handshake Home | News & events | Legal updates | Conflicting contracts terms: Who wins?

Conflicting contracts terms: Who wins?

22 January 2010

In a battle of the forms where two businesses seek to rely on their own terms and conditions of sale or purchase, who wins? And how do the courts decide?

A recent Court of Appeal decision has given fresh guidance on this thorny commercial problem.

For 20 years or more, Tekdata Interconnections Limited had been a subcontractor to Rolls-Royce, supplying cable harnesses for engine control systems forming a vital part of Rolls-Royce’s aero engines. Tekdata required connectors for the harnesses and got them from Amphenol Limited.

In the transactions under scrutiny, Tekdata issued a purchase order to Amphenol, which contained Tekdata’s terms and conditions. This was followed by an acknowledgement of order from Amphenol, which contained Amphenol’s terms and conditions and stated that these were to apply. On the basis of this documentation, Amphenol supplied the connectors. A dispute then arose about whose terms and conditions governed the relationship.

The traditional approach to such questions is based on 170 years of legal cases, and has tended to apply the rules of offer and acceptance and, using a military analogy, to ask who fired the last shot before the contract was made. Usually, the terms and conditions of the party firing last prevail. In this case, that was Amphenol, whose acknowledgement of order was the last document sent.

However, the judge at first instance ruled for Tekdata, relying on another broader approach to the problem, which had been canvassed in 1979 by Lord Denning.

Under this broader approach, the court was entitled to ‘look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points even though there may be differences between the forms and conditions printed on the back of them’. This approach potentially gives a court more room to intervene and to exercise more discretion in reaching a decision.

Ultimately, however, the Court of Appeal reaffirmed the traditional approach and ruled that Amphenol’s terms and conditions governed the parties’ relationship.

They found that ‘the traditional offer and acceptance analysis must be adopted unless the documents passing between the parties or their conduct show that their common intention was that some other terms were intended to prevail’.

It was possible that the requirement to show such an intention might be satisfied in some circumstances, but it was not satisfied here.

What does this mean?

For some years Lord Denning’s broader and more creative approach has given lawyers reason to hope that in difficult battle of the forms situations they may still be able to argue that their clients’ terms and conditions prevailed in a dispute, even where they did not constitute the last shot. That is now almost certainly a more difficult argument to run.

What should you do?

Any battle of the forms dispute is fraught with uncertainty. You should not allow your business to be exposed to these risks if at all possible. 

A clear agreement, signed up front at the start of a commercial relationship, or at a key point in that relationship, which sets out the terms agreed, is the best way of ensuring certainty and obtaining the protection you expect to have as a result of contracting on your own contract terms.

Links

Tekdata Interconnections Ltd v Amphenol Ltd

© Shoosmiths. This page is for general information: it is not legal advice. Please read our full terms and conditions for details of the disclaimers and exclusions which apply.

Get in touch

Andrew Pickin

Partner
T: 03700 86 5032
I: +44 (0)115 906 5032
E: andrew.pickin@shoosmiths.co.uk