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Terms Of Discord Rather Than Endearment

Oliver Jackson on the standard terms of trading – part 1

THE question of whose terms of trading apply in a contract is one of the most common causes of dispute between commercial contracting parties.

At the heart of this question lies two of the most fundamental and elementary principles of contract law, namely the principles of ‘offer’ and ‘acceptance’.

In the most straightforward cases, one party makes its ‘offer’ by providing its standard terms to the other.
These terms are ‘accepted’ by the other party signing them. Terms can also be incorporated into a contract by conduct (i.e. by performance of the contract) or as a result of a ‘course of dealing’ (explained next month).
It is not necessary that the conditions themselves should be set out in the document tendered. They can be incorporated by reference, provided reasonable notice is given and provided they can be and are made available on request (Circle Freight International Ltd v Medeast Gulf Expor ts Ltd [1988]).

The traditional sequence of events in the formation of contracts is: offer, acceptance, performance – in that order. Any terms and conditions you wish to incorporate into a contract must be brought to the notice of the other party before, or at the time of, contracting.

New terms cannot be introduced after the contract has been formed unless both parties agree to a ‘variation’ of the contract. Therefore, even if one par ty has signed the other’s standard terms, it may not be bound by them if they are supplied after performance of the contract has begun.

I Knowledge: For a contract to come into being there must be evidence of an intent to contract. It is a question of carrying out an objective analysis of the agreed terms. That said, a party seeking to rely on its standard terms is only required to do what is reasonably sufficient to give the other par ty notice of his conditions of trading (Parker v South Eastern Rail Co (1877)).

The Parker case established that it is immaterial that the party signing had not read the agreement and did not know its contents.

They were still held to be bound by its terms. It also established, however, that the person receiving the document may escape being bound by its terms if he did not know that it contained writing or printing and if reasonable steps had not been taken to bring the terms to his attention. The question of whether the
notice given was sufficient has been frequently considered by the courts.

Where standard terms are not set out on the face of the contractual document (for example quotation, purchase order or invoice) they should be referred to there.

The practice of printing standard terms on the back of a contractual document is ineffective in incorporating those terms if there is no reference to the terms on the face of the document.

Equally, where contractual documents are sent by fax with reference to conditions ‘on the back’, the conditions referred to will not be incorporated if they are not included in the fax or other wise communicated. Equally, conditions may not be incorporated where they have been obliterated or are otherwise illegible.
It is a common practice to include standard terms on the back of invoices which have been supplied after performance of the contract has commenced or been completed. Under these circumstances,thetermsand conditions will not have been incorporated into the contract unless you can show that a ‘course of dealing’ has been established (explained next month).

If a term is particularly onerous or unusual, or involves giving up a statutor y right, then the par ty seeking to rely on that term must show that it has been brought fairly and reasonably to the other’s attention(InterfotoPicture Library Ltd v Stiletto Visual Programmes Ltd [1989]). This usually arises in relation to cer tain exclusion clauses.
Next month: Part 2 – The battle of the forms.

Oliver Jackson is a solicitor and senior associate with Mundays LLP based in Cobham. He advises on a wide range of commercial disputes and is a specialist in insolvencylaw.

T: 01932 590500

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