Terms of business (T&Cs) are vital for the smooth operation of supply of goods and services for businesses across all industries. A clearer, functional set of standard T&Cs is a hugely valuable business tool that can govern business relationships without the need for individually-negotiated contracts with each customer or supplier, which would be impractical to achieve for busy commercial parties.
While firms strive for clearly drafted T&Cs setting out their delivery obligations, liability and apportionment of risk against a supplier or customer, this can be undermined if the supplier or customer instead seeks to impose their own T&Cs on the relationship. It is therefore important to understand whose T&Cs will prevail to any business contract. In legal doctrine, this is known as the “Battle of the Forms”.
In most cases, if two contacting parties each seek to impose their own equally-balanced T&Cs, the courts will apply the rule that the “last shot wins”. This means that the last set of T&Cs that are shared and acknowledged or accepted by the other party will prevail. While this is simple enough to comprehend, it presents difficulty where both parties seek for their T&Cs to be the ‘last shot’ issued in hope that this alone will make their T&Cs the binding document. It also has its limitations that even if the T&Cs are issued last, if they are not validly acknowledged or accepted by the other side, they would still not take legal effect.
To help counteract these complications, there are certain steps that businesses can take to make sure that their T&Cs stand the best chance of being the accepted terms of a contractual relationship.
Drafting of the T&Cs:
- Include clear wording that the T&Cs prevail over any other terms:This should include rival T&Cs, any other documents like pre-contract emails and even verbal discussions.
- Clarify the contract formation process: At its core, a contract requires an offer and an acceptance. If a supplier makes an offer by sending a quote, which a customer accepts, then the customer’s action creates the contract – potentially using their T&Cs. This suits a customer looking to win the battle of the forms. If a supplier wants to win the battle though, it should ensure it (not the customer) creates the contract. Supplier T&Cs should clarify that a quote is not a formal offer, but the customer’s reply to or purchase order following that quote forms the offer, which the supplier accepts or rejects. The T&Cs should confirm that the contract comes into existence only upon the supplier’s acceptance and on the basis of the supplier’s T&Cs. If the customer does nothing further to challenge that position, it gives a clear indication that the supplier’s T&Cs should apply to the contract.
Practical steps for suppliers
- Having set out an order process in the T&Cs, always follow it in practice: Avoid making inadvertent offers by ensuring that pre-contract documents and correspondence (for example quotes or emails sending out a catalogue) are clearly described as not being offers. That way, the offer and acceptance process is not accidentally triggered at the wrong time and the process in the T&Cs can operate as planned.
- Refer to the T&Cs in all pre-contract documents: A simple way to do this is to include a hyperlink to the T&Cs in all relevant documents.
- Make the position even clearer when quoting: Quotations should clearly state that (a) they are not an offer and (b) any order that is placed further to the quote is based on the supplier’s standard T&Cs. For added clarity, the T&Cs could be appended to the quotation itself.
- Send the T&Cs again with acceptance: Even if the T&Cs were shared at quote stage, attach them again when sending an order acknowledgment and make clear in the Order Acknowledgment email that the order – and the legal contract between supplier and customer – is based solely on the supplier’s T&Cs.
- Commence work only after order acknowledgement: Staff should not commence work on an order until after the order acknowledgement has been sent. This counters the claim that the customer “created” the contract (and so the customer T&Cs apply) because the supplier started work on the contract following the customer’s action or correspondence.
For further information on how to make your T&Cs work harder for you, please contact Rebecca Cooper on rac@blasermills.co.uk or call 01494 932614.