Which Terms Apply? Avoiding Conflict.

It's all too easy, amidst the flurry of emails about product details or delivery times, to lose track of whether you've stated that your standard terms take precedence over those sent by the other party. This scenario is often referred to as the ‘battle of the forms’ and understanding which set of terms and conditions apply is crucial to sidestep potential disputes further down the road.

The Significance of Standard Terms

Standard terms of business are crafted to bring consistency and clarity to commercial transactions. However, for these benefits to materialise, it's essential to clarify whose standard terms are in play and form part of the contract.

In the commercial world, clashes over whose standard terms apply typically surface during disputes. It's common for both parties to pull out their standard terms in the hope of leveraging them to their advantage in resolving the issue at hand.

The crux of using standard terms hinges on the fundamentals of contract formation. A meticulously drafted contract ensures that, should any problems arise, there's a concrete agreement in place between the parties, leaving no room for debate over the incorporation of standard terms into the contract. For a deeper dive into contract formation and the ins and outs of commercial contracts, exploring topics like contract authority, frequently asked questions, and contract interpretation can offer invaluable insights.

Disputes regarding whose standard terms apply, or whether a party’s standard terms are indeed part of the contract, boil down to interpreting the contract.

In the commercial sphere, where agility meets ambition, understanding the intricacies of contract terms is not just beneficial—it's essential. The phenomenon known as the 'battle of the forms' represents a common scenario where businesses clash over whose standard terms and conditions take precedence in a contract.

Imagine a digital startup negotiating a deal with a tech provider. The startup wishes to apply its own purchasing terms, but given its relatively small size and negotiating power, the tech giant's terms are likely to dominate. Or consider a scenario where a sales rep from Company A sends a product quote under their standard business terms. Company B's procurement assistant responds, accepting the quote but attaching Company B's own terms. This counter-offer essentially initiates a battle of the forms, where delivery and payment terms might drastically differ between the two sets of terms.

If these disagreements escalate to legal intervention, the court will apply traditional offer and acceptance rules to decipher which party's terms govern the contract. This could involve examining actions and communications to determine if a contract was indeed formed under a particular set of terms.

Navigating a Conflict of Terms

The courts have several paths they might take when dissecting such disputes:

• Deciding no contract exists due to irreconcilable terms.
• Determining that the latest set of terms sent before the contract was performed applies.
• Imposing implied terms to fill gaps left by conflicting terms.
• Incorporating express terms agreed upon outside the standard terms provided by either party.

Each of these outcomes carries its own set of uncertainties and expenses. A proactive approach at the onset to avoid conflict would include:

• Visibility of Terms: Don't bury your terms in fine print. Attach them prominently in communications or link to them on your website, ensuring they're always up-to-date.
• Signature Requirement: If your process involves signing terms, ensure this step isn't skipped. A missed signature could mean your terms aren't part of the contract, potentially swinging the battle in the other party's favour.
• Verbal Agreements: Tread carefully. Verbal contracts are a minefield of interpretative challenges. Label discussions as 'subject to contract' to keep negotiations open until terms are formally agreed upon.
• Framework Agreements: For ongoing supply relationships, consider framework agreements that clarify the non-negotiability of imposing one party's terms over the agreed framework.
• Pre-Contract Clarity: Ensure all preliminary documents state that any agreement is subject to your standard terms, preventing sales personnel from unwittingly committing to terms that aren't yours.
• Order Forms: Utilising standard order forms that explicitly reference your terms can clarify the basis on which orders are accepted.
• Contractual Hygiene: Regularly review and systemise your contracting process. This is vital for any business aiming to minimise dispute risks.
• Employee Training: Empower your team with the knowledge and procedures necessary to adhere to and enforce your standard terms, minimising the risk of disputes arising from oversight or misunderstanding.

‍

Our subject expert: Fayola-Maria Jack

Fayola-Maria Jack is a multi-award winning deal shaping and dispute resolution expert. She has shaped successful resolutions and out of court settlements for governments, multinationals, military, banks, and venture backed startups.