In no uncertain terms…

09 Apr 2015

After 20 years of weekly commercial dealings, between the same parties, it would be reasonable to assume that each party understood the terms on which they were contracting. However, the recent case of Transformers & Rectifiers Ltd v Needs Ltd acts as a stark warning that contracting parties should not take this certainty for granted. In this case Transformers & Rectifiers Ltd (the “Purchaser”) alleged that goods supplied to them by Needs Ltd (the “Seller”) were unsuitable for their purposes. As a preliminary issue the court was asked to determine whose terms and conditions (“T&Cs”) applied. In this latest “battle of the forms” the Purchaser argued their T&Cs applied because “they were printed on the back of its purchase orders”. The Seller argued its T&Cs applied because “they were referred to on its acknowledgment of the orders”.

Both parties fought for recognition of their respective T&Cs but found themselves in no man’s land when the court decided that neither party’s T&Cs applied, and were not incorporated into the supply contract. The Purchaser encountered problems proving its T&Cs applied as it had not made it reasonably clear to the Seller that it was seeking to rely on them. For example it had not sent them to the Seller when placing its purchase orders by fax or email, and only provided them on the back of purchase orders it had from time to time sent by post. The court also noted that the Purchaser had not consistently enclosed its T&Cs with every purchase, and the front of the purchase order did not refer to any T&Cs. Further, it was decided that the Purchaser’s T&Cs were not incorporated into the contract in question even when taking into account the lengthy commercial relationship between the parties.

The Seller was prevented from relying on its T&Cs as it had not printed them on the reverse of the order acknowledgment or provided the Purchaser with a copy of those T&Cs; in short it had not done enough to bring its T&Cs to the attention of the Purchaser. The court indicated that any seller who wishes to incorporate T&Cs into its order acknowledgment must, as a minimum, “refer to those T&Cs on the face of the order acknowledgement” and make it clear they are intended to govern the contract. Protection of a commercial and contractual position should be at the forefront of the mind of any business entering into a contractual relationship. It is important that a party gives the other party reasonable notice of the T&Cs on which it is seeking to rely. This recent decision reinforces the need for businesses to ensure that their paperwork expressly incorporates or refers to its T&Cs.

If you think your T&Cs or procedures relating to their incorporation into a contract may need updating in the light of the above, please contact Howard Ricklow or Charles Braithwaite.

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