2020-02-17
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Winning the "battle of the forms"

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Posted by Christine Jackson on 13 June 2010

Christine Jackson Partner

Suppliers and customers would ideally prefer to rely on their own respective standard conditions. But in order to be of any use at all, these have to be incorporated into the contract between seller and buyer.

Standard terms of sale, normally used by suppliers, are becoming more commonly used by purchasers (especially large national retailers). Problems start when both supplier and purchaser present each other with their own standard terms resulting in two conflicting documents jockeying for precedence; the so-called "battle of the forms".

Businesses using standard terms need to take all reasonable steps to bring the conditions to the other side's attention. The best way is to point out the conditions expressly in pre-contract correspondence. However this gesture almost invites the other side to negotiate the terms – which is precisely what standard terms are designed to avoid.   

The difficulty is in determining whose terms prevail. If each side seeks to impose its own terms, there is no acceptance at all. In practice, this means that the last set of terms, despatched prior to acceptance or performance (the last shot fired in the battle of the forms), will prevail.

Solutions

Practically, a seller has (only) two alternative courses of action: one is less commercially attractive but more likely to result in legal certainty, the other is usually more attractive from a commercial standpoint, less so legally.

Negotiate

The first option is to negotiate the terms with the buyer. If the seller’s conditions are expressly agreed as governing the contract then specific, agreed variations can be set out in a side letter. The advantage is that, once agreement is reached, the parties know exactly where they stand legally. The disadvantage is that negotiating the contractual terms may be costly and time consuming.

Fire the last shot!

Alternatively, ensure that the conditions at least appear in pre-contract and contract documentation. This might include product brochures and catalogues, tender/proposal forms, acknowledgement of orders, delivery notes and invoices too. However, this tactic can fail as in the case of British Road Services Limited v Arthur Crutchley & Co Limited ([1968] 1 All ER 811). The dispute concerned a consignment of whisky delivered to the buyer's warehouse. The delivery note contained the company's standard conditions - about as late a pre-performance document as is possible - but instead of simply signing the note, the buyer's warehouseman stamped it "Received on [the Buyer's] conditions". Given the long history of dealings between the two parties, the Court of Appeal held that the rubber stamp constituted the last shot of the battle and the buyer's conditions prevailed.

This sort of battle of the forms studiously avoids the burden of addressing the other party's standard conditions and, for many businesses, they have the added benefit of being undiluted and uncompromised by negotiation and should therefore offer strong protection. However, battling it out in this manner does not carry the legal certainty of a negotiated agreement.

Drafting?

One drafting solution which has attempted to address this situation is to incorporate a prevail clause in the standard terms (see below) which stipulates that (where, for example, the terms are issued by the supplier) the supplier's terms will prevail over any terms issued by the purchaser: "Application of terms - subject to any variation under condition [ ] these Conditions form part of the Contract to the exclusion of all other terms and conditions (including any terms or conditions which the Purchaser purports to apply under any purchase order, confirmation of order, specification or other document)."

The downside of this type of provision is that if the standard terms haven’t been accepted then neither will this clause. However, these types of clause continue to be used in the hope of bluffing the other party into assuming that nothing will be gained from trying to impose its own terms. Of course, provided the other party is astute enough, it will deal with this potential problem by delivering its own standard terms immediately preceding the performance (or acceptance) of the contract. 

Conclusion

So, if you decide not to negotiate, make sure that your terms appear on the last document passing between the parties before the contract has been performed. Fire that last shot! 

About the author

Christine helps clients manage risk and financial exposure in their day to day business dealings.

Christine Jackson

Christine helps clients manage risk and financial exposure in their day to day business dealings.

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