Need to properly incorporate Ts&Cs in Supply Contracts – ‘Battle of the Forms’ ends in Deadlock

The terms and conditions (Ts&Cs) that are incorporated into any agreement can be crucial in deciding liability and costs if any issue subsequently arises. The to’ing and fro’ing of these Ts&Cs, for example on the back of receipts, invoices and orders is sometimes labelled the ‘Battle of the Forms’. This is where each contracting party seeks to incorporate their own conditions into the contract before offer and acceptance ‘bites’ to form a binding contract. The lines on which contracts are agreed are sometimes blurred by conflicting terms and the interpretation of whether they were fully disclosed and accepted by the other party before the agreement was finalised. Where there is an long-standing commercial relationship disclosure and acceptance can be deemed by way of the ongoing mode of operating.

The level of any ongoing liability and what the standards required of the product are, are particularly important in supply contracts for food products. This is where, commonly, there may be different quality terms incorporated in the onward supply by customers and also where food products are used as ingredients in higher value goods.

The recent case of Transformers & Rectifiers Ltd v Needs Ltd 
[2015]  was a useful summary of past cases but also underlined how important it was where there was a  long-term commercial relationship that terms and conditions are adequately set out and maintained throughout that relationship. The need for consistency of terms and disclosure or reference of those terms with each order was underlined in the judgement of Edwards-Stuart J. Order forms should reference Ts & Cs each time, even when different methods of ordering were used such as email and fax.

It was held that as the purchaser, Transformers & Rectifiers Ltd (T&R,) did not follow a consistent practice of enclosing its Ts&Cs with every purchase order, Needs was entitled to assume that T&R was not intending to rely on them. The terms of T&R were therefore not incorporated.

However, additionally, any seller if wishing to incorporate their own Ts&Cs as a counter-offer for instance by referencing them in an acknowledgement of order must, as a bare minimum, reference those terms on the face of its’ acknowledgement in a way that made it clear they were to govern the contract. Alongside full disclosure and reasonable notice if the terms were not of an industry standard. As this had not taken place the Ts&Cs of Needs were similarly not incorporated.

The Ts&Cs of both parties were therefore found not to be incorporated into the contract.

Summary

The need to consistently reference Ts&Cs can sometimes lapse in long-term commercial relationships, especially where numerous orders are regularly placed; there is the temptation to assume that there is a settled contractual position in place. However, each new order can be considered a new agreement and it is vital to ensure that your company’s own Ts&Cs are not overridden by correspondence or conduct but are rather referenced (even if not disclosed in full) with each new order.