24 April 2015 by Matthew Miller

Two wrongs don’t make it right…

Problems can arise when both parties to a contract want to rely on their own standard terms; the so-called ‘battle of the forms’. However, there are 2 general rules that can usually be followed:

  1. the last set of terms and conditions that are incorporated, before the contract between the parties is formed, will apply (subject to some exceptions); and
  2. a party’s standard terms and conditions will not be incorporated unless it has given the other party reasonable notice of them and indicated that it intends to rely on them. 

In a recent case before the High Court, the position was that the buyer had:

  • placed orders for goods on a weekly basis using fax, email and also (sometimes) post;
  • printed its standard terms and conditions of purchase on the back of each purchase order, but not referred to them at all on the front page of the purchase order; and
  • when faxing or emailing an order, typically only sent the front page of the purchase order.

The seller in turn had acknowledged receipt of each purchase order by sending the following standard reply: “the quoted prices and deliveries are subject to our normal terms and conditions of sale (copies available upon request)”. Crucially, though, the seller had never actually provided its standard terms and conditions of sale to the buyer.

The buyer claimed the goods in question were defective, the seller argued its’ liability was limited/excluded by its standard terms of sale, and the parties disputed whose standard terms prevailed. In fact, in this instance, the court decided that neither party’s standard terms applied.

The buyer usually placed its orders by fax or email, sending only the front page of its purchase order to the seller, so its own standard terms (printed on the back but not referred to on the front page) were never brought to the seller’s attention, and so the seller was not aware the buyer intended to rely on them. As such, they did not form part of the contract between the parties.

Equally, in order for the seller’s standard terms of sale to have been incorporated into the contract, it should have sent them to the buyer when acknowledging each purchase order. But the seller did not do so, meaning its standard terms were not incorporated into the contract.

Where a contract for the sale of goods does not incorporate the seller’s, or the buyer’s, standard terms and conditions, the relationship is instead governed by the implied terms set out in the Sale of Goods Act 1979. So, for example, the seller cannot exclude or limit its liability for defective goods (which it would otherwise be able to do, subject to a reasonableness test).

It is vital for businesses, when buying or selling goods or services, that their standard terms are effectively incorporated into each contract, to avoid disputes and exposure to increased liabilities.

For advice on your standard terms of business, and how best to incorporate them into contracts with your customers or clients, please contact Matthew Miller: matthewmiller@boltburdon.co.uk or 020 7288 4739.

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