The Battle Of The Forms The Incorporation Of Contract Terms

Date Added 24.11.15

Issues often arise where parties to a contract each try to rely on their own standard terms, this was seen in a recent High Court case[1]  which involved a long standing commercial relationship between two parties.

The facts

The Buyer would often place orders for goods with the Seller on a regular basis, however the method in which the buyer would place such orders was not consistent; sometimes via e-mail, fax or post. The Buyer’s terms and conditions were printed on the reverse side of their purchase order without there being any reference to such terms and conditions on the front cover of the purchase order. Therefore, when the Seller came to print off such orders if made via fax or e-mail the standard terms and conditions would often not appear on the print-out. The Seller would acknowledge the Buyer’s purchase orders by returning an ‘acknowledgement of order form’ which stated that the “quoted priced and deliveries are subject to our normal terms and conditions (copies available upon request)”. The Seller’s terms and conditions were never presented to the Buyer.

The Judge made it clear that as a general rule, “where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, the correct analysis assuming that each party’s conditions have been reasonably drawn to the attention of the other, is that there is a contract on B’s conditions’.

However, each case must be taken on its own facts, and on these particular facts it was held that the method in which both the Buyer and the Seller had attempted to bring their terms and conditions to each other’s attention was inadequate; resulting in neither of the parties’ terms and conditions being incorporated into the contract.

The Judge rejected the claimant’s argument that its terms and conditions were incorporated into the contract by virtue of the previous course of dealings between the parties as there was no consistency in the way orders were placed each time.

What does this mean for you?

The decision in this case highlights the importance of providing the other party with reasonable notice of your terms and conditions to ensure that they are incorporated into the contractual arrangement. If sending orders by fax or email it is essential to draw the seller’s attention to standard terms of purchase either by an express reference on the front of the purchase order or by sending the terms and conditions as a separate document. When neither the seller’s or the buyer’s terms and conditions are incorporated into a business contract, the Sales of Goods Act 1979 will automatically apply. The seller will be unable to limits its liability for defective goods as this is a matter of contract. This could have major implications on the parties involved.

If you have any questions in regard to the above then please contact our Corporate Commercial Team will be able to offer you the advice to best protect your company’s needs and interests. If you have any queries in relation to the incorporation of your terms and conditions into your contractual relationships then please contact our Commercial Contracts team on 01908 306 950.


[1] in Transformers and Rectifiers Ltd v Needs Ltd [2015] EWHC 269

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