Is Your Business Winning The ‘Battle Of The Forms’?
Date: 04/06/2015 | Corporate
A ‘battle of the forms’ often arises in circumstances where two parties are negotiating the terms of a contract and each party wants to contract on the basis of its own standard terms and conditions.
A common example is where a purchaser offers to buy goods from a supplier on the purchaser’s standard terms and conditions and the supplier purports to accept the offer on the basis of its own standard terms and conditions. In those circumstances, whose terms and conditions will prevail?
Generally, the courts will apply the ‘last shot’ rule and find in favour of the last party to put forward terms and conditions that were not explicitly rejected by the recipient (although this rule is subject to certain exceptions).
The recent case of Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC) highlights the importance of ensuring that a party seeking to rely on its standard terms and conditions has given the other party reasonable notice of those terms and conditions.
The Facts
Transformers & Rectifiers Ltd (the ‘Purchaser’) had been purchasing goods from Needs Ltd (the ‘Supplier’) on a weekly basis over the course of a 20 year period. The Purchaser placed orders for goods using different methods including by fax, email and post. Its standard terms and conditions were printed on the reverse side of the purchase order sheets. However, there was no reference to the terms and conditions on the front of the purchase order and when a purchase order was emailed or faxed to the Supplier, the back page was never included.
The Supplier would acknowledge the purchase orders by sending an acknowledgement of the order that stated “The quoted prices and deliveries are subject to our normal terms and conditions of sale (copies available on request)”. However, the Supplier never provided its terms and conditions of sale to the Purchaser.
The Purchaser claimed that some of the goods supplied were defective. The Supplier contended that its liability was limited or excluded by a clause contained within its standard terms and conditions. A dispute then arose as to whether the Purchaser’s standard terms of purchase, or the Supplier’s standard terms of sale applied.
The Decision
The court held that neither party’s standard terms and conditions applied. As a result, the Supplier could not rely on the exclusion of liability clauses contained within its standard terms and conditions of supply and the contract was governed by the implied terms of the Sale of Goods Act 1979.
The Purchaser had not made it clear that it intended to rely on its standard terms and conditions of purchase for each order. The Purchaser did not follow a consistent practice of enclosing its terms and conditions with each order. Accordingly, the Supplier was entitled to assume that the Purchaser was not relying on them for that transaction, despite being aware of their general existence.
The Supplier had never taken steps to provide the Purchaser with a copy of its terms and conditions and had not done enough to bring its terms and conditions to the attention of the Purchaser.
Comment
The case highlights the importance of ensuring that your terms and conditions are incorporated into your contracts. To achieve this, terms and conditions must be brought to the other party’s attention. In particular, care should be taken when your terms and conditions are not easily identifiable (for example on the reverse of a purchase order, in an email attachment or on a website). The best way to incorporate standard terms and conditions is to consistently provide the other party with a set of your terms and conditions and clearly state that they will apply to that particular order or contract.
Please get in touch if you would like our assistance with ensuring that your terms and conditions are incorporated into your contracts.
