When an invoice is not a contract: the authorities behind the analysis

Following publication of a recent article on the proposition that the act of issuing an invoice does not, of itself, constitute a contract, a number of readers have asked whether the case discussed was reported. It was not. The purpose of the article was not to announce new law, but to illustrate the application of settled contractual principles drawn from established authority.

This short note explains the legal foundations relied upon.

At the heart of the analysis was the principle that where a pursuer’s averments, supported by productions lodged in process, directly and compellingly contradict the defender’s position, the court is entitled to proceed on that basis.

That approach is well established in Maclay Murray and Spens LLP v Andrew Orr [2014] CSIH 107, the Inner House confirmed that where documentary material undermines a defender’s factual position, the court is not obliged to ignore it simply because a denial is maintained on record.

Closely related is the court’s treatment of defences which appear designed to delay rather than genuinely dispute liability, as explored in Canmore Housing Estate v Scott 2003 SLT (Sh Ct) 68.

As McBryde explains, a contract may come into existence not only through formal exchange of written terms but also through performance. Where parties act in a manner consistent only with the existence of a contract, consent may be inferred from conduct. The law looks to the end result of the parties’ dealings, rather than their labels or subsequent characterisations. This is reflected in McBryde, The Law of Contract in Scotland, at paragraph 6-04. 

Consent remains the foundation of contractual obligation. As McBryde notes at paragraph 6-02, agreement in the abstract is not enough. The parties’ intentions must be communicated, and analysed through the familiar framework of offer and acceptance. Bell’s Principles, quoted by McBryde at paragraph 6-09, emphasise that a perfect obligation requires deliberate and voluntary consent and a purpose to engage.

The law has long recognised that acceptance may be demonstrated by conduct. McBryde at paragraph 6-05, citing the UNIDROIT Principles of International Commercial Contracts, records that a contract may be concluded where the conduct of the parties sufficiently shows agreement. That approach is consistent with older authority. In Allan v Colzier (1664) Mor 94, the absence of acceptance by a third party meant that no contract arose with them, underlining that acceptance remains essential.

As Stair put it, an offer accepted is a contract, because it is the deed of two, the offeror and the acceptor.

Taken together, these authorities explain why issuing an invoice, viewed in isolation, does not form a contract.

The binding obligation lies not in the invoice itself, but in the prior or contemporaneous consensus of the parties, evidenced by communication, performance and the overall structure of their dealings. The unreported case simply applied those principles to its facts.

Written by Ahsan Mustafa, senior associate, Aberdein Considine LLP.

Accredited by the Law Society of Scotland as a specialist in debt and asset recovery.