Do Your Terms & Conditions Apply? Use Them Properly and Win the “Battle of the Forms”
Many businesses ensure that they have a good working set of terms and conditions that they can use when supplying goods or services or buying the same from other businesses.
A lot businesses, however, fail to take the necessary steps that those terms are properly “incorporated” within the contract with the customer / supplier, the result being that they are of no effect. In other situations, both supplier and customer try to impose their own terms, making it problematic to identify on whose terms the parties have contracted – this is commonly termed “the battle of the forms”.
Get the Timing right
The basic rule is that contractual terms cannot be introduced or imposed after the contract has been agreed and entered into. A common mistake is for suppliers to put their terms and, for the first time, conditions on the back of the invoice – this is too late, because the contract is likely to already have been formed by this stage. The terms should be provided at the start of the ordering process, and before goods / services are supplied. To avoid inadvertently agreeing to supply on the customer’s terms, a seller should:
- Phrase marketing material carefully, to ensure a buyer cannot accept and form a contract there and then;
- Use a standard order form, which makes it clear that the buyer is buying on the seller’s terms, which should be provided at that stage.
- Put procedures in place to ensure that orders received not on the standard form are not accepted, with the buyer then being requested to put the order on the standard form.
Winning the “battle of the forms” – practical tips
A “battle of the forms” often arises between suppliers and customers of significant size – typically the seller makes an offer on its own terms, which the buyer then purports to accept, but on its terms. There then may be further exchanges of terms or references to a party’s own terms, in the hope that their terms will be incorporated within the contract. In practice, these can be thorny issues to resolve and, of course, each case will depend on its own circumstances. Generally, the courts come to one of the following conclusions:
- The party whose terms apply is the party who sent out the last set of terms before the contract was “accepted” (hence the scrabble to be that party);
- Neither party’s terms apply (if there is evidence that the parties intended for some other terms to apply);
- Neither party has done enough to ensure that their terms apply, and the court decides what other terms apply (implied terms / statutes);
- There is no contract at all (in practice, unusual, especially if the parties have started to perform under the contract, and clearly thought that they had a contract, but simply disagreed on its terms)
Devising a strategy to “win” this battle
Devising a strategy to “win” this battle must, of course, take account of varying commercial risks and objectives. There are some steps you can take, however, to improve the chances of prevailing:
- Include the terms, and references to terms (that, for example, can be set out on a website), in as many documents as possible, especially at the pre-contract stage;
- Supply the terms and conditions on a regular basis during the lifetime of the business relationship (for example, on the back of invoices) – this could help to establish that the terms have been incorporated through a course of dealing;
- Review and refine the procedures – ensure that open offers are not made in marketing material, use standard order forms, check orders received to ensure that they do not include other terms;
- Identify large / valuable contracts and, if a “battle” arises, spend the time on putting together a bespoke arrangement that satisfies both parties.
When setting up terms and conditions it is important to seek advice from a professional.
Simon Bean is a Partner at Wollen Michelmore working in the Employment and Dispute Resolution departments who has a wealth of experience in drafting contracts for businesses. For more advice get in touch.
Email – Simon.Bean@wmlegal.co.uk
Phone – 01803 225123