Terms & Conditions – How well do you use them?

02 Oct 2015
You almost certainly have standard terms of business (‘Terms’). Most businesses do. But do you use those them properly and consistently? Do you refer to them prominently on your purchase orders or sales documents? Do you include them in fax or email exchanges?

These questions came to the fore in the recent case of Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC). The Court was required to determine the preliminary issue of whether the contract between the parties was made on either the Claimant’s or Defendant’s Terms.

The Claimant, Transformers & Rectifiers Ltd, said its Terms applied because they were printed on the back of its purchase orders, even though there was no reference to them on the face of the purchase orders. The Defendant, however, claimed that its Terms applied because they were referred to on its acknowledgement of order form.

Each party sought to rely on beneficial provisions in its Terms. In particular, Defendant was hoping to rely on terms excluding and limiting liability to the Claimant. Each party claimed that its Terms prevailed, and so began a ‘battle of the forms’.

In summary, the Court rejected the Claimant’s claims, finding that the Claimant had (i) failed to make any reference to its Terms on the face of its purchase orders, (ii) been inconsistent in how it had delivered its Terms throughout the long period of dealing with the Defendant (if it had done so at all), and (iii) failed to include its Terms in faxes or by email (by which means the majority of orders had been sent).

However, the Court also found that the Defendant had failed to include its Terms on the acknowledgement of order form and had not provided a copy to the Claimant, so had failed to bring them to the attention of the Claimant. Consequently, the Defendant could not argue that its Terms were incorporated into the resulting contract.

The so-called “battle of the forms”, where each side argues that its Terms prevail, is a long-standing area of dispute in commercial contracts. This recent case acts as a reminder that if you are to stand a chance of winning the battle of the forms, you will have to be diligent and consistent in the way you use and present your terms during the contractual process, including: –

• Making clear reference to your Terms on your transactional documents, such as your purchase orders, proposals, acknowledgements of order and delivery notes.
• Ensure you present your Terms at appropriate times in the contractual process, in order to ensure that you have the chance of those Terms being incorporated into any resulting contract.
• Be consistent in your use of your Terms, making sure you include them in all postal copies and in all email and fax documents (when it is all too easy to omit them).

If you get these basics right, you will at least give yourself a fighting chance if you get into an argument regarding “battle of the forms”.
If you fail to ensure you meet these basic requirements, you may very well be consigned to a contract which is not concluded on your Terms and instead be bound by Terms favouring your contractual counterparty.

If you require any further information regarding the presentation of Terms, their incorporation into contracts or anything relating to the “battle of the forms”, please let us know and we’ll be happy to help.