A recent case in the High Court reminds us about the importance of properly incorporating terms and conditions (T&Cs) and providing reasonable notice of such T&Cs.

In Transformers & Rectifiers Ltd v Needs Ltd [2015], Needs Ltd (the Seller) had been working for Transformers & Rectifiers Ltd (the Buyer) for around 20 years. Orders had been placed almost weekly by the Buyer in several ways (including email, fax and post) throughout the duration of the commercial relationship.

The High Court in this case was asked to consider which of the parties T&Cs applied after the Buyer alleged that the goods sold were not in accordance with the contract and not fit for purpose.

THE SELLER’S T&CS?

The Seller argued that its T&Cs applied because they were referenced in its acknowledgement of orders placed, as follows "The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request)". The T&Cs had not, however been provided to the Buyer.

THE BUYER’S T&CS?

The Buyer maintained that its T&Cs applied because they appeared on the reverse of the purchase order. There was, however, no reference to the T&Cs on the purchase order itself and when the Buyer had placed an order via fax or email it had only sent the front page of the purchase order (and therefore had not sent the T&Cs).

Historically, however, a notable number of purchase orders had been sent by post and the Seller was aware that the T&Cs were listed on the reverse of the document.

THE COURT'S DECISION

The Court held that neither party’s T&Cs applied to the agreement between the Buyer and the Seller and noted the following principles:

  • if A makes an offer to B on A’s T&Cs and B accepts the offer on B’s T&Cs, assuming that each party’s T&Cs have been drawn to the other’s attention, there is a contract on B’s T&Cs
  • any attempt to rely on a previous course of dealing does not have to involve an extensive history
  • the party contending that its T&Cs apply must be able to show a consistent and unequivocal course of dealing
  • where standard trade or industry T&Cs apply it is typically easier to persuade the court that they should be incorporated, provided that reasonable notice has been given
  • a party’s own standard T&Cs will not be incorporated unless the other party is given reasonable notice of those T&Cs. The T&Cs do not necessarily need to be included or referred to - it may be sufficient if they are included in or referred to in invoices sent later on, and
  • if an invoice follows the conclusion of the contract which included a clear offer on standard T&Cs which have been accepted, even if only accepted by delivery, it may be too late.

If the Buyer had intended to incorporate its T&Cs when sending orders by email or fax it should have provided reasonable notice of the T&Cs to the Seller and made it clear that it intended to rely on them. The Buyer had not placed orders consistently and did not always include its T&Cs with each purchase order. Consequently, the Seller was justified in assuming that the Buyer was not intending to rely on its T&Cs. 

In referencing the T&Cs in the acknowledgement of order, the Seller was making a counter offer. As such, in order for the T&Cs to apply, the Seller should have stated in plain terms that its T&Cs were to govern the contract and should have provided a copy of them for the Buyer’s reference.

The Seller neither provided a copy of its T&Cs to the Buyer nor printed them on the reverse of the acknowledgement of order and as such did not do enough to bring them to the Buyer’s attention and thereby successfully turn the acknowledgement of order into a counter-offer.

The Judge stated that the outcome may have been different if the T&Cs where those which were routinely applied to contracts of this type.

COMMENT

The High Court has provided a useful reminder to businesses to ensure that if they want to rely on their own T&Cs and conditions they must go further than simply mentioning the T&Cs without bringing them to the other party’s full attention or attaching them without any reference to them in the other contractual documents.