Charles Edwards, Barrister and TECBAR Adjudicator reviews a case in the Technology and Construction Court which provides useful guidance on the incorporation of Terms and Conditions and the importance of giving reasonable notice of such Terms and Conditions: Transformers & Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC).
The Claimant and the Defendant entered into two agreements (in March 2012 and February 2013 respectively) for the purchase of nitrile gaskets. The Claimant alleged that the gaskets supplied were not in accordance with the contract and also were not suitable for their purpose. The Claimant and Defendant had a long standing business relationship which went back to about the mid-1990s and during that period, orders had been placed on almost a weekly basis by the Claimant.
The dispute between the parties involved which parties’ terms and conditions applied. This led to the so called “battle of the forms”, with each party insisting that their terms and conditions applied.
The Claimant contended that its terms and conditions applied because they were printed on the back of the purchase orders, however, there was no reference to those terms and conditions on the face of the purchase orders. Whereas the Defendant contended that its terms and conditions applied because they were referred to on its acknowledgements of order and further submitted that any liability for breach of contract on its part is limited or excluded by those terms and conditions.
The Court following consideration of the relevant legal authorities set out the principles which apply:
“The principles
42. From my rather brief review of some of the relevant authorities, I consider that in cases of this sort the following principles apply:
i) Where A makes an offer on its conditions and B accepts that offer on its conditions and, without more, performance follows, the correct analysis, assuming that each party’s conditions have been reasonably drawn to the attention of the other, is that there is a contract on B’s conditions: see Tekdata.ii) Where there is reliance on a previous course of dealing it does not have to be extensive. Three or four occasions over a relatively short period may suffice: see Balmoral at [356] and Capes (Hatherden).
iii) The course of dealing by the party contending that its terms and conditions are incorporated has to be consistent and unequivocal: see Sterling Hydraulics.
iv) Where trade or industry standard terms exist for the type of transaction in question, it will usually be easier for a party contending for those conditions to persuade the court that they should be incorporated, provided that reasonable notice of the application of the terms has been given: see Circle Freight.
v) A party’s standard terms and conditions will not be incorporated unless that party has given the other party reasonable notice of those terms and conditions: see Circle Freight.
vi) It is not always necessary for a party’s terms and conditions to be included or referred to in the documents forming the contract; it may be sufficient if they are clearly contained in or referred to in invoices sent subsequently: see Balmoral at [352], [356].
vii) By contrast, an invoice following a concluded contract effected by a clear offer on standard terms which are accepted, even if only by delivery, will or may be too late: see Balmoral at [356]...”
The Court’s view was that a buyer who wishes to incorporate his own standard terms and conditions when orders are sent by fax or e-mail must give the seller reasonable notice of its terms and conditions and must do so in circumstances that make it clear to the other party that he intends to rely on them. In the circumstances, if the terms and conditions are on the back of the purchase order, this would require a facsimile to be sent of the terms and conditions on the back of the purchase order as a separate document together with the purchase order or, if they are being sent by e-mail, to ensure that the pdf attachment includes both the face of the purchase order and the terms and conditions on its back of it. In the Court’s view, this was essential if the purchase order does not on its face refer to the terms and conditions on the back. Where the terms and conditions were not sent when placing the purchase orders by facsimile or e-mail, even though they were printed on the reverse of purchase orders which from time to time were sent by post, then Claimant did not make it clear to a reasonable person in the position of the Defendant that it was seeking to rely on them. The Court further stated that if the Claimant did not follow a consistent practice of enclosing its terms and conditions with every purchase order, particularly in circumstances where the purchase order that was sent did not on its face refer to any terms and conditions, the Defendant was entitled to assume that the Claimant was not intending to rely on them. In the circumstances, the Court agreed with the Defendant that the Claimant did not do what was necessary to incorporate its terms and conditions into the agreement.However, in connection with the Defendant’s terms and conditions, the Court’s view was that the Defendant took no steps to provide the Claimant with a copy of these terms and conditions and neither did the Claimant at the time ask for them. Also, the Defendant’s terms and conditions were not standard terms and conditions of some trade association, but were the terms and conditions of the Defendant. The Court’s view in light of the relevant legal authorities was that a seller who wishes to incorporate his terms and conditions by referring to them in his acknowledgement of order, which would make it a counter offer must, at the very least, refer to those conditions on the face of the acknowledgement of order in terms that make it plain that they are to govern the agreement. However, having done that, if the conditions are not in a form that is in common use in the relevant industry, the seller must give the buyer reasonable notice of the conditions by printing them on the reverse of the acknowledgement of order accompanied by a statement on the face of the acknowledgement of order that it is subject to the conditions on the back. In the circumstances, the Defendant neither printed its terms and conditions on the reverse of the acknowledgement of order nor provided the Claimant with a copy of those terms and conditions. The Court considered that the Defendant did not do enough to bring those terms and conditions to the attention of the Claimant to turn the acknowledgement of order into a counter offer.
The Court, however, suggested an alternative way in which the same end may be achieved (if the terms and conditions are not printed on the back of the order) it is for the seller to send the buyer a copy of his terms and conditions, making it clear that they are the only terms and conditions upon which the seller is prepared to do business.
In summary, the High Court on analysis of the relevant authorities and evidence in the matter, found that neither the Claimant or Defendant’s terms and conditions were incorporated into the two relevant purchase orders and therefore neither parties terms and conditions applied.
If the facts and matters referred to above are relevant to you or your organisation, then please do not hesitate to contact me in chambers to find out how I can assist you or your organisation.
The above is for general information only. Appropriate legal advice should be taken and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
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