Your Terms or Mine ?

Business dealings are rarely documented in a way that lawyers would like. It is also true to say that if commercial people tried to run their business to suit the lawyers, business would grind to a halt.

The Court of Appeal decision in Tech Data and Amphenol is a good illustration of how things can go wrong.

Tech Data were part of the supply chain for Rolls-Royce engines.  

• They sent a parts order to Amphenol. This was expressly subject to Tech Data’s standard terms and conditions, including tight delivery and quality requirements.
• Amphenol wrote back accepting the order but referring to their own standard terms and conditions which limited their liability for any delay and quality problems.
• Amphenol then delivered the parts, which Tech Data accepted.
• Tech Data later complained of serious delay and quality issues.

Whose terms and conditions governed the contract?

The appeal decision was that Amphenol’s purported acceptance of the order, but on different terms, amounted to a counter-offer. This was then impliedly accepted by Tech Data when it took delivery. The contract came into existence at that moment - and on Amphenol’s terms. Tech Data’s claims failed.

This reflects the traditional legal outcome of this toing and froing of small print paperwork - that the contract is governed by the last terms and conditions to be supplied before the contract came into existence. It’s the “last shot” which counts. That outcome can only be displaced where there is cogent evidence that both parties intended to contract on a different basis. There was none in this case.

One practical difficulty is that this grandly titled “battle of the forms” is typically played out between busy purchase and sales department staff who may not appreciate its potential significance.

The message

If it is important that you only enter into contracts on your own terms and conditions (and why bother with them if is not?) then have a system in place which always :-

• ensures that they are duly referred to in any order you or your colleagues place;
• checks the wording of any purported acknowledgment or acceptance of your order.

If this is anything other than a clean acceptance of your order (with no different terms attached or endorsed or referred to) then :-

• make it clear that there can be no deal until they confirm that the order is subject to your terms and conditions;
• and refuse to accept delivery unless that is done;
• or go ahead anyway - but in the knowledge that if things go wrong, you may not enjoy the protection you had carefully drafted into your business paperwork.

If you would like to discuss this article, or any other matter relating to disputed contract issues please contact John Cadywould on 01603 675629, or e-mail jbc@rogers-norton.co.uk.