How Courts Decide Whose Terms Apply
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The court case Transformers & Rectifiers Ltd v Needs clarified the principles governing the acceptance of terms and conditions in contracts when both parties refer to their own terms. Key points include that a party must give reasonable notice of their terms for incorporation and that invoices can represent an avenue for including terms, provided they are adequately referenced. Ultimately, neither party's terms were accepted in this case, highlighting the importance of clear documentation and agreement.
![How the Courts Decide Whose Terms Apply
Transformers & Rectifiers Ltd v Needs1 provides a useful summary of the battle of the forms
Mr Justice Edwards-Stuartreviewedthe authorities where both sides have sent or referred to their
owntermsand conditions over a period of dealing. The court had to decide whose terms applied:2
“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 courseof dealing by the party contending thatits 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 fora partycontending 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'sstandard termsand 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].”
Analysis
The starting point is that a term will be part of your contract if it forms part of a signed document.
Where there is no single source of terms then one party has to prove they have given adequate
notice to the other party, in a contractual document, and before that contract is finalised.
The court said “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 the terms and conditions
and must do so in circumstances that make it clear to the other party that he intends to rely on
them.”3
A seller, onthe otherhand,“who wishesto incorporatehis termsand conditionsby referring to them
in his acknowledgementof order…must,atthevery least,refer to thoseconditionson the face of the
acknowledgement of order in terms that make it plain that they are to govern the contract.”](https://image.slidesharecdn.com/noteonbattleofforms-150309070400-conversion-gate01/85/How-Courts-Decide-Whose-Terms-Apply-1-320.jpg)
![Conclusion
The court held that neither party’s terms and conditions were incorporated! The best course is to
pro-actively recordyouragreementclearlyandget those agreedterms signed. If not,ensure you ask
for a copy and respond to any terms sent to you.
The Author
Sarah Fox of 500 Words Ltd wrote this note. She provides confidence to construction companies to
read, use and understand their contracts. She is also author of the 500 Word Contract™.
To findouthow Sarah can helpyoulove your terms and conditions, contact her on: 07767 342747 or
by email: sarah@500words.co.uk
Cases Referred to
Balmoral Group Ltd v Borealis[UK] Ltd & Ors [2006] EWHC 1900 (Comm)
Capes(Hatherden) LtdvWesternArable ServicesLtd [2010] 1 Lloyd'sRep477
Circle FreightInternational LtdvMedeastGulf ExportsLtd [1988] 2 Lloyd'sRep427
SterlingHydraulicsLtdvDichtomatikLtd [2007] 1 Lloyd'sRep8
TekdataInterconnectionsLtdv Amphenol Ltd[2009] EWCA Civ1209
Footnotes
1 Transformers & Rectifiers Ltd vNeeds Ltd [2015] EWHC269 (TCC).
2 Paragraph42.
3 Paragraph 44.](https://image.slidesharecdn.com/noteonbattleofforms-150309070400-conversion-gate01/85/How-Courts-Decide-Whose-Terms-Apply-2-320.jpg)
How Courts Decide Whose Terms Apply
- 1. How the Courts Decide Whose Terms Apply Transformers & Rectifiers Ltd v Needs1 provides a useful summary of the battle of the forms Mr Justice Edwards-Stuartreviewedthe authorities where both sides have sent or referred to their owntermsand conditions over a period of dealing. The court had to decide whose terms applied:2 “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 courseof dealing by the party contending thatits 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 fora partycontending 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'sstandard termsand 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].” Analysis The starting point is that a term will be part of your contract if it forms part of a signed document. Where there is no single source of terms then one party has to prove they have given adequate notice to the other party, in a contractual document, and before that contract is finalised. The court said “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 the terms and conditions and must do so in circumstances that make it clear to the other party that he intends to rely on them.”3 A seller, onthe otherhand,“who wishesto incorporatehis termsand conditionsby referring to them in his acknowledgementof order…must,atthevery least,refer to thoseconditionson the face of the acknowledgement of order in terms that make it plain that they are to govern the contract.”
- 2. Conclusion The court held that neither party’s terms and conditions were incorporated! The best course is to pro-actively recordyouragreementclearlyandget those agreedterms signed. If not,ensure you ask for a copy and respond to any terms sent to you. The Author Sarah Fox of 500 Words Ltd wrote this note. She provides confidence to construction companies to read, use and understand their contracts. She is also author of the 500 Word Contract™. To findouthow Sarah can helpyoulove your terms and conditions, contact her on: 07767 342747 or by email: sarah@500words.co.uk Cases Referred to Balmoral Group Ltd v Borealis[UK] Ltd & Ors [2006] EWHC 1900 (Comm) Capes(Hatherden) LtdvWesternArable ServicesLtd [2010] 1 Lloyd'sRep477 Circle FreightInternational LtdvMedeastGulf ExportsLtd [1988] 2 Lloyd'sRep427 SterlingHydraulicsLtdvDichtomatikLtd [2007] 1 Lloyd'sRep8 TekdataInterconnectionsLtdv Amphenol Ltd[2009] EWCA Civ1209 Footnotes 1 Transformers & Rectifiers Ltd vNeeds Ltd [2015] EWHC269 (TCC). 2 Paragraph42. 3 Paragraph 44.