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Your Terms Or Mine

Update On The Battle Of The Forms

Having your own printed terms and conditions of contract is not enough.  For non-lawyers with business in mind it must be tempting to assume that the small print on the back of the other party's documents can be ignored, but it can't.

Where a buyer offers to buy goods on his standard terms, conventionally appearing on the back of the order form, and the seller accepts, but on his own terms printed on his acknowledgement of order and delivery of the goods follows, then generally this results in a contract on the seller's terms.

A contract is formed by offer and acceptance.  An acceptance of an offer on different terms is not an acceptance at all but a counter-offer.  So here the seller by accepting the order on his own different terms has in fact made a counter-offer which, in the absence of anything further passing between the parties, will generally be treated as having been accepted by delivery and acceptance of the goods.  The seller's terms will apply – he has succeeded in firing the last shot in the battle of the forms.

That was the sequence of events and the outcome in Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209.  The parties had been doing business for years as part of a chain of suppliers ultimately to Rolls Royce of components used in the engine control systems for their aero engines.  Tekdata supplied Amphenol with connectors some of which they claimed had been delivered late and were defective, not fit for purpose or of merchantable quality.  Amphenol successfully defended on the basis that the contracts were on the terms of their acknowledgement of the purchase orders which excluded or limited their liability for breach of contract. 

It was said on behalf of Tekdata that the words 'subject to the terms and conditions as printed overleaf' at the bottom of Amphenol's acknowledgments were not intended to have any contractual effect and were to be ignored.  The Court of Appeal, overturning the judge's decision, said that such a conclusion could only be reached if Tekdata could show that the parties had expressly agreed that these words were to be ignored or if such an agreement was necessarily to be inferred from the circumstances of the case and that this was a high hurdle to get over.  The court found that there was no evidence of any such express agreement or from which such an agreement could be inferred.  The judge had wrongly concluded that the parties must have intended that Tekdata's conditions should apply for reasons founded on 'reasonable commonsense' and by paying too much reliance on correspondence written after the dispute had arisen.

So whilst it is not impossible that the 'last shot' approach may be displaced it will be a rare case.  The Court of Appeal confirmed that to provide certainty in contractual relationships the general rule should be that in battle of the forms cases, where both parties are seeking to rely on 'standard form' documents, the traditional offer and acceptance analysis of formation of contract is to be applied.  This would only be displaced, and that with difficulty, if the documents passing between the parties and their conduct showed objectively that their common intention at the time the contract was made was that some other terms were intended to prevail, and the evidence did not justify such a conclusion in this case. 

It is worth mentioning that it will not help if a party's standard terms expressly state that they are to prevail over any terms and conditions in the other party’s documents if they are in the event followed by a document on the other party's terms (see Butler Machine Tool Co Ltd v Ex-Cell-O Corp. (England) Ltd [1979] 1 WLR 401).

Commercial clients must be aware of the need when involved in an ordering process in which both sides are seeking to rely on their own standard terms, to get the 'last shot' in and to have procedures in place to ensure this happens or where they can, to negotiate whose terms are to apply. Particularly when there are to be repeat orders, a negotiated supply agreement signed by both parties may be advisable.

For further information please email Nick Bates or Janice McMullen.