Our standard terms apply to the contract just by printing them on our quotations or invoices?
The myth
It is a common myth that if a business sends its standard terms to a customer, typically on the back of an invoice, these terms will apply to the contract between the parties. However, this may not necessarily be the case.
Issues
A business offers to supply goods to a customer and sends the customer a quote together with the business’ standard terms of sale. The customer accepts the quote but in doing so attaches its own standard terms of purchase. The business then supplies the goods to the customer. The business may believe its standard terms of sale apply whilst the customer may believe its standard terms of purchase apply. This scenario is known as the “battle of the forms”. The terms applying to the contract are uncertain and if there is a dispute it will fall to the court to establish what the actual agreed position was.
As a rule of thumb, the last set of terms sent prior to formation of the contract are most likely to prevail. This is sometimes known as the “last shot” in the so-called “battle of the forms”. However, this is by no means certain and it may be that neither party is able to show that its terms apply.
Evaluation
Which party’s terms are incorporated into a contract will depend on the relevant facts. The clearest solution is to have the terms signed, or agreed to online (“I accept”) or agreed to in an email exchange.
Where this hasn’t happened, some clauses and practices can be helpful in establishing that the terms apply and winning the “battle of the forms”.
A party can include a clause which states that these terms prevail over any terms proposed by any other party. Such clauses can be helpful from a presentational or negotiation perspective by suggesting to the other party that there is little to be achieved from seeking to impose their own terms or arguing they apply. However, if challenged, in practice these clauses may be of limited assistance especially if both sets of terms say the same thing!
It is also useful to refer to the standard terms in all relevant sales correspondence and attach the terms to sales documentation (for example invoices, quotes, tenders, order confirmation). Whilst including the terms on an invoice may not be effective (as an invoice is typically issued after formation of the contract), in the absence of any competing terms, this may be useful to evidence that the terms form a course of dealing and may have been incorporated.
Practical tips
- Implement robust contract management systems and processes for procurement and sales and ideally ensure that paperwork is actually signed or otherwise expressly agreed.
- Refer to standard terms in all relevant sales correspondence and attach the terms to sales documentation.
- Include a clause stating your terms prevail over all others.
- Keep a written record of all contractual negotiations.
- Explicitly reject any terms which are proposed by the other party.
Beverley Flynn