If you’ve entered into a contract for the supply of goods or services, you may have come across the idea of standard terms and conditions. In fact, you might have your own standard terms and conditions that have been written specifically for your business.
These terms and conditions help to protect your rights, limit your liability, and avoid unnecessary disputes by establishing some ground rules around how you engage with other businesses.
But what happens if your standard terms and conditions are different from a party you’re looking to do business with? Whose terms and conditions will apply?
In some cases, opposing terms and conditions may lead to a ‘Battle of the Forms’. This battle determines whose terms and conditions will govern the business relationship, so it’s important to maximise your chances of coming out on top!
What Is A Battle Of The Forms?
A Battle of the Forms arises when two parties are negotiating the terms of a contract and each party wants to contract on the basis of its own terms. One party will make an offer subject to its standard terms and conditions. The other party will appear to accept the offer, but according to its own standard terms.
It may seem like the parties have reached an agreement, especially in relation to the key subject matter (such as what they are buying and selling, and at what price).
However, as both parties will have prepared standard terms and conditions that tend to favour themselves, finer details—such as timeframes for payment and delivery, or dispute resolution processes—may be inconsistent.
An Example Of A Battle Of The Forms
Leila was recently approached by Tom to supply coffee beans for his new cafe. Following this, Leila provides Tom with a quote and her standard terms and conditions of supply. Tom then issues a purchase order, containing his own standard terms and conditions of purchase. Leila starts supplying Tom with coffee beans.
Neither Leila or Tom reads the other party’s terms and conditions. Although they agree on the product, quantity and price, they have different terms surrounding when Tom needs to make payment.
A dispute arises between Leila and Tom, with each side arguing that their own terms and conditions apply in relation to when payment should be made.
This is a common scenario and it can cause a lot of headaches—especially for small businesses that already have a lot on their plates. But rest assured: it can be avoided!
So, Whose Terms And Conditions Apply?
Before we answer the question of whose terms and conditions will prevail in a battle of the forms, it is helpful to understand how contracts are formed.
In Australia, the formation of a contract involves an offer and acceptance.
In the scenario above, Leila makes an offer when she provides Tom with her terms and conditions of supply. Following this, Tom has two options: to either accept Leila’s exact terms and conditions, or to make a counter-offer by responding with his own terms and conditions.
When the terms of a purported acceptance are not the same as the offer, it is generally considered to be a counter-offer. So, in this scenario, by sending Leila his standard terms and conditions along with his purchase order, Tom will likely be seen to be making a counter-offer.
It is up to the party who made the original offer to accept or reject the counter-offer, either expressly or by their conduct.
Here, the last shot rule comes into play. This rule generally determines priority between each party’s terms and conditions. Whoever had the “last shot”—or whoever made the last offer—will have their terms and conditions applied.
As Leila started supplying Tom with coffee beans after he presented her with his terms and conditions, her conduct will constitute acceptance of his counter-offer. As a result, Tom’s terms and conditions will likely apply.
It is important to note that not every case will be this simple. There are other factors that can displace the last shot rule.
For example, there may be situations in which a party’s terms and conditions expressly states that they are the applicable terms and conditions. Or there may be cases where there’s no clear offer, counter-offer, or acceptance. In these more complex cases, it’s recommended that you seek professional legal advice to find out where you stand.
How Do You Fire The Last Shot?
In most business arrangements, things will run smoothly and, hopefully, you won’t need to discuss opposing terms and conditions. However, it’s important to be prepared in case this happens. After all, unclear contract terms can be time consuming and expensive to resolve.
Here are some things you can do to maximise your chances of firing the last shot:
- Expressly reference your terms and conditions during contract negotiations, as well as in all relevant documents (such as your quote or purchase order). Make sure to provide the other party with a copy of your terms and conditions.
- If the other party sends you their own standard terms and conditions, you should express in writing that you do not accept them and that you will only proceed on your terms and conditions. Again, make sure to provide them with a copy of your terms and conditions. This will minimise confusion about the grounds on which you are willing to buy or sell.
Other things you can do to avoid a Battle of the Forms include:
- Where practical, enter into a contract that includes the agreed terms and conditions, and has been signed by both parties. This makes it clear which terms and conditions will apply to the agreement.
- Before you begin performing any contractual obligations, make sure it is clear whose terms and conditions apply. Don’t start executing your obligations until the issue is resolved. For example, don’t start delivering goods or making payments until you’re clear on where you stand.
- Where there is an ongoing relationship, it may be worthwhile to negotiate a set of terms and conditions that is appropriate for both parties and that will apply to all future transactions. This can help build a strong, positive relationship.
- Remember, you are protected from unfair terms and conditions under the Australian Consumer Law, so the other party can’t make you agree to these.
If you’re not sure whether your standard terms and conditions will apply, or if you’d like some assistance drafting your own standard terms and conditions, Sprintlaw has a team of friendly lawyers ready to help!
Get in touch with us for a free, no-obligations chat on 1800 730 617 or at email@example.com.
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