The Battle of the Forms; Whose Terms and Conditions Apply?

Summary

On Friday 13 February, 2015 the High Court handed down its judgement on the case of Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC). The Court's decision highlights the importance of ensuring that when seeking to rely on your own standard terms and conditions, sufficient steps must be taken to ensure that the other party is given reasonable notice of both the terms and conditions and your intention to rely on them.

Background

The claim concerned a dispute between Transformers & Rectifiers Ltd (the Claimant) and Needs Limited (the Defendant) as to whose terms and conditions applied to certain orders. Both had their own terms and conditions which they alleged had been incorporated into the contract.

The parties had a long history of dealing with each other. The Claimant would place an order by sending a purchase order and the Defendant would respond with its acknowledgement. The method by which the Claimant placed its orders was not consistent; changing between fax, e-mail and post. Whilst the Claimant's purchase order had its terms and conditions printed on the reverse, there was no reference to this being the case on the face of the order. Further, the terms and conditions were not included with those orders sent by fax or e-mail, as they appeared on the reverse. Notwithstanding this, the Defendant admitted that at the time of the orders forming the basis of the claim, it was aware that there were terms and conditions on the reverse of the order.

The Defendant's acknowledgement of the Claimant's order contained a statement which specified that its quoted prices and deliveries were subject to its “normal Terms and Conditions”. Those terms were not sent with the acknowledgement, but a copy was stated to be available on request.

The Decision

The Court considered the facts of the claim and previous case law and recognised that there is a general principle that where a buyer makes an offer on its own conditions and the seller accepts that offer but on its conditions and performance follows, the seller's terms and conditions apply, as they act as a counter offer to the buyer's conditions. However, this is only the case when each parties' terms have been reasonably drawn to the attention of the other. The Court found in this claim that neither party had taken sufficient steps in this respect and so found that neither parties' terms and conditions applied.

The Claimant's Terms and Conditions

The Court found that the Claimant had taken insufficient steps to make it clear that it intended to rely on its terms and conditions for each order. As the Claimant did not follow a consistent practice of enclosing its terms and conditions with each order, particularly where the order did not refer to those terms and conditions on its face, the Defendant was entitled to assume the Claimant was not relying on them for that transaction, despite it being aware of their general existence.

The Defendant's Terms and Conditions

The Court found that a seller must at the very least refer to its terms and conditions on the face of its acknowledgement of order and make it clear that it is intended that these will apply. If the terms and conditions are the seller's own and not trade or industry standard terms, the seller must also give the buyer reasonable notice of those terms and conditions by either printing them on the reverse of the acknowledgement and making this clear on the face of the order or otherwise sending the buyer a copy of the terms and conditions. As the Defendant had never taken steps to provide the Claimant with a copy of its terms and conditions it had therefore failed to do enough for those terms and conditions to be incorporated into the contract.

What Does This Mean For You?

To avoid arguments as to whose terms and conditions apply it is always preferable to have a contract which has been signed by both parties and includes the required terms. However, we appreciate that this will not always be practical or possible.
Whether you are a buyer or a seller, if you are seeking to incorporate your own terms and conditions into a transaction via a purchase order or subsequent acknowledgement of order, it is crucial that your documents clearly identify that those terms and conditions will apply and that the other party is provided with a copy alongside that document. You must also ensure that your practice is consistent and that terms and conditions are referred to and sent every time you deal with a party. Further, if you are a buyer, be aware that if the seller's terms and conditions are referred to or included in their acknowledgement of your order, these could apply if no issue is raised with them.

If you have any queries in respect of the issues raised above, or would like some advice as to whether your current practices and documents are sufficient to protect your interests, please do not hesitate to contact Peter Barnard, Catherine Wasilewski or any member of the Dispute Resolution team.