Suppliers: Can you ask a purchaser to pay more if you mistakenly invoice a lower amount?

The High Court recently considered a case around incorrect invoicing for the supply of aircraft engine spare parts.

Problems regarding invoicing aren’t a matter that typically gets much airtime in High Court, so Corporate and Commercial Partner, Rory O’Hare examines the case in more detail to understand the Judge’s ruling that the supplier could claim the difference between the sums mistakenly invoiced as debt:

Rolls-Royce Holdings Plc v Goodrich Corporation 

You know how it is.  End of the quarter, targets to meet and the finance team are under pressure to get invoices out and fees paid.  Not every invoice is checked against the contract, and reliance is often placed on purchase orders or notes raised from either party to the deal.  Mistakes can easily occur, and it is not uncommon for invoices to be sent with the incorrect value attributed.

So, if the invoice has been sent and paid, have you lost your chance to ask for more?

Not a point often litigated, the High Court case between Rolls-Royce and Goodrich gave the court an opportunity to consider this very point, and whilst not creating any new law, it provides comfort to suppliers who may find themselves in a similar position.

And the answer? Yes, you can.

Provided you have an agreement which sets out a clear price (or a clear mechanism for calculating the price), a failure to specify that price on an invoice will not prevent you from claiming the balance as a debt.

Goodrich was a parts supplier to Rolls-Royce and had established a call off agreement for which various parts would be supplied.  Under the agreement, Rolls-Royce had to submit orders to Goodrich stating what was required and, most importantly, the price due.  Goodrich would then supply the parts and raise an invoice for payment.

In providing its orders, Rolls-Royce mistakenly supplied the wrong prices, and this mistake carried through to the invoices raised by Goodrich – despite the contract setting out the correct price.  Rolls-Royce’s defences included the assertion that no debt claim was due as the Goodrich invoices were not accurate and that the contractual payment obligation only arose “provided the invoice is accurate”.

The High Court’s ruling

The court didn’t give this approach much traction.  Unless agreed otherwise, payment and delivery usually happen at the same time.  Moving away from that position requires a clear understanding, typically as set out in a contract.

So, whilst it is possible to make a payment conditional upon the delivery of an invoice, a mistake in that invoice will not negate the fact that a sum is owed.  The judge drew on the premise that an invoice typically operates as a way of saying “this is what I think you owe” and “pay me now”, rather than creating the underlying obligation to pay.

The above scenario will turn on the contract in question and the facts in each instance but provides assurances to Suppliers that where a clear payment obligation exists contractually, an underpayment owing to a simple mistake in an invoice will not protect a purchaser from a debt claim.

For further information on how our expert commercial contracts team can support you in ensuring your company contracts are watertight, get in touch with Corporate and Commercial Partner, Rory O’Hare today: rory.ohare@primaslaw.co.uk