A “battle of the forms” refers to a scenario when two (or more) businesses negotiating the terms of a contract exchange communications, and each attempts to incorporate its own standard terms into the contract.
If they never have cause to question the arrangement and everyone’s happy with the way the contract is being performed, great! But if a dispute arises, how will a Court determine which terms will win the “battle of the forms” and apply to (legally, be incorporated into) the contract?
Each case will turn on its own facts, with one of four distinct outcomes emerging:
1. One party’s terms succeed: the last set of terms sent before formation of the contract will often prevail. This is the most common outcome, and is known as the “last shot” doctrine.
2. Express terms other than a party’s standard terms are incorporated: if the documents and the parties’ conduct show that other terms were intended to prevail, then these may be found to apply. However the Courts have indicated that, in the absence of a clear course of dealing between the parties, it will be difficult to displace the last shot doctrine.
3. Neither party’s terms apply and so terms are implied: the Court may imply terms using standard principles or use statute to dictate what terms should be implied (for example the Sale of Goods Act 1979).
4. No contract is formed: in certain circumstances, the Court may determine that no contract has been formed.
There is no guarantee of a satisfactory outcome for the parties. This is because establishing the terms of a contract that the parties appear to have agreed requires the Court to undertake an analysis of the actions and, in certain circumstances, the intentions of the parties, which may not be clear.
Attempts to prevail in a dispute about a battle of the forms can be incorporated into contracts through drafting, but these attempts will not necessarily succeed in Court and it is always advisable to implement clear, best practice procedures at the start of negotiations.
Some examples of best practice which are reasonably straight forward to implement include the following, but remember that there will be times when a contract will remain valuable even if the other party’s terms apply:
- make it clear, ideally in writing from the outset, that it is your standard terms and conditions that will apply to any contract entered into in the absence of express agreement to the contrary by the parties;
- avoid a signature requirement - this is because if you fail to follow up requests for a signature, your terms may be found not to be incorporated due to that absence;
- respond to any standard terms sent to you by another party, and make it clear that it is your terms that will apply if a contract is entered into.
In all of this, it is imperative that your standard terms are clear and protective of your interests: it’s one thing to ensure that they are legally incorporated into a contract, but quite another to ensure that they operate to protect and preserve the interests of your organisation.
We can help you to ensure that your terms are in the most appropriate and protective form for your organisation; we can also assist where you find yourself or your organisation in dispute over which set of terms apply.