A recent TCC decision has considered a “battle of the forms” situation where neither party could establish that their terms and conditions were incorporated into a contract for the sale of goods. The case highlights the importance of giving reasonable notice of proposed terms and conditions and provides practical guidance on how to ensure such terms are successfully incorporated.
Transformers & Rectifiers v Needs
The case concerned two contracts for the sale of gaskets and whether the gaskets supplied by the Defendant, Needs, under the contracts were suitable for their purpose. The Claimant, T&R, argued that its terms and conditions applied because they were printed on the back of its purchase orders. Needs submitted that its terms and conditions applied because they were referred to on its acknowledgements of order. This gave rise to a “battle of the forms” issue.
The court found that neither side’s terms and conditions applied. Although Needs was aware of T&R’s terms and conditions on the back of its purchase orders, there was no reference on the face of the purchase orders to the terms and conditions on the reverse. Furthermore, when T&R placed an order by fax or e-mail it did not transmit a copy of the conditions on the reverse. A party who wishes to incorporate its own standard terms and conditions must give the other party reasonable notice of the terms and conditions and must do so in circumstances that make it clear to the other party that he intends to rely on them. Because T&R did not follow a consistent practice of enclosing terms and conditions with every purchase order, Needs was entitled to assume that T&R was not intending to rely on them. To have incorporated the terms, the buyers would have had to fax the terms and conditions on the back of the purchase order as a separate document together with the purchase order or, if being sent by email, ensure that the attachment included the terms and conditions.
Needs’ acknowledgement of the purchase orders stated: “The quoted prices and deliveries are subject to our normal Terms and Conditions of Sale (copies available on request.)” However, because Needs hadn’t provided a copy of these conditions, the court considered that reasonable notice of the conditions had not been given, and therefore they were not incorporated. The court noted that the position may be different if conditions are in a form that is in common use in the relevant industry, such as the terms and conditions of a particular trade association.
The case provides a useful reminder that general words in purchase orders and similar documents are unlikely to successfully incorporate a party’s terms and conditions unless a copy of the terms and conditions are actually provided. Parties should also be aware that e-mailing and faxing of purchase orders or acknowledgements may result in terms and conditions on the reverse not being incorporated.