Credit Control
Battle of the forms
- The Problem
Suppose you sell air cooling machinery and you receive a telephone order from a company of heating and ventilating engineers wishing to purchase equipment from you?
You then send the purchasing company a quotation to sell the equipment for say £5,000.00 along with a letter containing your standard terms and conditions of sale. These may be printed on the reverse of the letter or detailed separately. One of the conditions clearly states that the goods will be subject to these conditions of sale.
However, when your purchaser orders the goods they do so on their pre-printed order form. This contains their terms and conditions of purchase which clearly states that their terms apply to the contract.
You then deliver the equipment to the company but make no mention at all of the sale of purchase conditions. Whose terms and conditions apply?
- How does the law solve the problem?
In this example both parties want their terms to apply but obviously this cannot happen. The law has to provide a resolution of this conflict. The problem is solved, and the winner of the battle of the forms, is determined by using the contractual rules of offer and acceptance. This establishes at what point the contract is made and hence whose terms and conditions apply.
In the example given:
- Your quotation containing your terms and conditions is an offer.
- The purchaser's order form containing their terms and conditions is a counter offer (or qualified acceptance)
- At this stage no contract exists. But if you, the seller, do something to indicate acceptance of the counter offer then it is at this stage the contract would come into existence. That "something" may be delivery of goods and such an act may well be tantamount to acceptance of the purchaser's counter offer. It was this counter offer which contained their standard terms and conditions. So it will be their terms which will apply and not yours.
In a leading English case it was held that if there was a dispute before the courts then it would be open to the court to look at all the circumstances of the transaction and decide what the parties had agreed and thereby determine whose terms and conditions apply.
- Is there a way to win the battle?
Suppose you send out a quotation containing your standard terms and one of the conditions says that in any circumstances your terms will apply. In response let us suppose your purchaser responds with their order form containing their terms that state that in such a situation their terms will apply. In this situation if there is a dispute the courts may well say that no agreement exists due to this conflict.
To solve the problem what you really need to do is be "alive" to the issue. In the situation just described what you, as the seller, should do if you want your terms to apply is to contact the purchaser and clearly state that you want your terms to apply and then conclude the contract in writing on that basis.
You should clearly state that your terms and not the purchaser's apply and have them follow this up with a letter confirming the position. If there is a real conflict between your and the purchaser's terms then you will have to negotiate an acceptable deal between yourselves and come to an agreement this way.
What you don't want to happen is accept the purchaser's terms by accident or default. So, if you deliver the goods following upon receipt of their terms and conditions simply because you were careless making no mention of your conditions applying it will still be the case that you will have been deemed to have knowledge of them and accepted them apply without you even being aware of it! So the rule is be vigilant and have your staff be vigilant!
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