Battle of the Forms

Palma Percze

When businesses enter into contracts with one another, it is common for them to want their own terms and conditions (Ts&Cs) to apply to the contract. However, whether these have been successfully implemented into the contract often does not seem to be of concern to the parties until a dispute presents itself. Having the Ts&Cs adequately incorporated is especially important since it is common practice for businesses to conduct their dealings through contractual documents such as purchase orders and invoices rather than having an actual written contract in place. By not having a signed contract in place, the parties open up themselves to scrutiny over which party’s Ts&Cs are to prevail in case of a dispute.

The general rule is that of the ‘last shot’ doctrine, which states that the last set of terms sent before acceptance or performance will be binding as long as it is not explicitly rejected by the other party and reasonably brought to their attention. Alternatively, previous dealings could be of reference when determining the parties’ intention of whose set of Ts&Cs to apply. However, the length of the business relationship would only be of relevance if one of the parties supplies its terms consistently. The position might be less straightforward where the Ts&Cs are referred to in documents but for some reason are not capable of being inspected by the other party. Should this be the case, it would be nearly impossible for the other party to familiarise themselves with the other party’s Ts&Cs, and subsequently, subjecting the other party to the seemingly “non-existent” terms would be unfair.

Bermans has recently acted for a supplier where the circumstances of the case were similar to those above.  In the recent case a dispute arose due to damage caused to goods whilst in transit. This matter involved a business to business contract for the supply of goods on an ‘ex works’ basis. This trade term provides that the liability for the goods passes to the buyer following acceptance of the goods and the seller is relieved of all liability thereafter.

In this case, neither party’s Ts&Cs were provided to the other which raised the issue of whose Ts&Cs were to apply. The supplier stated on the quote to the purchaser and subsequently on its invoices that its set of terms are applicable to the dealings between the parties. Not surprisingly, the purchaser stated the opposite and referred to its own terms being referenced on the purchase order by way of a hyperlink. However, these terms were not available upon clicking on the link or on the company’s website. Bermans argued that as the purchaser’s Ts&Cs were not capable of being inspected by the seller they could not have been incorporated into the contract.  Fortunately for Bermans’ client, the dispute was settled and so the above argument regarding incorporation of Ts&Cs was not tested at Trial.

It may not be possible to fully eliminate the chances of any future disputes occurring during the life of business dealings, however, there are ways by which the likelihood of disagreements presenting themselves could be reduced. One of the most effective ways of doing this would be to have a written contract in place which would generally prevail in case of a dispute. In addition to this and/or in absence of a written contract, the parties may wish to consider adopting the following practices:

• Providing a copy of their Ts&Cs to the other party at the outset of the business relationship and ensuring that these are readily available upon request;
• Explicitly rejecting the other party’s Ts&Cs; and
• Referring to the applicability of their Ts&Cs on all documents, and preferably reinforcing this in writing

Disputes generally occur due to one or more of the parties’ failure to be proactive in ensuring that their Ts&Cs are incorporated into the contract. Should a dispute arise, the parties should seek legal advice as soon as possible.

For further information regarding the changes, please contact Andrew Koffman or another member of our Litigation and Dispute Resolution team.