Battle of the forms — will the “last shot” doctrine always prevail?
How can a party seek to ensure that their standard terms and conditions prevail in the “battle of the forms?”
What steps should be taken into consideration when drafting terms and conditions?
In an ideal world, businesses seeking to enter into a contractual relationship would by default incorporate the same set of standard terms and conditions into an agreement. However, in reality, it is often the case that businesses incorporate competing standard terms and conditions when entering into contractual agreements. Therefore, how can a party seek to ensure that their standard terms and conditions prevail in the “battle of the forms?”
The “battle of the forms” in a contractual dispute
The phrase “battle of the forms” is often referred to by legal professionals in the context of commercial contracts. This is where parties seeking to enter into an agreement attempt to incorporate their own standard terms and conditions into the contract. For instance, party A makes an offer to party B which incorporates its own standard terms and conditions and Party B then accepts the offer with its own competing standard terms and conditions.
The court has discretion when determining which party’s standard terms and conditions will prevail. Difficulties can arise with “battle of the forms” disputes ultimately because it is a matter of interpretation for the court to determine what has been agreed between the parties.
In situations where the contract has already commenced before the position on whose terms applied was made clear, should a matter proceed to trial, the court must decide the nature of the position. Each matter will be assessed on its own merits and the court’s discretion to order the following possible outcomes:
- the parties have contracted on party A’s terms and conditions
- the parties have contracted on party B’s terms and conditions
- the parties have contracted on alternative implied terms and conditions
- no contract has been formed between the parties.
What will the court take into consideration when determining which party prevails?
The “last shot” doctrine
Ordinarily, where two businesses are negotiating terms of a contract and each party wants to contract on its own terms, the battle is often won by the party who fired the “last shot.” This refers to the party who last put forward their terms without being rejected by the other party.
However, it appears that the last shot doctrine can be displaced where parties are able to show that they intended for alternative terms to apply. Where this is the case, the terms and conditions can be set out by the parties in correspondence or in a prior agreement.
In TRW Ltd v Panasonic Industry Europe GmbH  EWHC 19 (TCC), this dispute involved TRW Ltd purchasing electronic resistors from German company, Panasonic. TRW Ltd argued that the resistors were defective and Panasonic sought to rely on its standard terms and conditions, governed by German law, within the jurisdiction of the German courts. As TRW Ltd was an English company, they sought to rely on their standard terms and conditions governed by English law within the jurisdiction of the English courts. Despite TRW Ltd firing the last shot, it was ruled that Panasonic’s terms and conditions had been drafted to expressly protect Panasonic against the last shot doctrine. The court’s approach in this case recognises where parties expressly intend to preclude any conflicting terms and conditions from applying to their contractual agreement.
It may be the case that neither party to the contract has incorporated any standard terms and conditions into the agreement. This may be relevant where parties are seeking to agree a purchase order which does not expressly refer to their own terms and conditions. In these circumstances, the court may seek to impose implied terms to the contract. For instance, the court may determine that parties have contracted on the basis of the implied terms as set out in the Supply of Goods and Services Act 1982 (“the Act”). Section 15 of the Act states that a party seeking payment for services where there is an implied contract in place is entitled to be paid a reasonable sum, which is a question of fact in each case.
Absence of a contract
Alternatively, the court may consider that there is no contract and a party is entitled to a claim in restitution. For instance, this would ensure that a party is entitled to be paid for the services that they have provided. However, it is important to note that a remedy for restitution does not equate to a remedy for breach of contract, and can be of limited value to the parties, on the basis that the parties may not be afforded the protection of their standard terms and conditions.
How to ensure that a party’s terms and conditions prevail
Whilst the court is able to use its discretion to determine which standard terms and conditions prevail in a contractual dispute, there are a number of considerations which seek to strengthen a party’s position:
- ensuring standard terms and conditions are clear to the other party
- ensuring that pre-contractual documentation does not constitute an offer, unless this is the intended purpose
- setting out standard terms on all pre-contractual documentation
- acting on acknowledgments of orders
- ensuring that all contracts are reviewed by businesses and their legal professionals
- putting in place framework agreements for future supplies.
On the face of it, the court will often consider the traditional “last shot” approach when determining who will prevail in the battle of the forms. However, the case of TRW Ltd v Panasonic Industry Europe GmbH  EWHC 19 (TCC) demonstrates that the court will look to the parties’ intentions when seeking to determine which standard terms and conditions have been incorporated into the contract.
This case issues a cautionary reminder to businesses and legal professionals on the importance of carefully reviewing standard terms and conditions when seeking to enter into contractual arrangements with other parties.
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