Credit note binds company to pay out over faulty goods

A company that gave a credit note to compensate for faulty goods had effectively entered into a contract and was obliged to pay up to settle the dispute.

That was the decision of the Court of Appeal in a case involving a paper merchant and a firm of printers.

The issue arose when the printer was unhappy with the quality of a batch of paper.

The merchant accepted the batch was substandard, and a manager issued a credit note as compensation.

The dispute was whether the merchant was bound by the credit note and therefore liable to pay the sum promised.

The merchant claimed the credit note was “unauthorised and illegitimate”.

However, the judge ruled that the manager did have the authority to issue the credit note on the merchant’s behalf.

The Court of Appeal has upheld that decision.

Please contact us if you would like more information about the issues raised in this article or any aspect of contract law.