In commercial negotiations, both parties may attempt to rely on their own standard terms and conditions (“T&Cs”) as forming the basis for a contract. This to-ing and fro-ing over the incorporation of T&Cs is described as the “battle of the forms”. It has been a long held principle that The battle of the forms is usually determined by the “last shot” – i.e. a contract is formed on the basis of the last set of T&Cs put forward by one party or the other. However, the recent case of TRW Ltd v Panasonic Industry Europe GmbH & another [2021] is a timely reminder that parties should not assume the application of a general rule in these cases.

Background

In short, a claim arose between the parties in relation to the supply of allegedly defective resistors in 2015-2017 in relation to which the claimant, (“TRW”), sued the defendants, (“Panasonic”), in the English courts. Panasonic applied to set aside service and for a declaration that the English court had no jurisdiction over the claim. The nub of Panasonic’s application was whether the governing T&Cs were those of TRW or Panasonic (as the competing T&Cs had divergent jurisdiction clauses).

Contractual terms

As for the terms of the respective T&Cs, in 2011 (i.e. prior to the supply of the allegedly defective goods) TRW signed a “customer file” document which specified that TRW had “received and acknowledged the General Conditions of [Panasonic]”. Those general conditions specified that “the following terms and conditions shall apply exclusively to the entire business relation with us […] unless different conditions, particularly conditions of purchase of the contracting party, have expressly been confirmed by us in writing”.

In true “battle of the forms” fashion, TRW’s purchase orders specified the good were to be delivered “in accordance with [TRW’s conditions of] purchase”, and stated “Commencement of any work or delivery of any goods or service under this order… shall constitute your confirmation [that you] are aware of and accept such terms, conditions and requirements”. Notably, Panasonic was not asked to sign the purchase orders, nor to confirm its agreement with those terms.

On the basis of these competing terms, Panasonic argued that TRW was expressly precluded from relying on its own T&Cs unless they had been agreed in writing (which they had not). This argument was advanced despite the contract having been performed following the exchange of TRW’s T&Cs via the purchase orders (and TRW therefore having had the “last shot”). Of key importance was that Panasonic’s T&Cs stated that divergent T&Cs were not valid “even if [Panasonic] effected delivery… without reservation”.

In contrast, TRW submitted that the “customer file” document had no contractual force, and that it had had the “last shot” by effectively providing its T&Cs with its purchase orders. On that basis, TRW suggested that the performance of the purchase orders by Panasonic amounted to acceptance of its T&Cs.

The court’s decision and reasoning

Proceeding on the basis that “the last shot fired may not in every case hit the target”, Mr Justice Kerr found in Panasonic’s favour.

It was held that the “customer file” document was of contractual force, and bound TRW to Panasonic’s T&Cs for the purposes of future supply contracts. To this end, Kerr J stated that “I can see no reason why parties may not agree binding terms of future trades that may or may not occur”. In effect, Panasonic had drafted its contract so as to avoid losing the battle of the forms.

Kerr J went on to suggest that TRW could have displaced Panasonic’s T&Cs by persuading Panasonic to renounce them and supply goods according to TRW’s T&Cs. Indeed, this possibility was envisaged by Panasonic in its T&Cs. However, TRW made no attempt to do so.

The position was summarised at paragraph 73 of the court’s judgment: “Although it is unusual, the last shot doctrine was displaced on the facts here. The last shot missed the target.”

Practical implications

It may be asserted that the court’s decision in TRW v Panasonic has increased uncertainty in the battle of the forms. In essence, TRW were bound by a broad agreement entered into many years earlier, and despite putting forward their own T&Cs in relation to a number of specific transactions, the court held TRW to its earlier (general) bargain. Without the very specific wording of Panasonic’s T&Cs which expressly caught this novel situation, it is suggested that TRW’s T&Cs would have almost certainly prevailed.

At the very least, the court’s decision should have the effect of focussing commercial parties’ minds on the contractual terms to which they are signing up. It should not be assumed that the last shot will win and, by this decision, the court appears to have emphasised the importance of parties’ freedom to contract on whatever bases they wish.

We may now see clauses which expressly exclude future T&Cs from taking precedence in a battle of the forms become commonplace. However, as Kerr J highlighted in his judgment, in cases where both parties are alive to the issue there is a substantial risk that no contract will be formed at all.