The recent case of Transformers and Rectifiers Ltd v Needs Ltd [2015] EWHC 269 re-examined the question of whether a buyer or seller’s terms and conditions apply when a contract is formed.

This case concerned two parties who had done business with each other for over 20 years. Each party argued that the contractual relationship was conducted in accordance with its own terms and conditions. The buyer’s terms and conditions were printed on the reverse of its purchase orders, but were not referred to on the front of the document, and the majority of orders were sent by fax or email, when the terms and conditions were not supplied at all. By contrast, the seller’s acknowledgement of order stated that the order was ‘subject to our normal terms and conditions of sale (copies available on request)’, but had never supplied a copy of those terms and conditions to the buyer.

The case restated many of the well-known principles concerning which party’s terms and conditions apply when each party wishes to trade on its own standard terms and conditions:

Battle of the forms explained

  • Where the buyer makes an offer on its conditions and the seller accepts on its own conditions, then performance follows without further discussion, the contract will be on the seller’s terms and conditions provided that they have been reasonably drawn to the buyer’s attention.
  • Parties may rely on a previous course of dealings to determine the terms and conditions of the contract, and the previous course of dealings need not be extensive, but there must be consistency, such as a consistent supply of the terms and conditions of the party who wished to rely on them.
  • Where an industry standard exists, a party’s terms and conditions are more likely to be seen as incorporated, as long as reasonable notice of these terms and conditions has been given.
  • A party’s terms and conditions need not be referred to or included in the contract itself; it may be enough for them to be referred to or included in a subsequent document, such as an invoice. However, if the contract has already been concluded when the terms and conditions are provided, this is less likely to be sufficient, as the contract is likely to have already been formed

In this case, the judge decided that despite the longevity of the parties’ contractual relationship (spanning over 20 years), neither parties’ terms and conditions applied. The buyer had not referred to its terms and conditions on the front of its purchase order, and so had not made it sufficiently clear that it wanted to rely on them, and did not supply a copy of them when making orders by fax or email. Similarly, the seller had not provided a copy of its terms and conditions, and had failed to make it sufficiently clear that its terms and conditions were to apply.

What was stressed by the judge in this case, and is of critical importance to all of the principles listed above, is that a party who wishes to rely on its terms and conditions must give reasonable notice of them to the other party. A party will not be subject to terms and conditions it was not aware of and did not have the opportunity to read.  The best approach to take is to ensure that terms and conditions are always attached (or, if overly long, a summary of the terms and conditions is provided with information on where to access the full version). It should also be stated that the parties are contracting on those terms and conditions, and that they apply irrespective of what the other party tries to impose. By doing this a party will be doing all it can to ensure a contract is subject to its terms and conditions in the battle of the forms.