim for misrepresentation holds water. The case law for signing contracts and not reading them not being a legitimate excuse are very old.

Here's an example - it should be noted that an onerous term that was hidden in small print was judged to be binding. Of course, this situation the price of the item is rather more upfront than this: https://en.wikipedia.org/wiki/L%27Estrange_v_F_Gra...

If they were to start a claim, not only would it fail on the facts supplied so far, but they were almost certainly invite a counterclaim for the losses from the breach of contract, which would likely succeed.

Edited by JustinP1 on Friday 27th November 20:25

elanfan

5,516 posts

226 months

Friday 27th November 2015
quotequote all
A 6% hike in price in just 4 months seems a bit hefty in current times with almost non existent inflation. Whilst I can see the supplier is in the right might it not be better for all to accept a 3% hike and each share the cost. Surely this would be the path of least resistance and may be they could each continue to trade with each other without future rancour? and each profit together in future?

chrisxr2

1,127 posts

193 months

Friday 27th November 2015
quotequote all
Surely have to split the difference assuming any further business it's likely.

Edited by chrisxr2 on Friday 27th November 20:39

chrisxr2

1,127 posts

193 months

Friday 27th November 2015
quotequote all
Supplier at faultcan quote is a quote, now if it was an estimate, different matter.

johnfm

13,668 posts

249 months

Friday 27th November 2015
quotequote all
S11Steve said:
Correct - B2B sale.

I think the customer is pushing towards misrepresentation, and I can sort of see his point, as maybe the supplier should have been more open/clear about the change in price.

I'll have a conversation with both on Monday, a few of us are mulling over possible solutions this weekend so maybe we can keep both parties feeling they have won over on the other, even if they never speak to each other again!
How could it possibly be misrep if the customer received a new quote with updated prices?

The argument is over 5 x £1500.

It will cost WAY more than this for the customer on legal fees and on the limited facts presented I'm not sure what action they could bring.

Customer needs ti be careful.

If I was supplier (and customer is solvent) I would have lawyered up by now. Customer is probably repudiating the contract. Supplier could affirm and sue for damages inc loss of profit.

On a £125k order, the customer is being daft and doesn't seem to have any grounds to dispute, let alone demand money back.

Funk

26,254 posts

208 months

Friday 27th November 2015
quotequote all
chrisxr2 said:
Surely have to split the difference assuming any further business it's likely.

Edited by chrisxr2 on Friday 27th November 20:39
I was thinking exactly that.

Technically I'd side with the supplier; it's an invoicing error. However for the sake of goodwill/retaining a customer I'd suggest splitting the difference especially if the customer is a long-standing one and likely to order again in future?