Caledonia Water Alliance against Electrostreel Castings (UK) LTD (Court of Session)

Factual and Procedural Background

An action was raised by Plaintiff against Defendant seeking £35 million in damages for alleged breaches of contract related to the supply of ductile iron pipework for a major water pipeline project, the South Edinburgh Resilience Scheme. Plaintiff is a joint venture engaged as a contractor under an alliance agreement with a public water authority (the ultimate customer), which required the use of suppliers under a framework agreement. Defendant was one such supplier on that framework.

The dispute concerns which contractual terms govern the 60 separate contracts made between Plaintiff and Defendant for the supply of pipework. Defendant contends that the contracts are governed by its own standard terms, which specify English law and courts' jurisdiction. Plaintiff argues that the contracts are subject to the framework agreement's standard terms, which provide for Scots law and the exclusive jurisdiction of the Scottish courts.

The commercial judge held a proof on the jurisdiction issue, considered witness evidence, and concluded that the Scottish courts had jurisdiction. Defendant appealed this decision to the Inner House.

Legal Issues Presented

1. Whether the contracts between Plaintiff and Defendant are governed by the framework agreement terms incorporating Scots law and Scottish courts' jurisdiction, or by Defendant's own standard terms incorporating English law and English courts' jurisdiction.
2. Whether the traditional offer and acceptance ("battle of the forms") analysis applies or whether the parties' conduct and surrounding circumstances demonstrate an intention to exclude Defendant's standard terms in favour of the framework terms.
3. The proper approach to contractual interpretation in a "battle of forms" context involving framework agreements and automated procurement procedures.

Arguments of the Parties

Defender's Arguments

• The contracts are subject to Defendant's standard terms and conditions, which specify English law and exclusive jurisdiction of English courts.
• The case is a "battle of the forms" where traditional offer and acceptance rules apply unless there is clear evidence that the parties intended otherwise.
• The commercial judge erred by relying on a nebulous concept of a "common understanding" that the framework terms applied, which was unsupported by sufficient objective evidence.
• Subjective impressions of Plaintiff's witnesses do not establish mutual intention or awareness by Defendant to be bound by the framework terms.
• The judge inverted the burden of proof by requiring Defendant to show that its terms were intended to apply rather than Plaintiff to show otherwise.
• The references to each party’s own terms and conditions in the exchanged documents must be given effect, depriving the Scottish courts of jurisdiction.

Plaintiff's Arguments

• Although both parties exchanged documents referencing their own standard terms, objectively neither party intended those terms to apply to the contracts made under the framework agreement.
• The framework agreement's terms, incorporating Scots law and Scottish courts' jurisdiction, were intended to govern the contracts due to the structure of the alliance and framework arrangements.
• The "last shot" doctrine can be displaced by objective assessment of the parties’ intentions in light of the entire background and conduct.
• The commercial judge correctly found on the balance of probabilities that a common understanding existed that the framework terms applied.
• Defendant’s own witnesses accepted the applicability of the framework terms and acknowledged that automatic attachment of their standard terms was a system function not intended to override the framework.
• The parties conducted themselves consistently with the framework terms, including pricing and rebates, evidencing their intention to be bound by those terms.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co [2010] 1 WLR 753	Objective approach to contract formation and interpretation.	Referenced as part of the objective test for contractual intention between parties.
Baillie Estates Ltd v Du Pont (UK) Ltd [2009] CSOH 95	Contractual interpretation principles under Scots law.	Applied in assessing the parties’ intentions and communications.
Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209	Battle of the forms and the "last shot" doctrine; high hurdle for displacing standard terms.	Used to assess whether the parties intended to exclude standard terms in favour of another set of terms.
Specialist Insulation Ltd v Pro-duct (Fife) Ltd 2012 SCLR 641	Contract formation and interpretation in commercial contexts.	Supported the principle that the parties’ conduct and background can displace standard form terms.
TRW Ltd v Panasonic Industry Europe GMBH [2021] EWCA Civ 1558	Battle of the forms and objective assessment of parties’ intentions.	Reinforced that "last shot" doctrine is not absolute and can be displaced by objective evidence.
Luminar Lava Ignite Ltd v Mama Group plc 2010 SC 310	Contractual interpretation requires objective evidence known to both parties.	Referenced to emphasize that subjective impressions are insufficient without mutual awareness.
Muirhead & Turnbull v Dickson 1905 7F 686	Objective approach to commercial contracts: contracts are based on what parties say, not think.	Supported the court’s focus on objective communications and conduct rather than subjective intentions.
Continental Tyre and Rubber Co Ltd v Trunk Trailer Co Ltd 1985 SC 163	Objective assessment of whether standard terms form part of contract in light of parties’ conduct.	Applied to affirm that contractual terms depend on mutual intention inferred from conduct and communications.
McCutcheon v David McBrayne Ltd 1964 SC (HL) 28	Importance of mutual intention and conduct in incorporation of terms.	Used to underline the court’s task to infer mutual intention from parties’ words, deeds, and silence.

Court's Reasoning and Analysis

The court reviewed the evidence including witness testimony and documentary records, finding no challenge to the commercial judge’s factual findings. It accepted the judge’s conclusion that the parties shared a common understanding that their contracts would be governed by the framework agreement terms incorporating Scots law and jurisdiction of the Scottish courts.

The court emphasized the objective approach to contractual interpretation, focusing on what reasonable and honest business people with shared knowledge would understand from the parties’ communications and conduct. It rejected the argument that the judge relied improperly on subjective impressions, noting that the findings were supported by a substantial body of factual evidence, including the parties’ conduct consistent with the framework terms (e.g., pricing, rebates, supplier guides).

The court acknowledged that the references to each party’s own standard terms in exchanged documents were automatic, pro forma, and not intended to have contractual effect in the context of the framework arrangement. It held that the traditional offer and acceptance analysis ("last shot" doctrine) is not absolute and can be displaced by clear objective evidence of a different common intention, as supported by the authorities cited.

The court found no error in the commercial judge’s approach or reasoning. The evidence was sufficiently cogent to overcome the usual presumption that the last exchanged standard terms apply. The parties’ actual intentions and expectations coincided in adopting the framework terms, notwithstanding the conflicting standard terms referenced in the documentation.

Holding and Implications

The Scottish courts have jurisdiction over the dispute between Plaintiff and Defendant. The reclaiming motion (appeal) by Defendant is refused, and the interlocutor of the commercial judge is affirmed.

The case is remitted for further procedure in the court below. This decision resolves the jurisdictional issue in favour of Plaintiff’s position that the framework agreement terms govern the contracts. No new legal precedent is established beyond the application of established principles of contractual interpretation and battle of the forms analysis in the context of framework agreements and automated procurement processes.