At the end of last year, the court delivered its judgment in
a case that has important implications for members.
negotiations between BrandX and a buyer at RetailerY, which culminated in the
following email exchange:
"Hi Dave, … Just to confirm, you are placing orders and committing
to the yearly quantity against all lines detailed below based on the ROS you
have provided… We have agreed that you will call off stock, in exactly the same
way as XYZ, on an ad hoc basis within a 12 month period… [there was then a
table of 9 products with quantities and prices] If you could drop me a note to
confirm all the above ASAP that would be great, I shall then be in a position
to push the button at this end. Thanks, Claire"
"Hi Claire, Please go ahead with the below, happy on [the brand]… Regards, Dave"
The products didn’t sell as well as anticipated, so RetailerY stopped buying them. BrandX then sued for the profit it hadn’t made on
the orders that hadn’t materialised - £980,000, plus storage charges for unsold
In its defence, RetailerY claimed that BrandX were well
aware that the buyer did not have the authority to place orders or to make
contractual commitments regarding quantities, and that his authority was
limited to identifying products that RetailerY should stock and negotiating the
The key arising from the judgment were:
- The judge rejected
RetailerY's claim that everyone working in the FMCG sector knows that buyers’
in large retailers do not have the authority to commit their company. He ruled
that FMCG is not a distinct market with special practices and that the normal
- The position within RetailerY was irrelevant. What mattered was that the buyer was held out as the
person with whom terms of trading were to be discussed and agreed, and the
documentation in the supplier pack which RetailerY had supplied to BrandX did
not set any limitations on his authority to do that. Whether or not he had the authority
to place actual orders did not matter: BrandX were entitled to treat him as
having the authority to commit RetailerY to buying a minimum quantity over the
- BrandX were entitled to the
profit they would have earned on those sales.
The take-away points are:
- Casual emails can create
- Buyers should open
commercial negotiations by setting out - in writing - any restrictions on their
authority to commit their company. They cannot assume that this is general
knowledge in the business.
- Companies need to make sure
that their buyers do this.
- Suppliers should not be
deterred from bringing claims for lost profit in these circumstances - this was
a successful application for summary judgment without the expense of a trial, on
the basis that holding a trial would be pointless because BrandX's claim was
clear-cut and RetailerY's defence was not even arguable.