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Terms and conditions must be clearly stated to apply

Battle of forms highlights a hard truth for company contracts

Two companies who went to court in an argument over whose terms and conditions applied to a contract between them, have both lost out.

The ruling from the High Court has said that neither company made enough efforts to deliver up their terms and conditions to the other side, leaving both without a leg to stand on in a dispute over a supply of rubber gaskets.

The dispute arose between Transformers & Rectifiers Ltd and Needs Ltd. Needs argued that its terms and conditions applied to the sale of the gaskets, so that its liability for breach was limited to the contract sum, but Transformers & Rectifiers said that its terms and conditions applied because they were printed on the back of the purchase orders.

The commercial relationship had been going on for more than 20 years and orders were placed for the gaskets and other components every week by fax, e-mail and sometimes by post. What was important was that the terms were printed in a pale typeface on the reverse of the purchase order with no reference to them on the face of the purchase order. When the orders were faxed or emailed, the reverse side was not included in the transmission.

Similarly, Needs referred to their standard terms and conditions in their order acknowledgement, but did not provide a copy of them or print them on the reverse.

As a result, both companies failed to have their terms and conditions upheld in deciding the contract, with the High Court saying that neither party’s terms and conditions were sufficiently incorporated into the purchase process.

This ruling highlights the importance of making sure that if you want to be able to rely on your terms, then you must state clearly that you are purchasing or providing the goods or services on your terms. Also, the terms need to be supplied each time or readily available – these days it could be a link to the document on your website.

So, for example, the order acknowledgement could say “Our standard terms of business shall apply, click here to read our standard terms” – the important thing is to be clear and be consistent.

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