Whose terms win? Key considerations when faced with a “battle of the forms”

A recent Scottish case, Specialist Insulation Limited v Pro-Duct (Fife) Limited, considered the age old problem of the “battle of the forms” and provided some useful guidance on the deemed acceptance of standard conditions of purchase/supply. 

Last shot approach
Where both parties to a contract attempt to incorporate their own standard terms and conditions into an agreement then there is bound to be an issue in determining which terms prevail. This is rather grandly referred to by law lecturers (and therefore lawyers) as the “battle of the forms.”

Traditionally, this has been approached using the general principles of offer and acceptance: one party gives the other its standard terms and if the other party, instead of accepting those terms, puts forward its own terms (a counter-offer), then those new terms replace the previous terms and require acceptance before the contract is formed. A battle of the forms ensues, and so it continues… Essentially the winner is whoever gets their set of terms on the table last or to follow the battle analogy, whoever fires the last shot.

Objective approach
In a 2009 (English) Court of Appeal case, Tekdata, this traditional “last shot” approach was questioned. The judge in Tekdata stated that in reality it was not possible to apply a general rule to the battle of the forms, suggesting instead that the objective intentions of the parties should be taken into account.

Approach in the Pro-Duct case
In the Pro-Duct case the Court of Session followed Tekdata’s holistic approach and the circumstances of the case as a whole were considered.

The key points in this case were:

  • the Supplier’s quotation expressly incorporated its own standard terms, but the Purchaser’s Purchase Order did not;
  • the Supplier’s standard terms stated that any terms of the Purchaser would not apply, unless the Supplier agreed to those terms in writing – he did not;
  • the Purchaser’s standard terms provided for acceptance by the Supplier by signing the form and returning it to the Purchaser – the terms weren’t signed or returned by the Supplier.

Findings

Generally an agreement can be deemed to have been accepted by performance. In this case the last terms on the table were the Purchaser’s, and the Supplier had started to supply the goods under the agreement.

However, perhaps surprisingly, the Court found that this didn’t necessarily mean that the Purchaser’s terms applied. Instead, the Court concentrated on the fact that the Purchaser had accepted the goods without having received a copy of its own terms signed by the Supplier, finding that the Purchaser must have accepted the goods on the Supplier’s terms.

This case serves as a good reminder as to some boilerplate provisions that should appear in your company’s standards terms and conditions of supply / purchase to deal with the battle of the forms, in particular to deal with acceptance of “other” terms. Businesses may also wish to take this opportunity to consider whether any formal requirements under their contracts (for example, the return of a counter-signed set of terms and conditions) are actually being adhered to in practice.

After all, a written contract which doesn’t reflect what the parties actually do in practice is almost as bad as no written contract at all.

Leigh Kirktpatrick

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