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17-September-2007
Battle of the forms...
Many businesses have their own standard Terms and Conditions attached to Purchase Orders, quotations, estimates, invoices etc. In a business transaction, many documents can go backwards and forward and the 2 parties to the transaction may well have different Terms and Conditions. If a dispute arises, the obvious question is whose terms come out on top.
These issues have been raised in many Court cases in the past. However, a couple of recent cases have looked at this area again.
In one case, the seller provided a quotation stating that any sales were subject to normal terms and current conditions of sale. The buyer placed its order without querying what those terms might be. The problem arose because the seller had an exclusion clause specifically excluding a number of implied terms under the Sale of Goods Act. After the transaction took place, the seller sent its invoices, which listed, is exclusion clause in full. The buyer passed the invoice for payment without comment or objection. Sometime later, the buyer put in another order with reference to its own terms, which required compliance with all Sale of Goods Act conditions and quality and fitness for purpose. A dispute then arose over the quality of the goods in question.
Normally, on the basis of past cases, the rule is that where there are contradicting Terms and Conditions, it is the last of the forms, which is sent and received without objection who comes out on top. I.e. he who fires the last shot wins the battle. In the most recent case referred to above, this was not followed. It was decided that on the basis of the previous Agreement i.e. the seller setting out its position more clearly than the buyer who did so at a later stage, it was the seller who came out on top and the claim was rejected.
In a case reported earlier this year, a buyer ordered goods subject to Terms and Conditions set out on the back of the buyer’s order. The seller acknowledged the order and stated that delivery was based on their general terms of sale. No further explanation was given by the seller. In this case, the Court found that although the buyer knew the seller had its own terms, it could not be supposed to have read or understood them and still less to have agreed to them. In this case, the battle was won by the person who fired the first shot not the last.
The problem is that we have a number of authorities, which could be seen to be contradictory. Sometimes, the first shot wins, sometimes, the last and unhelpfully, it can be something in between.
There is a well-worn legal phrase that every case must turn on its own facts. I accept that that isn’t particularly helpful for businesses trying to avoid Litigation but I am afraid to say it is unavoidable. The problems however can be minimised by studying the contracts, which are the basis of how businesses transact and to take appropriate steps to protect their interest. If businesses fail to do that then the Court may not step in to assist in that dispute. In those circumstances, all that one could hope for is that the Court would look at this in a fair and reasonable manner but that is no substitute for Directors and Managers making sure that their paperwork is in order. Failure to do so can result in costly and uncertain Litigation.
ENDS
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