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Battle of the forms: This means war…

Jun 13, 2012

Previously on the Waterfront blog, we’ve written about how contracts are formed. Our two part series explained the well-established principle that contracts are created when an offer is accepted. During a successful contract negotiation, both parties might make amendments to a proposed contract. Each change effectively amounts to a rejection and “counter offer”, until finally the contract is signed or acceptance is otherwise communicated.

Time to ready the troops? But what happens when there is no negotiation? What if both a buyer and a seller have their own standard terms and conditions? Both parties are, understandably, very keen to ensure that the contract governing the relationship will be their own. They’re familiar with its terms, the clauses will be favourable to them and they aren’t going to have to pay lawyers to review and advise on the terms.   Naturally, the very thought of paying us (already too rich) lawyers even more money is enough for many a buyer or seller to dig their heels in and ready for battle. So if both parties are doing their utmost to ensure any contract made is on their own terms and conditions, which set is going to prevail? In practice, the prevailing contract will be the final set of terms despatched before:   1. actual acceptance (i.e. one party finally relenting); or 2. deemed acceptance by performance (e.g. in a contract for the sale of goods, performance would be delivering the goods).   As a result, what ensues is a constant attempt by the parties to “fire the last shot”.  Cue each party trying to include their terms and conditions in as many pre contract documents as possible to ensure that their terms are the last to pass between the parties before performance.   But even this approach has proved unsuccessful in the past. In the sixties, a Court ruled that the seller’s terms (which had been delivered with the consignment in an attempt to get that last shot) had not prevailed.

This was because on delivery, the buyer hadn’t signed them, choosing instead to stamp, ”Received on [Buyer’s] conditions”. The buyer’s terms prevailed.   [ One buyer took the battle a little too seriously...[/caption] More recently, the Courts have found that neither party’s terms prevailed, instead deciding that the contract between the parties was governed by the Sale of Goods Act. It was noted by the judge that, “...both sides buttoned their lips, or fastened their seatbelts, and hoped that there would never be a problem, or that, if a problem arose, it would be a small enough one that, with goodwill, it could be settled 'on a case by case basis”. A collective shudder would no doubt have been felt by all contract lawyers as the judge spoke.   In my opinion, a battle of the forms can often involve the use of rather “questionable” tactics, and such behaviour will likely do nothing but sour any business relationship from the start. A reasonable and measured approach to contract negotiation can hopefully help you steer clear of any impending battles.   If you’re looking for any advice on making sure your terms properly accepted, give the commercial contracts team a call for a free, no obligation initial chat. Otherwise, ready the cannons...