Farmers often have terms dictated to them by suppliers and buyers. Sometimes there is scope to negotiate contract terms, sometimes not. However what contractual parties cannot do is unilaterally change terms after the contract has been entered into.
Just recently we have started to see the first Brexit related contractual clauses which seek to pass the cost of Brexit (new tariffs, charges, customs issues, cost increases, delays) onto the buyer. This is particularly the case with animal feed.
Standard terms of sale are regularly used by suppliers and purchasers. Sometimes 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 or buying products on 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, dispatched prior to acceptance or performance (the last shot fired in the battle of the forms), will prevail.
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.
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 ( 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 and the parties may find themselves in a legal dispute over which terms apply.
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.
In light of the uncertainty surrounding what will happen after 29 March 2019, it is difficult for suppliers to assess the financial impact on their business. As a result, we are starting to see ‘Brexit Clauses’ creeping into contracts and standard terms in which one party seeks to pass any additional costs incurred as a result of increased custom duties, changes in VAT and exchange rates, or the potential costs of complying with new or more onerous regulatory standards, to the other party.
Brexit clauses for farmers are particularly onerous. A combination of customs delays due to inspection and also tariffs and currency volatility may well mean that animal feedstuffs are more expensive than budgeted for and in a worst case may not turn up on farm at all.
Disputes are likely to arise where contracts are silent on the possible consequences of Brexit, one party is seeking to terminate a contract as a result of market changes, clauses are unclear, or there is question over whose standard terms apply where both parties seek to rely on their own terms. Disputes can also arise if one party tries to unilaterally change the terms of a contract after it has been entered into.
If you decide not to negotiate, make sure that you have read the terms between the parties before the contract has been performed. Keep a record of the terms you are singing up to and most of all if you are worried about the terms seek proper advice. With the potential for disruption and also increases in cost it would also be advisable for farmers to keep samples of inputs supplied just in case there is a problem with the input in question. If you do find yourself in dispute or just want some advice, speak to a member of our team to discuss your options and the early dispute resolution strategies available to you.