Invoicing gone wrong – am I still entitled to payment?

The recent case of Rolls-Royce Holdings Plc v Goodrich Corporation ([2023] EWHC 1637 (Comm)), saw the High Court decide if sums were owed to a payee under circumstances where the payee invoiced less than the sums agreed as payable in the contract. The question for the Court: Should the payer be made to pay the difference, or are they only required to pay what they were invoiced for?

As common as payment disputes are (and we know all too well just how common in the construction industry), for such a dispute to reach the court room is extremely rare. The upwards of US$100million sums involved in this case however may have something to do with that.

The two parties entered into a contract for the supply of aircraft engine spare parts. The contract stipulated the price payable, which was on variable rates. The customer submitted the orders, quoting the price on those orders, and the supplier subsequently raised invoices for payment which were then duly paid by the customer. The supplier later realised that they had invoiced less than was due under the contract. This mistake came about by raising invoices based on the sums quoted in the orders, which turned out to be incorrect. The supplier then sought to recover the balance.

It is important to note here the way in which the supplier sought to recover the balance. The customer’s incorrect pricing of the orders was a breach of contract and so the supplier could have chosen to bring a claim for damages based on breach of contract. They chose however to bring a debt claim. In defence of the claim the customer contended that because they had paid the invoices in full there was in fact no debt.

In reaching their decision, the Judge considered two things:

1. Did the contract make it clear that there could be no action in debt unless the invoice was submitted? No. Therefore section 49 of the Sale of Goods Act 1979 applied.
2. Did the contract expressly link payment to the submission of an accurate invoice? No, and furthermore, although the contract did expressly state that payment was due “provided the invoice is accurate”, this did not negate the requirement for the customer to pay a shortfall which has not been invoiced.

Based on these considerations the Judge held that the supplier was entitled to be paid the balance.

The decision in this case provides a valuable analysis of a supplier’s rights where it has failed to invoice for goods, or has invoiced the incorrect sums. Whilst it will inevitably depend on drafting and the facts of the case, this decision suggests that the right to claim the price is not easily lost.

The Birketts view

Whilst the best way to avoid a situation like this is to make sure you invoice the right amounts, mistakes do happen. A little comfort can perhaps be taken in the knowledge that invoicing an incorrect amount isn’t fatal!