Suppliers and purchasers will be familiar with the concept of a “battle of the forms”. This arises where both the supplier and purchaser of goods or services issue their terms and conditions to each other without any attempt by either party to negotiate a bespoke agreement.
In December 2014, the Supreme Court delivered two judgments, based on broadly similar facts, which together constitute an important update to this complex area.
In both cases, construction aggregate provided by a supplier to certain customers contained pyrite that subsequently led to complications in construction. When these issues arose, each party sought to rely on their own terms and conditions in a classic battle of the forms scenario.
In one case, the supplier’s delivery document, which was signed by the foreman of the customer, contained the sentence: “This material is sold subject to the terms and conditions available on request.” One of those terms allowed the supplier to limit its liability for defective goods to the cost of their replacement. The supplier argued that its terms and conditions, including the limitation of liability clause, were incorporated into the contract between the supplier and the customer.
The question to be considered by the court was whether the delivery dockets issued by the supplier constituted contractual documents that varied the terms of that master contract.
Delivery dockets play an important administrative and record-keeping function in a contractual relationship. Whether they can also be contractual documents, however, depends on the facts and circumstances of each particular case.
The court stated that a factor of “critical importance” in determining the contractual status of a delivery docket is whether the docket expressly contains either the relevant terms and conditions or a reference to known industry-wide terms and conditions. It is insufficient to refer to terms and conditions being “available on request”.
Any battle of the forms will depend on its own particular circumstances. In the context of ongoing contractual arrangements however, these decisions suggest that, where practical, terms and conditions should ideally be issued in full at the outset of the arrangement at principal level, rather than relying on ongoing exchanges of documents by more junior staff who may not have the necessary authority to negotiate and conclude contracts.
If a business intends to rely on terms and conditions issued with delivery dockets (or similar documents), they should ensure that the dockets expressly contain their standard terms and conditions in full. If these terms are to be printed on the reverse side of the docket, specific reference to such terms should be made on the face of the docket. Also, if the size of the docket limits the number of terms that can be printed, businesses should consider whether a shortened version of the standard terms and conditions (including certain key terms such as limitation of liability clauses) should be included.