Avoid a ‘battle of the forms’ in supply agreements — clarify whose terms and conditions apply

It is common practice for businesses to have a set of standard form terms and conditions that apply to all their business agreements for the supply of goods or services. This is a good practice, but only when it is implemented properly.

Businesses should be aware that the use of standard terms can cause unnecessary disputes amongst traders if they fail to clarify whose standard terms and conditions will apply to their dealings before they reach a final agreement.

Standard terms in the transport and logistics industry

This is especially true for our clients in the transport and logistics industry who often contract with counterparties on the basis that there will be no ‘formal’ written agreement, but their enforceable rights and obligations will be as set out in their standard terms and conditions. Those clients will know that often, their standard terms and conditions are not signed by the parties but are attached to quotes or purchase orders — failing that — referred to in quotes and purchase orders as being ‘available on our website’.

What is a ‘battle of the forms’?

A ‘battle of the forms’ will arise where, for example, one party issues a quote for the provision of goods or services on the basis that their standard terms and conditions will apply, following which the other party responds with a purchase order attaching their own standard terms and conditions. The parties proceed with the engagement, each expecting their standard terms and conditions to be the definitive legal document.

How Courts resolve conflicting terms

Where a ‘battle of the forms’ arises, the Courts may attempt to synthesise or reconcile conflicting terms wherever possible. However, where terms cannot be reconciled, the Courts will have regard to all of the circumstances including the communications between the parties, the content of the conflicting terms and conditions and the conduct of the parties.

The Courts may also apply the ‘last shot rule’, which provides that a counteroffer kills the original offer such that the terms that govern the transaction will be the terms that were last offered by a party, provided those terms were not objected to. This is consistent with the traditional contractual doctrine of offer and acceptance, where each time a party sends their terms and conditions to the other party that is considered a counteroffer, and performance of the contract constitutes acceptance of the final counteroffer.

How to minimise the risk of a ‘battle of the forms’

To limit the risk that a ‘battle of the forms’ will arise, businesses should:

1. include within their standard terms and conditions a clear provision which excludes any terms and conditions of the other party and/or provides that in the event of inconsistencies, their terms and conditions will apply — this is not a failsafe, but may strengthen their position, particularly if adopted in conjunction with the balance of our recommendations set out below;
2. consider in the context of the value of the transaction and their understanding of the counterparty’s business reputation whether it is appropriate to proceed on the basis of standard terms or whether if you should finalise a ‘formal’ bespoke contract;
3. communicate clearly their expectation that their standard terms and conditions will apply;
4. ensure that where a counterparty provides their terms and conditions (whether by attaching them to, or referring to them in, their purchase order or quote, or otherwise), they contact them in writing to explicitly state that their terms and conditions are not accepted and the only basis upon which you will proceed is on that of your own standard terms; and
5. not proceed unless and until the parties have acknowledged and agreed in writing whose terms and conditions will apply to the dealing.

Contact us

If you require advice regarding your standard terms and conditions, please contact a member of our Transport and Logistics group.