Opinion

Practical pre-contract steps towards protection

15th August 2019

Practical pre-contract steps towards protection

A battle of the forms arises when two parties are negotiating the terms of a contract, with each party wanting to contract on the basis of its own terms. It is therefore sometimes difficult to determine what the parties have agreed about whose terms govern the contract. 

 

For example:

 

Scenario One:  Party A offers to supply goods or services to Party B on Party A’s standard terms and conditions. Party B accepts the offer, but says that it does so on the basis of its own standard terms.  Whose terms apply in these circumstances?

Scenario Two:  Party A sends Party B a purchase order with its standard terms and conditions on the back. Party B then sends back an invoice with its own terms and conditions on the back. The terms of the contract are not revisited, and the goods or services are subsequently provided. Again, whose terms apply in these circumstances?

 

What are the potential outcomes?

There are three typical outcomes to the kinds of scenario highlighted above:

  • The parties are contracting on Party A’s standard terms of business
  • The parties are contracting on Party B’s standard terms of business
  • The parties are contracting on some other terms, such as those imposed by legislation

 

What is the general position under English Law?

Fundamentally, each case will be determined by a Court based on its own particular facts. There is therefore no ‘one size fits all’ approach which can be said to apply to an issue involving a battle of the forms. 

 

However, the Court’s initial analysis will typically involve identifying ‘who fired the last shot. This means that the Court will seek to identify which was the last party to put forward terms and conditions that were not expressly rejected or challenged by the other party. However, this is not always possible, as the last set of terms and conditions may have been sent and received after the contract had been performed (eg. after goods have been delivered to a purchaser). 

 

It is also worth bearing in mind that if Party A makes an offer on its standard terms, and Party B apparently accepts the offer but says that it is doing so only on its own terms, then there has in fact been no acceptance of Party A’s offer at all.  Instead, Party B is deemed to have made a counteroffer, and the Court will then try to determine whether Party A is deemed to have accepted that counteroffer.

 

In some instances the Court will take note of previous dealings between the parties in an attempt to identify whether one party has accepted the other party’s terms and conditions. Such an exercise is however not without challenge and is not always conclusive.

 

On any analysis, an argument as to battle of the forms is unwelcome. Resolving this issue is typically a protracted and expensive exercise, with no guarantee of success. 

 

How do you protect your position?

The risks set out above are significant and real; the consequences of failing to address these at the pre-contract phase can be severe. With that in mind, what steps can you take to protect your position in contract negotiations and minimise the prospect of a battle of the forms arising?

 

The following practical steps are not guaranteed to entirely protect your position, but they may certainly help:

 

  • Provide the other party with a copy of your terms and conditions as early as possible in any transaction, and do not be afraid to send and refer to these terms and conditions on more than one occasion. Most importantly, ensure that any communications or paperwork agreeing to an order exhibit your terms and conditions, with direct reference to the same. This will maximise your chances of being deemed to have “fired the last shot”.

 

  • Include a signature block in your standard terms and conditions, acknowledging receipt of and consent to your terms and conditions. Ask or require the other party to sign this statement. A signature will ordinarily be enough to bind a party to terms and conditions.

 

  • Be wise to the fact that other companies will seek to impose their own terms and conditions.  Put policies in place to minimise the chance of you inadvertently agreeing to another party’s terms and conditions, and do not sign terms and conditions circulated by another party.

 

  • In any event, include a provision in your terms and conditions which asserts that these are to apply to any contract to the exclusion of any terms and conditions that any other party may seek to rely upon, both now and in the future. These clauses are not without challenge, but are better included than excluded.

 

  • Consider whether you are able to use standard quotation forms, purchase order forms and order acknowledgement forms that contain your standard terms and conditions.

 

  • Make a written record of all contract negotiations. Consider having these records or meeting notes signed by all attendees.

 

  • At all times be aware that a contract can be concluded by conduct. As such, if you proceed without having agreed terms, you may be deemed to have accepted the other party’s terms, regardless of your contrary intention. 
  • If in any doubt, seek legal advice before you perform, agree to perform or accept any liability under a potential contract. 

For further information, contact Ben Tompkins, an Associate in the Dispute Resolution team at Higgs & Sons on 0345 111 5050.

 

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