When two parties want to use their own forms of contract it can lead to stalemate, but there are several ways to resolve this, as Bill Barton outlines.
- How to ensure you’re contracting on your terms?
- Firing the last shot can define terms
- Further legal developments likely
There are various different standard forms of contract that can be used when forming an agreement and negotiating the terms of the contract.
The problem arises when both parties want to agree on their own terms and are reluctant to carry out an agreement on the terms of the other party. This produces the battle of the forms.
It may be the case that an offer is made using the standard form used by the party providing the offer. If the party receiving the offer accepts but attempts to enforce its own terms, then the contract cannot be classified as accepted.
Instead, it is classed as a counter-offer, which can in turn be accepted by the provider through an unequivocal acceptance.
How to ensure you’re contracting on your terms
When using standard terms you need to take all reasonable steps to bring the conditions to the other side’s attention.
The best way of doing so is to point out the conditions expressly in pre-contract correspondence; however, this gesture invites the other side to negotiate the terms, which is precisely what standard terms are supposed to avoid doing.
In an attempt to address this battle scenario, a ‘prevail clause’ can be incorporated into the provider’s contract, which states that in the event the buyer tries to contract on their terms, the provider’s terms will prevail.
However, this clause may frequently fall foul of the law of contract if it has not been truly “accepted” by the other party.
Alternatively, the supplier may deal with the battle of the forms in a more direct way. This would involve discussions with the buyer regarding various terms of the contract and, as a result, agreeing variations.
This negotiation of the standard terms has a disadvantage due to the time and expense that will be incurred; the main motive for having and using standard terms of contract is to avoid such situations.
Firing the last shot can define terms
In some cases of the battle of the forms the terms of the agreement are decided merely by whichever party ‘fires the last shot’. This is making the assumption that the opposing party has agreed through lack of objection, and proceeding to carry out the agreement.
This approach was followed in Trebor Bassett Holdings v ADT Fire and Security (2011). The main advantage of this is that very little time, if any, is wasted in negotiating terms between the two parties.
“Given the ever-growing importance of cashflow, ensuring that you are contracting on your own, favourable, terms is more important than ever”
There is, however, a risk that the opposing party may also carry out the same strategy and succeed in firing the last shot. For instance in the case of British Road services Limited v Arthur Crutchely & Co Limited (1968) a quantity of whiskey was being delivered to the buyer’s warehouse.
The delivery note had on it all the provider’s terms and conditions, with a view to having it signed by the warehouseman and subsequently “firing the last shot”.
However, the warehouseman, instead of signing the delivery note, stamped it with a note stating “Received on [the buyer’s] conditions”. The Court of Appeal held that this stamp constituted the “last shot” and the buyer’s conditions prevailed.
Further legal developments likely
Given the ever-growing importance of cashflow in the industry and the disputes that arise out of this, ensuring that you are contracting on your own, favourable, terms is more important than ever and it is unlikely that we have heard the last word on this.
However, until we do it is worth taking your time to ensure the contract is agreed on terms that are acceptable to you before commencing work.
Bill Barton is a partner at Barton Legal