Standard Terms & Conditions

Introduction

Which party’s standard terms and conditions (“Ts&Cs”) apply to a specific sale/purchase is one of the most frequently misunderstood points that we come across.

This post will set out some guidance on what the law says and some practical tips for bolstering the likelihood that your terms (or the terms you expect to apply) will apply.

Your standard terms likely look something along the lines of the below:

“[Our] Terms and Conditions apply to this [sale/purchase] to the exclusion of all other terms and conditions that law may apply, even if provided to us at a later date.”

Bringing your Ts&Cs to the other party’s attention

• It is essential that your counterparty is clearly told that your Ts&Cs apply to a sale/purchase/transaction.

• If you haven’t done this and subsequently get into a dispute there is little or no chance that your Ts&Cs will prevail.

• N.B. just displaying them on a website isn’t good enough!

Battle of the forms

The other party to your transaction is likely to also have standard Ts&Cs, potentially with very similar wording.

This is known as the “Battle of the Forms”. It usually arises when Company X offers to buy goods from Company Y on their (Company X’s) standard Ts&Cs (X’s form) and Company Y accepts the offer on the basis of their standard Ts&Cs (Y’s form).

Both parties can’t be right - so who “wins”? While many people expect that the last set of Ts&Cs sent will apply (known as the “Last Man Standing” approach), this is not the test that the law will apply!

What the courts think

Courts apply a test which looks to when the contract (i.e. the agreement) was formed (under the law). A contract is formed when an offer is made by one party, which is unequivocally accepted by another party (which acceptance can be by words or conduct). It doesn’t matter if a party has written that their terms will “prevail”, if the terms in question were included in an offer (or counter-offer) that was not accepted then they are not relevant.

The below scenarios set out how an offer-acceptance might play out in real life (if slightly tweaked to make some legal points):

• Customer A asks you for a quotation. Their email includes the following language “Our Ts&Cs apply exclusively of all others whatever may subsequently be said or written about this enquiry and any subsequent purchase”. Fantastic: no contract exists yet.

• You reply with a quotation, stating in the email “We expressly draw your attention to the condition that this quotation and any ensuing sale is based on our Ts&Cs applying, and that they are to be found at the following link.” Still no contract. You have made an offer on the basis of the quotation you’ve put in the email. They haven’t accepted yet.

• There are any number of different scenarios that could follow – all of which could lead to a different outcome. We have set some out below just to show the principles that you and your sales team need to be aware of.

  • They phone in saying “We accept; please proceed.” In this case, the contract is struck at that moment (as they’ve accepted unequivocally) and the likelihood (although this is not 100% certain) is that your Ts&Cs will apply to the agreement.

  • Instead they email back, to say they accept and include the words that they used in their first bullet above. This is now a counter-offer, since they’ve changed the basis on which they accept, requiring their Ts&Cs to apply. You write back to say that this is great and you would like to proceed. In this case, the contract is struck when you accept unequivocally, and the likelihood (but again this is not 100% certain) is that their Ts&Cs will apply.

  • However, suppose (just as in the bullet above) that they write an email back, to say they accept on their Ts&Cs (i.e. make a counter-offer). BUT THEN you reply saying that that this is great, that you will proceed (implicitly accepting their cash value of their counter-offer), but including our words from the second bullet above. This now is effectively another counter-offer (a counter-offer to their counter-offer) on your part. If they do nothing more that changes this, and we deliver the goods, then they have by their actions accepted our counter-offer. In this case, the contract is struck at that moment and the likelihood (although again this is not 100% certain) is that your Ts&Cs will apply.

In all the above examples, the “Last Man Standing” principle has applied but only because the other party didn’t say or do something to indicate that it wasn’t happy contracting on those terms. This doesn’t always apply! For example, if there is evidence of historic dealing between the two parties that favours one side, this course of dealing may “win”. This is essentially because by their actions, both parties have shown how they expect to transact.

It should now be clear then that clauses stating that one sides’ terms will “prevail” don’t generally work (except as a bluff to the other party’s less legally savvy employees). Trying to get your own Ts&Cs on as many documents as possible may work, but there’s still a risk that the other side have the last word on the day.

What we suggest

It is important that you (as management or inhouse legal) make sure that your sales/negotiating teams understand the points we have laid out above. Ensuring that one’s own terms are in the best position to apply might not be the smoothest grease to closing a sale or transaction, but it is essential that they understand the real world implications (payment terms / warranties etc.) that accepting another party’s Ts&Cs could have on the business.

LawSimple has great advice available on ideas to handle all this with your teams. Contact us if you’d like some help.