An invoice is a written account, or itemised statement of merchandise shipped or sent to a purchaser, consignee, factor, etc, with the quantity, value or prices and charges annexed, and may as appropriate to a consignment or a memorandum shipment as it is to a sale1. An invoice is a bill with itemized amounts of the goods sold by the invoicing party. At its most basic level, it is a promise for a promise. Where the vendor sends just the invoice and the other side has not accepted there is no contract. An invoice alone, even after goods are sent, is just evidence that a quantity was sent and that there is a price attached to that, but without acceptance on the part of the other side no contract has been formed2. An invoice is not a bill of sale nor is it evidence of sale. It is a more detailed statement of the nature, quantity and cost or price of the things invoiced. Standing alone, it is never regarded as evidence of title3.
So long as the recipient has acknowledged the terms and there is some evidence of acceptance of those terms, there will be no contract. Where goods are received, held on, and reselling is started there is an indication that you accepted the goods. Where one is rejecting the invoice one should also reject the underlying goods on their delivery.
For an invoice to become a contract there needs to be some sort of overt action to show acceptance such as holding on to the goods and selling them or signing the invoice. But one should remember that there can be no contract without offer, acceptance, and consideration4.
The requirements for a commercial invoice have been laid down in Uniform Commercial Code-600(UCP)5 as per the provisions of UCP, a commercial invoice:
i. Must appear to have been issued by the beneficiary6;
ii. Must be made out in the name of the applicant7/buyer
iii. Must be made out in the same currency as the credit; and
iv. Need not be signed.
The description of the goods or services or performance in a commercial invoice must correspond with that appearing in the credit. The commercial invoice for the goods must appear on its face to be issued by the beneficiary named in the credit. A bank has discretion to reject a set of documents containing an invoice issued for an amount in excess of the credit. An incomplete invoice can lead to problems, particularly with the customs administration who determines the value of imported goods. Where invoice is incomplete it will delay finalisation of customs duty assessment and as such imported goods could only be released provisionally pending furnishing of complete document8.
A c.i.f. seller must tender an invoice. The form of the invoice was originally set out by Blackburn J9. It was observed that: "The invoice is made out debiting the consignee with the agreed price (or the actual cost and commission, with the premiums of insurance, and the fright, as the case may be), and giving him credit for the amount of freight which he will have to pay the ship-owner on actual delivery." The courts have now demand that invoice must be made out as described by Blackburn J10.
The common law requirement is loose in the extreme, with not even a mention, for example, of any description of the goods. It would be usual for there to be additional express requirements. If not in the sale contract itself then certainly in the credit. Where the credit required a commercial invoice, it differs from other documents in that it must comply strictly with the terms of the credit, whereas for other documents some leeway is allowed by the U.C.P11.
The invoice would usually debit the buyer with the agreed price, and credit him with any freight or other charges he may have to pay the carrier at discharge in a c.i.f. contract, (for example , if freight has not been paid in advance and a freight collect bill of lading is used).
In commercial transactions banks are not required to look behind the documents tendered to them and in particular the invoice in dispute about the goods.12
As regards exchange of negotiations through emails one should remember that a series of email can form a contract. There is one caution that through a careless attitude one can agree to something that one did not intended to by accepting and hitting the reply button on computer. One has to be careful about these matters.
Sending emails back and forth can actually create a contract of a promise for a promise, for example, a contract for 500 TV sets at $450 to be delivered at 8:00 on Thursday. However, it looks very vague and that is why often businesses turn to lawyers to draft sophisticated documents to make clear the terms are of the deal.
One has to double check the invoices one sends or receives as alone they are not a contract but an evidence of acceptance which can form a contract.
However, a bill of sale is different than invoice as it is an assignment for moveable property whereby property is intended to pass without possession13. Many agreements are however not bill of sale, for example, agreement of sale of furniture on the ordinary hire and purchase system14.
Invoices can raise many issues, incomplete, incorrect or unclear invoices could be sent back in order to remain unpaid until questions about them are settled.
While issuing an invoice one should be sure that all the parts of the invoices are complete.
One should remember the following rules before sending or issuing the invoice:
1. The source of the invoice should be clear and include company's name, address and telephone number.
2. Invoice should include customer's full company name and address. It is also good to note the individual contact that placed the order or authorised the purchase.
3. Invoice must indicate invoice number for better referencing for both the buyer and seller.
4. The invoice should have a clear date of issue and the terms of payment. For example, the invoice may be due in 30 days or may be paid at 1 percent discount if paid within 10 days.
5. The invoice should state the quantity of goods or services and the per unit price.
6. Any taxes, fees, handling charges to the invoice should be clearly itemised.
7. Where required Tax number must be shown for tax adjustment or refunds.
8. Through a note box added to invoice one can thank its customers or reveal other needed important information in respect of goods sold.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi)
1 Black's Law Dictionary, Sixth Edition, West.
2 Joseph B. Cooper & Son, Inc v. Finlay Depts., Inc, 11 Misc. 2d 382, 174 N.Y.S.2d 265, 269
3 Dows v National Exchange Bank of Milwaukee, 91 US 618
4 See the provisions of contract law.
5 See Article 18 of UCP-600.
6 Exception to these rule are provided in Article 38 of UCP-600.
7 Id. Article 38 (g). Where banks accept invoice of the value more than the credit the decision of the banks will binding on contracting parties.
8 See Article 13 of The Agreement on Valuation, and Advisory Opinion No 11.1.
9 Ireland v. Livingston (1872) L.R. 5 (H.L.) 395.
10 [1911] 1 K.B. 214.
11 See Article 18 of UCP-600.
12 co-operative Central Raiffeisen-Boerenleen Bank B.A v The Sumitomo Bank Ltd; The Royan [1988] 2 Lioyd's Rep.250
13 Johnson v Diprose, IQB 512
14 Ex p. Crawcour, 9 Ch.D 419
Comments
Comments are closed.