A cautionary tale for contract managers
It is common for organisations to have ordering processes in place to control the purchase of goods and services. These processes are often communicated to suppliers at the procurement stage and incorporated into contract management procedures. However, the recent case of Athena Brands Ltd v Superdrug Stores Plc highlights how gaps can appear, particularly with email communications, says Liz Fletcher of law firm Bevan Brittan.
The case focused on communication between the senior brand manager of Athena and a buyer at Superdrug about a new product that Superdrug was hoping to introduce to its stores. The Athena brand manager sought confirmation that:
“[Superdrug] are placing orders and committing to the year quantity against all lines detailed below…”
The buyer responded with: “Please go ahead with the below.” The below being a volume commitment to goods worth £1.3m.
When Superdrug did not place sufficient orders, Athena sought to recover losses of over £900,000. Superdrug defended on the basis that the buyer didn’t have authority to bind the company, nor was a specific purchase order placed.
Superdrug’s defence was dismissed on the grounds that the buyer had been held out as authorised to negotiate terms with no evidence to suggest he could not. And there was no doubt that Athena had relied upon the confirmation by email and was reasonable in doing so.
This case highlights that a formal purchase order process may not be defence if there is commitment in correspondence. The inclusion of terminology such as “subject to contract” and clarifying authority of an individual to commit or otherwise needs to form part of the process and training in this area.