By Georgia Jones
Borneo Martell Turner Coulston
SO you’re negotiating a business-to-business contract and you’ve sent the other party your businesses standard terms and conditions, does that mean that those are the terms of the contract? Not necessarily.
Businesses may inadvertently find themselves in a situation known as the battle of the forms. This arises when two businesses are negotiating the terms of a contract and each party wants the basis of this on its own terms. For example, if ABC Ltd sends an order form along with its standard terms and conditions to XYZ Ltd and XYZ Ltd returns the completed order form with its own set of standard terms and conditions, a contract may have been entered into with each party believing their own standard terms and conditions have been accepted by the other.
In this situation, the battle is often won by the party who fired the ‘last shot’, that is, the last party to put forward terms and conditions that were not explicitly rejected. When deciding whose terms and conditions have been incorporated the court will usually consider whether they were adequately brought to the attention of the other party.
This issue was addressed in the 2015 High Court case of Transformers & Rectifiers Ltd v Needs Ltd. Transformers and Rectifiers (T&R) argued that its terms and conditions prevailed as these were supplied on the reverse of their purchase orders. Needs Ltd (Needs) argued that their terms and conditions prevailed because they were referred to on their acknowledgement of the purchase orders.
During this time many orders had been placed by T&R by fax, post and email. When sent by fax and email the purchase order did not transmit a copy of T&R’s terms and conditions as these were on the reverse. Needs responded to these orders by sending an acknowledgement of order which stated: ‘The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request).’
In this case the court held that neither party had successfully incorporated their own terms.
Despite the fact that T&R and Needs had a 20-year business relationship during which time T&R sent Needs its terms and conditions when placing purchase orders by post, the court held that these had not been incorporated into the contract subject to the dispute. T&R had not made it reasonably clear to Needs that it was seeking to rely on its terms and conditions as these were not referred to on the face of the purchase order and had not been sent to Needs when placing orders by fax or email.
In comparison Needs’ terms and conditions were never supplied to T&R but only referred to. The court held that for Needs to incorporate its terms and conditions into the contract by its order acknowledgement (making it a counter offer) that it must at the very least refer to those terms and conditions on the face of the document.
This case highlights that it is not always easy or straightforward to determine whose terms and conditions will prevail in a business to business contract. Taking the following steps may prevent this situation from occurring to your business;
* Do not simply refer to your terms and conditions, provide a copy.
* Be clear that you intend to rely on your terms and conditions and note this on the face of any contractual documentation.
* Be consistent in the way you use your terms and conditions when negotiating a contract.
* If in doubt seek legal advice.
Georgia Jones is a commercial solicitor at Borneo Martell Turner Coulston Solicitors, for more information on incorporation of your businesses terms and conditions please call 01604 622101.
