20 years of commercial dealings but still no certainty as to which T&Cs apply!

1. Summary

Transformers & Rectifiers Ltd (the “Purchaser”) allege that goods supplied to them by Needs Ltd (the “Seller”) are unsuitable for their purpose and not in accordance with the Contract.  As a preliminary issue, the High Court was asked to determine the victor in a “battle of the forms”, that is, a fight between the Parties as to whose terms and conditions (“T&Cs”) prevails.

The Purchaser argued that its T&Cs applied because they were printed on the back of its purchase orders, although there was no reference to those T&Cs on the face of the purchase orders.

The Seller argued that its T&Cs applied because they were referred to on its acknowledgements of the purchase orders.

Both sides fired a blank as the Court decided that neither side’s T&Cs applied. The decision demonstrates the importance of a contracting party, when seeking to rely on its own T&Cs, taking sufficient steps to give reasonable notice of both its T&Cs and its intention to rely upon them.

Set out below are some tips to help your business avoid a costly skirmish over whose T&Cs apply.

2. The Decision

The Purchaser’s T&Cs

  • The Purchaser had not made it reasonably clear to the Seller that it was seeking to rely on its T&Cs as it had not sent them to the Seller when placing its purchase orders by fax or e-mail. The Purchaser’s T&Cs were not incorporated into the contract in question even though the Parties had a 20-year commercial relationship and the T&Cs were printed on the back of purchase orders the Purchaser had from time to time sent to the Seller by post.
  • As the Purchaser had not consistently enclosed its T&Cs with every purchase order and the purchase order in question did not on its face refer to any T&Cs, the Seller was entitled to assume that the Purchaser was not intending to rely on them.

The Seller’s T&Cs

  • The Seller had not done enough to bring its T&Cs to the  attention of the Purchaser as it had not printed its T&Cs on the reverse of the order acknowledgement nor provided the Claimant with a copy of those T&Cs.
  • A seller who wishes to incorporate its T&Cs by its order acknowledgement (making it a counter offer) must, at the very least, refer to those T&Cs on the face of the order acknowledgement in terms that make it plain that they are to govern the contract.
  • If a Seller’s own T&Cs are not in a common, industry standard form then the seller must give the Purchaser reasonable notice of its T&Cs by printing them on the back of the order acknowledgement and stating on the face of the order acknowledgement that it is subject to the T&Cs printed on the back. Alternatively, the Seller could send the Purchaser a copy of its T&Cs, making it clear that they are the only T&Cs upon which the Seller is prepared to do business.

3. How to Prepare for Battle, if Not Avoid the Skirmish!

There is no general rule that will apply in all battle of the forms cases, but your business can arm itself as follows:

  • Provide the other party with a clearly identifiable, legible copy of your T&Cs together with your order/acknowledgment and state clearly on the face of your order/acknowledgment that you seek to rely upon those T&Cs.
  • Be careful when sending orders/acknowledgments  electronically. Double check that the copy of the T&Cs has not been inadvertently omitted.
  • Fire the last shot! Be aware that the other party’s T&Cs could apply if they are submitted and, without a counter offer, performance of the contract follows.

In B.R.S  v Arthur V. Crutchley Ltd the claimant delivered whisky to the defendant’s warehouse. The delivery note contained the claimant’s T&Cs but the defendant’s warehouseman stamped it “Received under [the defendant’s] conditions”. On the facts of that case, the Court held that the rubber stamp constituted the last shot of the battle and the claimant’s T&Cs prevailed because the stamp amounted to a counter-offer which the claimant had accepted by its conduct in handing over the goods.

  • Take the above approach consistently with each and every order/acknowledgment, regardless of whether you have a long standing relationship with the other party.