Scotland’s Inner House of the Court of Session’s ‘battle of the forms’ ruling in Caledonia Water Alliance v Electrosteel Castings (UK) Limited [2025] CSIH 21

The recent decision of Scotland’s Inner House of the Court of Session in Caledonia Water Alliance v Electrosteel Castings (UK) Limited contains an important analysis of the traditional ‘battle of the forms’ approach to contractual interpretation in the context of framework agreements, which in this case was key to determining which courts had jurisdiction. This ruling is of particular significance to developers, contractors and suppliers operating under such frameworks, as it underscores that parties must actively state if they wish to deviate from its terms. Although it was ultimately concluded that the case fell to be determined in accordance with Scottish law, Lord Malcolm’s consideration and application of the Court of Appeal’s decision in Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA (Tekdata) is likely to be persuasive to the courts of England and Wales.

Case Facts 

The case centred on a £35m damages claim brought by Caledonia Water Alliance (Caledonia) against Electrosteel Castings (UK) Limited (Electrosteel). Before being able to engage with the merits of Caledonia’s damages claim, it had to be determined whether the Scottish courts had jurisdiction to resolve the dispute.

Caledonia had entered into an alliance agreement with Scottish Water in 2015, under which Caledonia could be engaged as a contractor in Scottish Water projects. This alliance agreement required Caledonia to (among other things) procure plant, material and services from suppliers, such as Electrosteel, with whom Scottish Water had established framework agreements. Caledonia went on to place 60 orders for ductile iron pipes with Electrosteel over four years. Although Caledonia’s works for Scottish Water were ultimately completed, it was alleged that deficiencies in Electrosteel’s products led to contamination of the drinking water carried. Caledonia sought to recover its losses.

Electrosteel’s framework contract with Scottish Water incorporated Scottish Water’s Terms and Conditions of Contract (SW Terms), which stipulated that the Scottish courts had exclusive jurisdiction to determine any disputes arising between the relevant parties. However, each order that Caledonia placed with Electrosteel involved: (1) a purchase order from Caledonia; and (2) an order confirmation from Electrosteel, both of which contained standard wording attempting to incorporate the respective party’s own terms and conditions. Caledonia argued that each contract was a project order made under the framework and to which the SW Terms therefore applied. Electrosteel argued that its order confirmations incorporated its own terms and conditions, under which the courts of England would have jurisdiction and, crucially, Electrosteel would benefit from more favourable terms regarding quality, specifications and exclusions of liability.

Which courts had jurisdiction ultimately turned on which set of terms governed the 60 contracts formed between Electrosteel and Caledonia.

Decision

In affirming the Outer House’s decision that the Scottish courts did have jurisdiction to determine the dispute and allowing the case to proceed in Scotland, the Inner House of the Court of Session considered and rejected Electrosteel’s various arguments against the SW Terms applying under the framework.

The court rejected Electrosteel’s argument that its order confirmations, as the last documents exchanged on each order, incorporated its own terms and conditions under the “last shot” doctrine. Lord Malcolm adopted an objective approach to contract formation, as outlined by Lord Richardson in the lower court, drawing on the English Court of Appeal’s decision in Tekdata. The “general rule” is to apply an offer and acceptance approach to determination of the contract. However, that general rule will not be applied if “by necessary inference” the parties agreed that the terms and conditions in question were to be ignored. The focus must always be on what the parties intended at the time of the contract, when viewed objectively.

The court also rejected Electrosteel’s submission that the lower court had relied too heavily on the subjective impressions of Caledonia’s witnesses. It was ultimately held that there was no merit in this argument because there was “more than sufficient evidence” to conclude objectively that the parties must have intended for the 60 contracts to be governed by the SW Terms, and that neither party had intended their own terms and conditions to apply. Of particular importance were:

• shared understanding of the purpose of the framework arrangements - notably, both oral and documentary evidence pointed “clearly” to the parties having a shared understanding of the purpose of the framework agreement, namely to ensure consistency in terms and pricing. It was shown that Electrosteel was aware of its obligation to incorporate the framework terms into its contracts with Caledonia, that Caledonia learned of Electrosteel as a preferred supplier through Scottish Water, and both parties’ representatives attended Scottish Water framework meetings. This shared understanding indicated that the parties intended their contracts to align with the framework’s SW Terms;
• automatic processing of pro forma contract documentation - both parties had only referenced their own terms and conditions automatically by way of pro forma correspondence, which was recognised as standard practice in the water industry. While neither party thought to disable their automatic pro forma processes for the framework orders, equally neither actively intended their standard terms and conditions to have contractual effect. They simply ignored references to each other’s standard terms because of their shared understanding that their relationship was to be governed by the framework;
• conduct of the parties - the court also found that the parties’ conduct in practice — placing orders, delivering materials, paying invoices and giving rebates to Scottish Water in accordance with the SW Terms — demonstrated a mutual intention to operate under the framework terms. Neither party acted consistently with its own standard terms, and it was accepted that Electrosteel’s standard documents contained wording that was simply inapplicable to framework supplies.

It was recognised that the situation was not directly analogous to that in Tekdata, where reliance had been placed on the parties’ prior course of dealing to depart from a simple offer and acceptance analysis. However, while no prior course of dealing was relied on by Caledonia or Electrosteel, it was nonetheless held that the overall context was relevant, and that considering this was in line with the approach taken in Tekdata. In the words of Lord Richardson, “A reasonable person with the knowledge of and in the position of the parties would understand that neither was proceeding on the basis that its own standard terms and conditions were part of their bargains.”

Take aways

In a straightforward “battle of the forms” dispute the “last shot doctrine” may well suffice. However, in more complicated cases like this, where framework arrangements and multiple parties are involved, contracting parties will not be able to simply ignore the wider circumstances and evidence that may objectively be relevant to understanding the bargain that was struck. This outcome has important implications for commercial parties operating under framework agreements:

• Primacy of Framework Terms: This case highlights the possibility that framework agreements may take precedence over conflicting terms introduced in transactional documents, unless parties explicitly and specifically agree to deviate. This underscores the importance of clarity when framework arrangements are involved and the need for parties to align their expectations at the outset.
• Limits of Battle of the Forms: The traditional “battle of the forms” approach and the “last shot” doctrine, whereby the terms of the last document exchanged will prevail, is not sacrosanct and does not automatically apply in complicated cases such as this where framework arrangements are involved. Parties cannot rely on standard wording included automatically or “unthinkingly” in transaction documents to override pre-agreed terms without clear evidence of mutual intent to do so.
• Robustness of procurement processes: At a practical level, businesses operating under framework agreements should review their procurement processes and ensure that there is sufficient flexibility in their automated systems to accommodate the requirements of more complex projects. Procurement teams should be advised to avoid inadvertently introducing conflicting terms through standard documentation: where the intention is to deviate from agreed framework terms, this should be agreed clearly between parties. Failure to do so risks courts upholding the framework’s terms which, as can be seen in this case, could have significant implications for matters such as jurisdiction and liability.

This judgment makes clear that where a party wishes to rely on its own terms and conditions when operating under a wider framework, it will not necessarily be sufficient for these to be exchanged automatically during contract negotiations. Ultimately, the courts will adopt an objective interpretation of the parties’ intentions when determining which terms govern contracts formed as part of a wider framework, and a shared understanding of the transaction’s overall context may well displace the presumption that the final documents exchanged ought to prevail.