Standard terms: May the forms be with you

It is a common scenario. A buyer places an order accompanied by his standard terms and conditions of contract. The supplier responds with an acknowledgement of the order which states that it is based on his standard terms. He then supplies the items ordered. It is obvious that the terms and conditions of the supplier are the ones which apply – isn’t it?

“The battle of the forms” is a concept which has occupied contractors and lawyers for almost as long as there have been written contracts. Happily, (for the lawyers) the traditional approach of resolving the issue as to which terms and conditions govern a contractual relationship by simple application of the rules on offer and acceptance has become more complicated with the use of emails and instant ordering.

That is not to say that the courts do not apply the basic principles. Indeed most, if not all, case law develops with these in mind. However, a new case in the Technology and Construction Court demonstrates that there are always different angles to interpret old favourites.

A supplier seeking to incorporate its terms and conditions by referring to them in its acknowledgement of order must ensure that they are provided to the buyer and not simply rely upon the buyer requesting them

In Transformers and Rectifiers Ltd v Needs Ltd, orders were placed by Transformers for equipment to be supplied by Needs over the course of approximately 20 years. During this time the purchase orders were sent to Needs by fax, email and post. Transformers’ standard terms and conditions were printed on the reverse of the hard copies of the purchaser orders but, when these orders were sent by fax or email, they were not included. On receipt of the purchase orders Needs sent an acknowledgement stating that all orders were subject to Needs’ terms and conditions of sale. Copies of the terms were not included, but were available on request. The issue as to which terms governed the contracts arose when Transformers alleged that Needs had delivered items which were not fit for purpose.

Following a discussion of case law going back to 1969, relating particularly as to whether the usual rules of offer and acceptance could be displaced by a course of dealings, the judge found that neither of the parties’ terms and conditions applied.

So what can you do to be reasonably confident that it is your standard terms and conditions which govern your contract when you replace or receive an order? Firstly, bear in mind that such cases turn on their facts and the courts have refused to lay down general rules. A specific outcome cannot be guaranteed. Secondly, some consideration could be given to a few points arising from the judge’s analysis.

From a purchaser’s point of view, it is sensible to ensure that where repeat orders are placed (it does not have to be very long before a course of dealings can be established), these are in a consistent format, giving clear notice to the supplier each time of the terms which are intended to govern the relevant order. It should be evident that the purchaser intends to rely upon them. If, for example, an order is placed by email, ensure that, on all occasions, the pdf attachment contains both the order and the terms and conditions.

A supplier seeking to incorporate its terms and conditions by referring to them in its acknowledgement of order must ensure that they are provided to the buyer and not simply rely upon the buyer requesting them. If the terms are an industry standard, of which the buyer could be deemed to have constructive notice, this may be sufficient, but where they are bespoke, the supplier must make it clear to the buyer that he is, effectively, making a counter offer.

The ultimate solution to this potential dilemma? The parties should try to take a little time to discuss the matter in advance and reach an express agreement. In most cases, this may not be too difficult or time consuming - and is almost certainly better than keeping your fingers crossed.

Stephanie Canham is national head of projects and construction at law firm Trowers & Hamlins