March 24, 2015

‘Battle of the forms’ ends in defeat for both sides

A recent court decision has highlighted the importance of clarity in contractual terms and conditions, including in the construction sector.

The “battle of the forms” case, heard in the Technology and Construction Court, involved Transformers & Rectifiers Ltd (the claimant) which had been a long-term buyer of nitrile gaskets from Needs Ltd (the defendant).

In March 2012 and February 2013, the companies entered into two contracts for gaskets but Transformers & Rectifiers argued that they were unsuitable and not in accordance with the contract.

Transformers & Rectifiers said its terms and conditions applied because they were printed on the back of its purchase orders. Needs Ltd claimed that its terms and conditions applied because they were referred to on its acknowledgements of orders and that they limited or excluded its liability for any breach of contract on its part. 

However, Mr Justice Edwards-Stuart, who heard the case on 11 December, ruled the following day that neither side’s terms and conditions applied. His full reasons for the decision, which were published on 13 February, included:

  • the claimant often sent purchase orders by fax or email, including the two contracts in question, when the terms and conditions were not included. The judge 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”
  • if the claimant did not consistently include its terms and conditions with every purchase order, the judge said the defendant was entitled to assume that the claimant was not intending to rely on them
  • the defendant did not print its terms and conditions on the reverse of its order acknowledgement, or give the claimant a copy, making it clear they were the only terms and conditions under which it was prepared to do business. The judge said: “I consider that it did not do enough to bring those terms and conditions to the attention of the claimant and thereby turn the acknowledgement of order into a counter offer.”

The case highlights that it is not enough for a business to have its own terms and conditions in place when entering a contractual arrangement and that certainty about which terms and conditions apply is crucial.

As a firm specialising in construction law, Palmers can provide comprehensive advice at all stages of the construction process, including drafting and advising on all forms of construction contracts to mitigate the risk of costly and time-consuming disputes. For more information, please contact Adam Davis.