The battle of the forms – how can you get your standard terms incorporated in a contract?

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High value or particularly complex transactions often involve detailed negotiations between parties and their legal advisors, sometimes lasting weeks or months, resulting in bespoke detailed contracts.

The “battle of the forms” occurs in more routine cases where parties are not negotiating detailed terms and instead contract (often via email or verbally) under standard terms. The so-called “battle” is centred on whose standard terms apply to the contract in circumstances where each party is trying to ensure its own terms apply.

Standard terms deal with matters such as delivery, quality, termination, limitations and exclusions of liability, and remedies (among others). With a party’s standard terms often being weighted heavily in its own favour the consequences of getting this wrong can be expensive and could result in you being legally bound to unfavourable terms and liabilities you were not expecting.

Who wins the “battle of the forms”?

It used to be the party that “fired the last shot” was deemed to be the winner of the “battle of the forms”. In other words, the last party to send their standard terms, which were not rejected by the recipient, would ‘win’ and the contract would be formed under their standard terms.

However, the recent case of TRW ltd v Panasonic Industry Europe Gmbh [2021] has made this a little less certain and confirms that, in certain circumstances, the party who fires the ‘first shot’ can be the ‘winner’.

In this case the judge decided that because the buyer had previously agreed to the seller’s terms, which stated that any future terms proposed by the buyer would not apply, the seller’s terms would apply to future contracts. The only way the buyer would have been able to incorporate its own standard terms would have been to have the seller agree in writing to a change in the terms.

How can you give yourself the best chance of winning the ‘battle of the forms’?

1. Never ignore standard terms sent by another party

Always review the terms sent by the other side. Even if they are generally acceptable, considering the TRW decision, you should make sure there is no clause which binds you to those terms for future contracts, where those standard terms may not be acceptable.

2. Check all communications for copies of standard terms

Standard terms can be sent in a number of ways and so it is always important to check quotations, purchase orders and even payment documents and invoices to avoid accidentally agreeing to the other party’s standard terms. Make sure your own website and documents state that your own standard terms apply. Even on invoices, which come after the contract has been formed, a reference to standard terms can help ensure your terms apply to future contracts with the same party.

3. Get written confirmation

The best way to ensure that your standard terms are incorporated is to have the other party confirm this in writing. However, even if you have this confirmation, it is still important to expressly reject any future communications that purport to incorporate their standard terms into the contract. Remember too, that an attempt to impose your terms after the contract has been formed will be ineffective.

4. If in doubt, get professional help

If you are ever unsure, take legal advice. Taking advice before something goes wrong can save time, cost, and hassle later.

Whether you need advice pre-contract or have a dispute over a contract formed under standard terms, Muckle LLP has industry leading commercial and dispute resolution experts who would be more than happy to assist.

To find out more, contact Robin Adams on 0191 211 7949 or e-mail [email protected].