Three things to consider in getting your Terms & Conditions properly incorporated
Every business needs this — whenever operating on standard terms and conditions, there is always the challenge of ensuring they are properly incorporated. This challenge could arise with each and every negotiation where the parties are trying to conclude the contract on their own standard terms and conditions. The incorporation of standard terms and conditions is important, especially when involving limitation and exclusion clauses that mitigate the risks of doing business. These are our three top tips you should consider when drafting your terms and conditions:
- Know when the contract is binding — one of the key issues to consider is to identify precisely when a binding contact is formed. There is plenty of case law in this area — but in practice it is generally accepted that the last set of terms dispatched before acceptance or performance (without objection being taken to them) will prevail (for example, on acceptance or before delivery). This last set of terms is sometimes referred to under English contract law as the “last shot” in the battle of the forms.
- Make everyone aware of your terms — you must give reasonable notice to the other party. A party will not be subject to terms and conditions that it was not aware of and did not have the opportunity to read.
- How to bring the terms to the other party’s attention — a party who wants to trade on its own standard terms will need to consider how its terms are brought to the other party’s attention (for example, they may be published on its website or on the reverse of its invoice).
There are no hard and fast rules that a business can follow to ensure that its standard terms and conditions apply to each and every arrangement that it enters into. It is, however, good practice to attach your terms and conditions (or, if they are considerably longer, provide a summary with information on where to access the full version) in as many documents ( for example in the original price quotation or on the order confirmation) as possible.
A more thorough approach to ensure greater certainty for contracting parties, would be to structure the contracting process in such a way that each party signed up to a formal contract (i.e. both signatures on the same document) which attaches the applicable standard terms and conditions. Such certainty will make it more difficult for a party to assert their own terms over documents that the other party have not signed up to.
A Poignant Legal Anecdote…
In the case of Transformers and Rectifiers Ltd v Needs Ltd, the High Court decided that neither parties’ terms and conditions applied despite the parties trading history stretching over 20 years. The synopsis of the case is as follows:
- the buyer, whose standard terms were printed on the back of its purchase order, but not referred to on the front cover, had not made it sufficiently clear that it wanted to rely on its terms. -Fundamentally, the terms were not sent to the supplier when the customer placed its purchase orders by fax or e-mail; and
- the seller, whose order acknowledgement stated that the order was “subject to our normal terms and conditions of sale (copies available on request)”, had never provided a copy of its standard terms and conditions and had therefore failed to make it sufficiently clear that its terms and conditions were to apply .
The case serves as a useful reminder that if a party wants to rely on its standard terms and conditions — it must give reasonable notice of them to the other party, and that a party will not be subject to terms and conditions that it was not aware of and did not have the opportunity to read.
Careful examination of sales documentation (both front and back and any apparent or non-apparent attachments) is therefore required when considering the relevant paper trail in a battle of the forms case.
So the case law is clear, and why it’s important to get this right from the start.
Please contact the Trowers’ team for more information. We have also produced a series of fact sheets to help you, so click here to access our online resources.
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Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice.