In the recent case of Transformers & Rectifiers Ltd v Needs Ltd (2015) the parties were involved in a dispute concerning the suitability of nitrile gaskets. The parties had a 20 year course of dealings during which orders were placed and deliveries made in various ways and both contended that its terms and conditions applied. In reaching its decision the High Court took the opportunity to refer to general authorities on the incorporation of terms.
Having reviewed the relevant authorities, the judge set out the following principles:
- where A makes an offer on A’s conditions and B accepts that offer on B’s 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.
- where there is a reliance on a previous course of dealings it does not have to be extensive – three or four occasions over a relatively short period may suffice.
- the course of dealings by the party contending that its terms and conditions are incorporated has to be consistent and unequivocal.
- where trade or industry standard terms exist for the type of transaction in question, it will usually be easier for a party contending for those conditions to persuade the court that they should be incorporated, provided that reasonable notice to the application of the terms has been given.
- a party’s standard terms and conditions will not be incorporated unless that party has given the other party reasonable notice of those terms and conditions.
- it is not always necessary for a party’s terms and conditions to be included or referred to in documents forming the contract; it may be sufficient if they are clearly contained or referred to in invoices sent subsequently.
- by contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late.
In this particular case, the court found that neither party’s terms were incorporated - the problem facing the buyer was that it did not place its orders in the same way every time. Some orders were placed by post with the terms and conditions on the back but with no mention on the front of the existence of the terms. However, on many other occasions the orders were placed by email or fax with no terms and conditions included. In the absence of a consistent practice of enclosing terms and conditions with every order, particularly where the order did not refer on its face to the terms and conditions, the seller was entitled to assume that the buyer had not intended to rely on the terms.
As for the seller, its terms were referred to in order acknowledgments with “copies available on request”.
The court found that for these terms to be incorporated by reference to the order acknowledgement the seller must, at the very least, refer to them on the face of the acknowledgment in such a way that it is clear they govern the contract and further, print a copy of them on the reverse of the acknowledgment with a statement on the face of acknowledgement that is subject to the conditions on the back.
Alternatively, the court said the seller could achieve the same end by sending the buyer a copy of the terms and conditions making it clear that they are the only terms on which it was prepared to do business.
As the seller had failed to adopt either approach the court decided that it had failed to satisfy the requirement of giving the buyer reasonable notice of the terms and conditions on which it sought to rely. As a consequence neither party could rely upon the contents of their respective terms.
This case serves as a useful reminder to parties to always ensure reasonable notice of its terms and conditions are provided to the other party and to consider the way in which such notice is given in order to ensure you win the “battle of the forms”.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.