Ensuring Your Terms & Conditions Apply

A purchaser of goods or services sends a Purchase Order to a seller with its “T’s & C’s” in faint writing on the reverse.  The seller then sends an Acknowledgement of Order referring to its “T’s & C’s” and proceeds to supply the goods or services.  The question is: “whose terms and conditions apply”?

This question came before the Technology and Construction Court recently in the case of Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC). The judgment provides the following useful summary of the authorities concerning what is commonly known as ‘the battle of the forms’:

• i) Where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, the correct analysis, assuming that each party’s conditions have been reasonably drawn to the attention of the other, is that there is a contract on B’s conditions: see Tekdata.
• ii) Where there is reliance on a previous course of dealing it does not have to be extensive. Three or four occasions over a relatively short period may suffice: see Balmoral at [356] and Capes (Hatherden) [2010] 1 Lloyd’s Rep 477.
• iii) The course of dealing by the party contending that its terms and conditions are incorporated has to be consistent and unequivocal: see Sterling Hydraulics [2007] 1 Lloyd’s Rep 8.
• iv) Where trade or industry standard terms exist for the type of transaction in question, it will usually be easier for a party contending for those conditions to persuade the court that they should be incorporated, provided that reasonable notice of the application of the terms has been given: see Circle Freight [1988] 2 Lloyd’s Rep 427.
• v) A party’s standard terms and conditions will not be incorporated unless that party has given the other party reasonable notice of those terms and conditions: see Circle Freight.
• vi) It is not always necessary for a party’s terms and conditions to be included or referred to in the documents forming the contract; it may be sufficient if they are clearly contained in or referred to in invoices sent subsequently: see Balmoral at [352], [356].
• vii) By contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late: see Balmoral at [356].

Interestingly on the facts of this case the judge found that neither party’s terms and conditions applied to the transaction!

Comment

This case provides a useful reminder of the importance of properly incorporating your terms and conditions into transactions. Rather than relying upon an oblique reference to your ‘standard terms & conditions’ or upon previous course of dealings, the safer option is always to include your terms & conditions in quotations, purchase orders and order acknowledgements and at the same time draw the other parties attention to them. And remember, the party who fires the last shot will often win the battle of the forms.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.