When an invoice is not a contract — Offer, acceptance and commercial reality in Scots law

Ahsan Mustafa explores a common commercial litigation dispute through the lens of a recent sheriff court case.

A recurring theme in commercial litigation is the attempt by a defender to escape liability by asserting that the ‘wrong party’ was sued. This argument often surfaces where goods or services were supplied under an apparently straightforward commercial arrangement, but invoices were issued to a different entity for administrative, accounting or tax-related reasons. A recent sheriff court case provides a clear illustration of how Scots law approaches such disputes, and why form will not be allowed to trump substance.

Outline of the dispute

The pursuer was a Scottish supplier of commercial goods. The defender was a corporate entity operating under a well-known trading name as part of a wider group structure. The dispute arose following supply of goods ordered by the defender’s senior employee, who also held a directorship within the defender’s corporate group.

The defender denied contractual liability. Its core position was that the pursuer’s contract was not with the defender at all, but with a separate foreign-incorporated company. The basis for this assertion was that, at the defender’s request, invoices had been issued in the name of that third party.

The pursuer maintained that there had been a single, direct contract between the pursuer and the defender, formed by offer and acceptance through email correspondence, followed by performance. The invoicing arrangement, it was argued, was a matter of convenience only, motivated by the defender’s wish to secure a tax advantage.

The legal issue: who was the contracting party?

The central legal question was whether the identity of the contracting party could be displaced by the mere fact that invoices were issued to a third party, absent any communication, negotiation or acceptance involving that third party.

In Scots law, the answer is clear. A contract requires offer and acceptance between identifiable parties. In the absence of acceptance by a purported contracting party, no obligation can arise.

Here, all substantive communications were between the pursuer and the defender’s authorised representative. The quotation was addressed to the defender. Acceptance was communicated by the defender’s operations manager using an email signature bearing the defender’s name, registration details and address. Delivery instructions were given by the defender. A deposit was paid by the defender. Subsequent negotiations regarding payment were conducted by the same individual on the defender’s behalf.

No correspondence was averred, let alone produced, between the pursuer and the alleged third-party contracting entity. There was no averment of benefit conferred on the third party and no suggestion that the third party ever accepted contractual obligations.

Against that background, the defender’s position required the court to infer the existence of a contract with a party who never communicated with the pursuer at all.

Invoicing versus contract formation

The case highlights an important but often misunderstood distinction: invoicing is not constitutive of contract.

Scots law looks to the substance of parties’ dealings. A request to invoice a different entity, whether for tax, accounting or internal group reasons, does not alter the identity of the contracting parties. Commercial reality matters. As McBryde observes, agreement may be inferred from conduct sufficient to demonstrate consensus, even where formalities are imperfect or secondary.

Here, the defender’s own correspondence made the position explicit. The request to invoice a foreign entity was justified by reference to tax arrangements.

Contradictory and unspecific defences

The defender’s pleadings suffered from a further difficulty: internal contradiction.

On the one hand, the defender denied that it had contracted with the pursuer. On the other, it admitted that its own senior personnel had negotiated the transaction, arranged delivery and made payment. Assertions that the contract lay elsewhere were unsupported by specification and contradicted by the documentary record.

While Scots procedure permits skeletal defences, that latitude is not unlimited. Where a pursuer sets out a detailed factual case supported by contemporaneous productions, a defender cannot simply assert an alternative reality without pleading the facts necessary to support it.

Commercial common sense and decree de plano

The court was invited to refuse probation to the defender’s averments on the basis that they were irrelevant, lacking in specification and contradicted by the defender’s own documents. If there was an offer and acceptance between the pursuer and the defender, and no such exchange involving the alleged third party, then there was no stateable defence.

The broader lesson is an important one. Scots law does not permit parties to rewrite contracts retrospectively by pointing to invoicing arrangements divorced from the reality of how the bargain was struck and performed. Where the documents show offer, acceptance, authority and performance, the court is entitled, indeed required, to apply commercial common sense.

In such circumstances, decree de plano is not a shortcut. It is the proper procedural response to a defence that, stripped of artifice, has no legal foundation at all.