Battle of the Forms

by Mike Morris, Consultant Solicitor

It is common enough in the commercial world that a seller and buyer of goods do business on their standard terms, each stating in negotiations that they do business on their terms of business. It is the conventional wisdom, in what is often referred to as “the battle of the forms”, that the “last shot” (the last to say their terms apply before the contract is concluded) normally prevails, so they are the terms that govern that sale and purchase.

In a very recent decision of the England and Wales High Court, it unusually decided, and based on the particular facts of the case (which weren’t so unusual), that the first, and not the last, shot of terms prevailed. How come?

The case involved TRW Ltd (an English company, the buyer) v Panasonic Industry Europe GmbH (of Germany, the seller) and concerned resistors, which TRW claimed were defective.

In Panasonic’s standard terms the contract was subject to German law and the exclusive jurisdiction of the Hamburg Courts, and in TRW’s to English law and its courts!

Panasonic had included in its standard terms that, for example, if the conditions of the buyer diverge from Panasonic’s terms then the buyer’s terms shall not be valid even if Panasonic makes delivery without reservation or comment concerning the buyer’s terms; also, the buyer’s terms needed to be expressly agreed to in writing by Panasonic.

The case highlights the possibility that if standard terms of business are worded appropriately that the party that puts its terms forward first, can find that their terms can apply to the exclusion of the other party’s, and therefore the “last shot” does not win.

So when the other party tries to use its standard terms first, it is best practice to particularly check if the terms create “bear traps” similar to those in the Panasonic situation. If so, you will have to negotiate terms, otherwise silence, and with business continuing between the parties, can be taken to mean that agreement/consent has been given to the other party’s terms.

Check if the Panasonic approach can be made to work, for your circumstances, and that it is prudent.

And obviously don’t assume if your terms went in last that they will inevitably prevail!

Also it is important when looking at the applicable terms of a deal to review what other agreements may already be in place between the parties, as a result of perhaps dealings in previous years, (in this case as far back as 2011), as the terms may well have the potential (as in this case) to directly affect the current contract terms.

The court decided that the dispute could not be heard in London, but only before the courts in Hamburg, and with German law applying – not what TRW wanted.

If you have any questions about this, please don’t hesitate to get in touch with us on 020 7846 2370 or by email info@jurit.com, or your usual Jurit contact.

Photo by Scott Graham on Unsplash