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Reach agreement on Terms of Business

Reach agreement on Terms of Business

A cautionary tale of a dispute over which party’s contract terms prevail (the battle of the forms).

This particular case involved a buyer who received a batch of faulty car control sensors from a manufacturer. As often occurs in business purchases, the buyer’s purchase order stated that all purchases would be on its standard terms but the seller’s acknowledgement of the order referred to its own terms of trade.

The generally accepted rule is that the conditions of the party ‘who fired the last shot’ will prevail in the battle of the forms, but that is not always so. In the car sensor case the High Court looked at the conduct of the parties and on the facts the seller had always referred to its terms and acknowledgements of order but it made no attempt to impose them during negotiations as the seller knew the buyer would not accept them.

The seller had also consistently told the buyer that it did not accept certain standard terms which the buyer was trying to impose. It was found that neither party had accepted the other’s terms and therefore the Judge ruled that neither set of terms applied. This highlights an all too common problem in which both parties proceed with a transaction and hope for the best, thinking that any future dispute can be resolved fairly easily.

As neither set of terms applied the buyer essentially won, as the Sales of Goods Act does not imply a limit of liability on the supplier. The implied terms of s.14 Sale of Goods Act will therefore form the basis of the subsequent car sensor trial.

Dispute Resolution Team