Battle of forms – Case Study
Following our previous blog on Incorporating your terms and conditions, here is a case study on the Transformers and Rectifiers Ltd v Needs Ltd.
In Transformers and Rectifiers Ltd (T&R) v Needs Ltd (Needs), the court had to decide which terms and conditions applied to two contracts for the sale of certain goods. The parties had a long history of dealing with each other during which T&R had placed many purchase orders with Needs. A dispute arose with T&R claiming that the goods supplied were not in accordance with the contracts. Needs sought to rely on its own terms as liability for its breach of contract was limited or excluded. Conversely, T&R wanted to rely on its terms as there was no such limitations or exclusions. This created what is known in the legal world as a “battle of the forms”.
T&R’s terms and conditions were printed on the back of the purchase orders but there was no reference to those terms and conditions on the face. Furthermore, some purchase orders were sent via a means where the reverse of the purchase order was not included (eg by fax).
Needs’ terms and conditions were referred to on its acknowledgment of the purchase orders. The terms were not sent with the acknowledgement but a copy was stated to be available on request.
The court held that neither of the parties’ terms and conditions applied to the contracts. It found that neither party had taken sufficient steps to draw the attention of other party to its terms and conditions.
What does this mean in Practice?
This case illustrates:
1. the importance of, where it is impractical for both parties to sign an agreement, spending time considering how to incorporate your terms and conditions into each transaction (whether you are the seller or purchaser);
2. just because you have a longstanding amicable relationship with a supplier or customer, does not mean you should neglect putting in place robust and protective terms and conditions.