In Medical Device Technologies Pty Ltd v Health Administration Corporation [2024] NSWCA 142, the New South Wales Court of Appeal applied well-established principles of offer and acceptance in finding that the terms of a purchase order did not form part of an agreement between the parties because the purchaser had accepted the vendor’s offer before the purchase order was received.

The NSW Health Administration Corporation (NSW Health) entered into two agreements with Medical Device Technologies Pty Ltd (MDT) to purchase ventilators as part of the NSW Government’s response to COVID-19. The agreements were created through an exchange of emails.

In respect of the first agreement, MDT issued NSW Health with a quote for the provision of 148 ventilators. NSW Health responded by email requesting MDT’s payment terms. The subject line of that email recorded a purchase order number and the words “to secure stock of 148 units ventilator”. MDT replied stating that its terms were as set out in the quote and confirmed that it would issue NSW Health an invoice upon receipt of a formal purchase order. NSW Health requested MDT immediately issue an invoice, which it did, and requested NSW Health advise of any proposed changes. NSW Health did not reply with any changes but 24 hours later sent MDT an email attaching a purchase order which contained:

• a statement that the ventilators were to be supplied in accordance with NSW Health’s standard terms and conditions (PO T&Cs); and
• a hyperlink to the PO T&Cs.

Shortly thereafter, NSW Health expressed an interest in acquiring further ventilators, and requested MDT provide pricing and terms for the supply of additional ventilators. MDT issued NSW Health an invoice (containing payment terms) for 200 ventilators for its consideration. NSW Health responded by email with a purchase order number and the words “to secure 200 ventilator[s]”. Separately, NSW Health sent another email attaching a purchase order which contained the same statement and hyperlinked PO T&Cs as its previous purchase order.

The ventilators were delivered under both agreements and allegedly did not meet the performance requirements identified in MDT’s user manual. NSW Health claimed (amongst other things) that MDT had breached the terms of the purchase agreements. It argued that the purchase order attached to its email responses to MDT’s invoices formed part of the agreements and, pursuant to the hyperlinked PO T&Cs, NSW Health was entitled to a refund.

In respect of the first agreement, Payne JA found that NSW Health had accepted MDT’s offer at the point it responded to MDT’s invoice by email attaching its purchase order. Having considered the parties’ correspondence and conduct, the shortage of ventilators at the time and the urgent need to secure a supply of ventilators, Payne JA concluded that NSW Health had intended to obtain a binding contractual commitment from MDT to supply the ventilators prior to paying 50% of the purchase price under MDT’s payment terms. His Honour held a reasonable person in the parties’ position would have concluded that the first agreement was formed on the terms that NSW Health asked MDT to provide. On that basis, viewed objectively, NSW Health’s conduct amounted to an acceptance of MDT’s offer and the agreement was formed before NSW Health provided a purchase order.

In respect of the second agreement, Payne JA held that the agreement was formed when NSW Health accepted MDT’s offer (being the second invoice) and that acceptance occurred at the point when NSW Health:

• provided MDT with a purchase order number to use “for confirmation” of the order; and
• paid MDT (pursuant to MDT’s payment terms) with the intent to secure further delivery of ventilators.

Since in both instances the purchase orders were sent after the agreements were held to have been formed, the PO T&Cs could not have been incorporated into the agreements and NSW Health could not rely on those terms to claim a refund.

This case serves as a reminder that, even when goods or services are procured urgently, contracting parties must be careful to ensure that terms and conditions are expressly agreed, and refrain from engaging in conduct and correspondence which could later be construed as acceptance of a contractual offer.

The full decision can be found here.