In the High Court case of Transformers & Rectifiers Ltd v Needs Ltd  the preliminary issue of whether the standard terms and conditions (Ts&Cs) of sale of the supplier or the standard Ts&Cs of purchase of the buyer had been properly incorporated into two contracts for the supply of nitrile gaskets was considered. In the resulting 'battle of the forms', Edwards-Stuart J held that neither party's Ts&Cs applied.
Transformers & Rectifiers Ltd (the Buyer) had a long standing commercial relationship with Needs Ltd (the Seller) going back to the mid-1990s, although orders were not always placed in the same way. The Buyer purchased nitrile gaskets from the Seller. The Buyer alleged that the gaskets were unsuitable and not in accordance with the contract. The preliminary issue being dealt with by the Court was to determine the terms of the relevant contracts between the parties. Both parties asserted that their Ts&Cs applied.
The Buyer argued that its Ts&Cs applied because they were printed on the reverse page of its purchase orders. However, there was no reference to its Ts&Cs on the face of the purchase orders. Further there was inconsistency in that when the Buyer placed orders via fax or e-mail, instead of through the post (as in the present case), it had only sent the front page of a purchase order and had not included its Ts&Cs. However, during the lengthy course of dealing a significant number of purchase orders had been sent by post and it was accepted by the Supplier that its management was aware that there were Ts&Cs on the reverse of the order form.
The Seller, on the other hand, maintained that its Ts&Cs applied because they had been referred to in its acknowledgements of the orders. The acknowledgements contained the following wording at their foot:
"The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request)".
However, the Seller had not printed its Ts&Cs on the back of the order acknowledgement and had not provided the Buyer with a copy of its Ts&Cs.
The Court's decision
Edwards-Stuart J, having reviewed the authorities, identified a number of principles which included:
- Where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, the correct analysis, assuming that each party’s conditions have been reasonably drawn to the attention of the other, is that there is a contract on B’s conditions.
- Where there is a reliance on a previous course of dealing it does not have to be extensive. Three or four occasions over a relatively short period may suffice.
- The course of dealing by the party arguing that its terms and conditions are incorporated has to be consistent and unequivocal.
- Where trade or industry standard terms exist, it will usually be easier for a party with those conditions to persuade the court that they should be incorporated.
- A party’s standard terms and conditions will not be incorporated unless that party has given the other party reasonable notice of those terms and conditions.
- It is not always necessary for a party’s terms and conditions to be included or referred to in the documents forming the contract; it may be sufficient if they are clearly contained in or referred to in invoices sent subsequently.
- By contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late.
The Buyer’s Ts&Cs
In order for a buyer to incorporate its standard Ts&Cs when orders were sent via fax or e-mail, it had to provide reasonable notice of the Ts&Cs to the seller and further had to make it clear it intended to rely on them.
The Buyer had not made it clear to the Seller that it was seeking to rely on its Ts&Cs. However, the Buyer had not consistently enclosed its Ts&Cs with every purchase order and the great majority of orders had been sent by fax or e-mail when the Ts&Cs were not sent. Accordingly, the Seller was entitled to assume that as the Ts&Cs were not included, the Buyer was not intending to rely on them.
The Seller’s Ts&Cs
In relation to the Seller wishing to incorporate its Ts&Cs by referring to them in its acknowledgement of the order (thus making it a counter-offer) the Seller must at the very least refer to them on the face of the acknowledgement of the order and must state in plain terms that they are to govern the contract. The Seller must give the Buyer reasonable notice of its Ts&Cs by providing it with a copy of them and drawing the Buyer's attention to them in the order acknowledgement. Alternatively, the Seller could send the Buyer a copy of its Ts&Cs and make it clear that they are the only terms and conditions upon which the Seller is prepared to do business.
Since the Seller neither printed its Ts&Cs on the reverse of the acknowledgement of order nor provided the Buyer with a copy of its Ts&Cs, it did not do enough to bring those terms and conditions to the attention of the Buyer and thereby turn the acknowledgement of order into a counter-offer.
The judge accepted that the position may be different if the terms and conditions which a seller seeks to impose are those which are routinely applied to contracts of the type in question, because, for example, they are the terms and conditions of a particular trade association. In those circumstances it may be sufficient for the seller simply to refer to those conditions on the face of the acknowledgement of order stating that copies are available on request – but that was not this case.
This case acts as a useful reminder that a company seeking to rely on its own terms should not simply attach the terms to its order acknowledgement or purchase order and assume the terms have been incorporated. This case shows that firing the last shot is not always enough to ensure your terms apply. It is crucial that organisations ensure that their sales and procurement teams understand how the battle of the forms works and the steps they need to take if the other party seeks to impose its terms. In some circumstances, it may not be sufficient simply to reply attaching your own terms and conditions and it may be necessary to make direct contact to agree whose terms apply. Where an agreement is not formally reached and each party seeks to apply its own terms, there is a risk that neither party’s terms will apply. A stalemate in the battle of the forms is unsatisfactory for all concerned!