This week Jack Mullen takes a look at how to ensure your terms and conditions apply in a "battle of the forms"

Life's greatest learning opportunities often come from things that go wrong. Only businesses that are properly vested in learning from mistakes are truly positioned to maximise their potential.

The aviation industry has this down to a fine art. When things go wrong, the black box flight recorder ensures that their errors are "data rich". That industry's ability to learn from its mistakes has taken it from one of the most dangerous forms of transport to one of the safest.

The law is no different. As part of the world's largest law firm, our disputes team is also "data rich": so here we use our knowledge of why things go wrong to help you to either avoid disputes in the first place, or to identify opportunities for fighting your client's corner.

Ensuring your terms and conditions apply in a "battle of the forms"

In the course of arranging the supply of goods or services, it is common practice for each party to attempt to incorporate its standard terms and conditions (Ts and Cs) into the contract.

When a dispute arises between the parties and each believe that their Ts and Cs were incorporated into the contract, the issue that needs to be addressed is whose Ts and Cs apply? These disputes are referred to by lawyers as the "battle of the forms".

More often than not, the party who has the "last shot" in the negotiations will win the battle. This occurs where one party makes an offer, which incorporates its Ts and Cs, and the other party purports to accept the offer with a document that incorporates its own conflicting Ts and Cs. If the parties then go on to perform the contract, it is likely that a court would find that the parties agreed that the last set of Ts and Cs to be exchanged were the ones the parties intended to agree to.

However, parties who rely on the "last shot" doctrine do so at their peril as it does not always apply.

In the English case of TRW Ltd v. Panasonic Industry Europe GmbH [2021], Panasonic successfully persuaded Mr Justice Kerr that its Ts and Cs prevailed over TRW's. This was despite the fact that TRW's Ts and Cs, which were included in its purchase order, were the last set to be exchanged before performance of the contract took place.

The court found in Panasonic's favour because its Ts and Cs included a clause that precluded any contrary terms proposed by the buyer to apply to the contract without reservation. Panasonic had effectively created a master agreement that applied to all subsequent purchases by TRW. The court held that the only means by which TRW could have the Ts and Cs disapplied was to agree with Panasonic, in writing, to a different set of terms.

In effect, Panasonic had drafted Ts and Cs that protected it from the "last shot" doctrine.

Clear and comprehensive language stating that your terms prevail and that no divergent terms will be valid can often assist contracting parties. However, it will not always succeed, particularly where your counterparty can demonstrate that it rejected the terms containing the prevailing language. Therefore, it is also important to review all documentation carefully and ensure you can demonstrate both acceptance of your terms in writing and that you have not accepted the other party's terms. 

Previous Black Box Tips

• 29 June 2022 - Black Box Tips: No oral modification clauses
• 9 June 2022 - Black Box Tips: "Standstill" agreements in Scotland