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Battle of the Forms – Whose Standard Terms & Conditions Apply?
October 2, 2012 | Construction Contracts
The issue of the “battle of the forms” often arises in construction disputes. This is where at the time of entering into a contract, both parties attempt to impose their respective standard terms and conditions. The result is often therefore that neither party is sure which terms prevail. Usually, strict rules of offer and acceptance apply. Where a supplier offers to contract on its own terms and conditions, and the buyer accepts but concurrently puts forward its own terms and conditions; the buyer is often held to be making a counter-offer. If the supplier then goes on to provide the goods or services without expressly addressing the issue, it is deemed to have accepted the counter-offer. Therefore the parties would be contracting on the buyer’s terms and conditions because the buyer “fired the last shot” and won the battle of the forms.
The recent Scottish case of Specialist Insulation Ltd v Pro-Duct (Fife) Ltd is therefore an unusual decision.
Pro-Duct (Fife) Ltd (“Pro-Duct”) was a sub-contractor on a development project at Edgbaston cricket ground in Birmingham. It contracted with Specialist Insulation Ltd (“SI”) for the supply of ductwork.
In October 2010, SI sent a quotation to Pro-Duct which was subject to SI’s standard terms and conditions. SI’s terms and conditions were subject to English law, and any disputes arising would be referred to arbitration. SI’s terms and conditions also stated that SI’s written agreement was required if any other terms were to apply to the contract.
In November 2010, Pro-Duct made an order, sending SI a copy of a document headed “Pro-Duct (Fife) Ltd – Material Supply Only Sub-contract Agreement”. The document stated that “sub-contract works” were to be “in accordance with the following conditions”. These standard conditions stated the contract was subject to Scottish law and any disputes arising would be referred to adjudication. The document required execution by both parties. The document was executed by Pro-Duct, but was not executed by SI.
SI supplied Pro-Duct with the ductwork. However, by July 2011 a dispute about payment arose. SI referred the dispute to adjudication. Throughout the adjudication, Pro-Duct argued that the adjudicator did not have jurisdiction on the basis that its own terms and conditions did not apply and there was no adjudication clause in SI’s standard terms. SI argued that the adjudicator did have jurisdiction, and that its terms and conditions, which required disputes to be referred to arbitration, did not apply.
The situation was most unusual as both parties were arguing that the other party’s standard terms applied. The adjudicator found in favour of SI, and SI sought to enforce the decision in court. The question for the court was: which of the standard terms were incorporated?
Which standard terms were binding?
Under the usual “battle of the forms” rules, because Pro-Duct “fired the last shot”, its terms and conditions would have been incorporated. If this reasoning had been followed, the adjudicator would have had jurisdiction, and the court would have enforced his decision. However, on this occasion, the court found in favour of Pro-Duct, deciding that SI’s terms and conditions (which required disputes to be referred to arbitration not adjudication) were incorporated. Accordingly, the adjudicator had no jurisdiction.
Why was the “last shot” principle not applied?
The court considered the recent case of Tekdata Interconnections Limited v Amphenol Limited, in which it was held that it is not possible to lay down a general rule to apply to all battle of the forms cases because it is always necessary to objectively assess what the parties must be taken to have intended. That case indicated that the last shot principle can be ignored if an agreement to the contrary can be inferred from the circumstances of the case.
The court’s decision that Pro-Duct’s standard terms did not apply was based on the following factors:
- SI’s quotation was an offer which was expressly subject to SI’s standard terms. It was clear that different terms would only apply if SI expressly agreed to this in writing.
- Pro-Duct’s document set out a specific mechanism for acceptance (i.e. it required execution by both parties) and SI did not execute the document.
- Pro-Duct did not question why SI failed to sign their document.
- SI could not be taken to have accepted Pro-Duct’s terms by conduct in circumstances where SI had expressly stated that their own terms would apply unless they agreed otherwise in writing.
- Pro-Duct’s document contained terms which were not applicable to a supply contract. There was a reference to “labour only” and also certain terms clearly related to a construction contract, for example the references to construction legislation and interim payments. Given that these sorts of terms were not applicable to a contract the supply of ductwork, SI would have been entitled to assume that PD’s terms did not apply unless SI expressly agreed to them.
Taking all these issues into account, the court decided that the parties had to be taken to have proceeded on the basis that SI’s terms applied.
Although this is a Scottish case and therefore not binding in England and Wales, it does provide guidance. The ruling confirms that it is not always the case that the last party to make an offer before work commences or goods are supplied will win the “battle of the forms”. However, it should be stressed that this is an unusual decision and in the vast majority of cases the “last shot” principle will still apply. Indeed, the court did say that a different analysis might have applied in this case if the documents provided by Pro-Duct had expressly allowed for acceptance simply by supplying the goods, rather than insisting on a signature.
If your standard terms do contain a clause which states that a signature must be obtained in order to constitute acceptance, it is essential to ensure the required signature is obtained. However, as there is always a risk that a signature may not be obtained, a more secure alternative would be to include a clause stating that acceptance occurs when the goods are supplied or the work begins, regardless of whether a signature has been given.
It is also good practice to include a clause which states that any divergence from your standard terms and conditions will only be permitted if you agree to it in writing. Such clauses typically tend to be ineffective in “battle of the forms” scenarios, but as this case shows, there are rare occasions when they can help persuade the courts that your terms and conditions do apply.This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.