The above question is frequently asked by parties who wish to incorporate their own standard terms into a contract but are faced with the other contracting party’s conflicting terms.
It is a common situation for businesses to want to contract on their own standard terms and this scenario is frequently referred to as the battle of the forms. The battle of the forms could occur, for example, when one party provides a quotation for a supply of goods and/or services that is accompanied by the party’s conditions of sale, and the other party accepts that quotation with a purchase order subject to its own standard terms.
The issue arises when neither of the parties explicitly accepts or rejects the other party’s standard terms and proceeds to perform the contract.
There are several possible outcomes resulting from the battle of the forms scenario:
The last dispatched set of terms prevails
Neither party’s terms apply and some other express terms are incorporated into the contract
Neither party’s terms apply and implied terms are incorporated into the contract
No contract is formed
The first outcome is most likely to occur in a situation where the last set of terms despatched by the contracting party is followed by performance of the contract. The act of sending of the last set of terms is often referred to as the “last shot”. This well established common law doctrine is unlikely to be displaced unless it could be shown that the contracting parties’ conduct and any documents passing between the parties show that they intended to rely upon some other express terms, as set out in correspondence, for example.
The second possible outcome could therefore occur provided it could be shown that those “other” express terms have been incorporated into the contract by a course of dealing between the parties. In order to successfully argue that terms have been incorporated into the contract as part of the course of dealing, it must be shown that the parties regularly traded on the same terms and by following consistent procedures.
The third possibility is that neither party’s standard terms apply and in the absence of other documented terms, the court will have to imply the terms into the contract. The court may imply terms on the basis of the parties’ previous course of dealings, the parties’ intentions or the objective meaning of the contract, custom, common law or statute.
Finally, there may be circumstances in which the courts will determine that no contract has been formed due to uncertainty over the applicable terms.
Disputes relating to the battle of the forms are often complicated however a prospective party to a contract could take some practical steps to strengthen its position and avoid the battle of the forms. Those include:
- References to standard terms on all pre-contract documents
- Requirement for return of acceptance forms or purchase order confirming the set of terms that applies to the contract
- Refraining from making open offers
- Agreeing variations in a side letter
- Ensuring that you fire the last shot!