Contract Law – Battle of the Forms

What is a “Battle of the Forms”?

A “battle of the forms” arises where two parties exchange standard documents, such as purchase orders, quotations, or invoices, to enter a contract, with each party intending for their standard terms and conditions to apply to the agreement. For example, a battle of the forms occurs where a buyer issues a purchase order with its standard terms and conditions printed on the back but the seller then responds with an order acceptance or invoice attaching its own terms. This back and forth is common in day-to-day commercial transactions for many businesses, but it can leave both parties unclear about which set of terms governs the contract.

Whilst relying on standard documents can save time, this can lead to uncertainty over whose terms actually apply compared to negotiating a bespoke agreement for each transaction.

To resolve this uncertainty and determine whose terms are incorporated into the contract, the courts will generally apply the “last shot” principle. This means that the terms contained in the final document exchanged between the parties before the performance of the contract will prevail i.e., the terms of the party who “fires the last shot” will be incorporated.

Why does this matter?

A battle of the forms creates ambiguity and uncertainty. Each party may assume that their standard terms apply, only to discover later that the other party’s terms were incorporated. This can lead to disputes over important points such as price, delivery, limitation of liability, or termination options. Each of these could have a significant impact on the ability of the parties to complete the transaction or continue their business relationship as planned.

It is important to note that once a contract is legally formed, by whatever means, its terms become binding on the parties. It is therefore essential that each party has a clear understanding of what terms are being incorporated into the contract at the outset.

Ensuring clarity at the contracting stage can help avoid disputes later down the line and promote smoother commercial relationships. We have set out below our top tips for getting clear on contracting terms during the negotiation stage.

Tips to Avoid or Manage a Battle of the Forms

1. Direct negotiations

Ideally, engage in express discussions to negotiate an agreement and agree terms. Though this may take more time, it will provide much greater certainty, and a smoother business relationship going forwards.

2. Be aware

Be alive to the risk of a battle of the forms, and if you realise that one has commenced (for example, you have sent out a quotation with your terms and conditions attached but the customer respond with an order acceptance form with their terms attached), raise this with the other party and have a discussion to express your intentions and try to agree which terms which will govern the contract.

3. Last Shot

If you can’t avoid a battle of the forms, try to increase the likelihood of your terms being the “last shot” and, therefore, the terms which govern the contract. Make sure to include your terms consistently in all pre-contractual documents and, most importantly, ensure that they appear on the last document passing between the parties before performance of the contract.

4. Put in place a Framework Agreement

This can be particularly helpful where you expect to do repeat business with the other party. A Framework Agreement should be put in place at the outset and govern all subsequent orders or statements of work between the parties. The terms of the Framework Agreement can be drafted to include an acknowledgement that its terms will prevail over any later conflicting terms. This approach provides greater certainty, though enforceability will vary depending on the circumstances, so seek legal advice if you are unsure.

5. Conduct

Consistent conduct, and which terms the parties abide by in practice, can influence which terms are deemed to apply. It is therefore important to be attentive to your actions in relation to the conduct of the agreement, for example, by making deliveries, invoicing and payment in accordance with the timeframes set out in your own standard terms. Regular and consistent behaviour strengthens the argument that your terms govern the relationship.

6. Internal procedures

Implement robust internal procedures to reduce the risk of a battle of the forms. This could include training staff on what to watch out for, using standard documents that clearly incorporate your terms, and set proper contracting procedures, including using order acknowledgements which explicitly state that orders are accepted on your standard terms.

Whose standard terms are going to win the battle of the forms?

If there is a dispute as to terms, the Court will have to decide whose standard terms have been incorporated into the contract, or, whether any standard terms have been incorporated at all.

The Court will apply an offer and acceptance analysis i.e. a contract is formed when an offer is made by one party which is unequivocally accepted by another party, either in words or by conduct. The courts will analyse the parties’ behaviour and communications to find an offer that has been accepted.

Battle of the forms disputes can be inherently tricky as deciding the terms of the contract is a matter of interpretation and fact. Depending on the circumstances, the battle of the forms can have at least four different outcomes:

1. One party’s standard terms prevail.

More often than not, the last set of terms sent before acceptance or performance will prevail i.e. the “last shot” fired in the battle of the forms. This situation is illustrated in a case where a supplier delivered some whisky to a customer’s warehouse. The supplier handed over a delivery note containing the supplier’s standard terms but, instead of signing the note, the customer’s warehouseman stamped it “Received on [the Customer’s] conditions”. The court applied the last shot principle and decided the customer’s words “Received on [the Customer’s] conditions” amounted to a counter offer and their terms prevailed.

2. Express terms other than a party’s standard terms are incorporated.

Whilst the “last shot” principle is typically the default solution, the court may disregard this if the conduct of the parties or documents passing between them show that they intended other terms to prevail (usually this would be terms set out in correspondence or in a prior agreement that amounts to a Framework Agreement for future supplies).

3. Implied terms fill the void.

It could be that neither party’s terms and conditions are incorporated into the contract e.g., where the customer’s purchase order does not refer to its own standard terms and conditions, there is no consistent practice of enclosing terms and conditions with every purchase order and the supplier only referred to, but did not provide, the standard terms and conditions. In these cases, the court will have to decide what terms other than the standard terms apply.

4. No contract is formed.

In certain circumstances, the court may determine that no contract has been formed and the supplier has a claim in restitution. These claims however can be of limited value compared to a remedy for breach of contract. Restitution may result in the supplier receiving a reasonable payment for what has been supplied, but it will not have the protection of its standard terms and the customer will not be entitled to the relief available for breach of contract.

Conclusion

Clarity at the contracting stage is key to avoiding disputes and fostering strong commercial relationships. By understanding the risks associated with a battle of the forms and taking proactive steps to manage them, businesses can protect their interests and ensure smoother transactions.