Essay: Battle of forms (contract law)

Battle of forms is a term used in contract law to describe a situation whereby two businesses/companies `negotiate terms of a contract on their own demanding terms, setting out what they wish should be involved in the contract. To put this into a scenario, the purchaser and the seller put forward their own one sided terms of a contract which can be deemed to be unreasonable for the other party; this is known as boilerplate . A term used in commercial agreements where the parties should analyse the applicability of provisions in the contract they are discussing. To conclude this brief introduction, battle of forms is the process of negotiating terms with no official signed contract.
One example of Battle of forms is Butler Machine . This case involved a contract for the selling of a machine tool costing £75,535 and it was agreed to be delivered within 10 months. The terms and conditions of the offer stated that the conditions of the sellers ‘’shall prevail over any terms and conditions in the buyer’s order’’. The initial problem was when the offer for the tool was made by the buyers, they put forward a different set of terms and conditions than that of the sellers. However, at the bottom of the receipt there was a tear off acknowledgement stating that they accepted the terms and conditions of the buyers. When the delivery came around, the sellers tried to raise the price, however, the courts held that the contract had been concluded on the buyer’s terms. The majority found that the buyers offer acted as a counter offer, which the sellers accepted by accepting the acknowledgment. Judge Lawton Lj stated that placing orders with conditions in small print is likely to cause a battle of forms, as seen in this case . In relation to this case, Denning concluded that the contract formed was based on the ‘’last shot’’ of the buyer’s terms. He believed that a contract was formed on the material points and if conflicting terms arose, then Denning would focus on the content rather than the formation of the contract.
According to case law, there are two approached to the battle of forms. The traditional approach and the Dennings approach, which could also be known as the contextual approach. The traditional approach is favoured by Lawton and Bridge LJJ and enforced in Butler Machine. The traditional approach essentially looks at whether one party in the battle had the intention to agree to the deal on the term of the second’s party. With this approach, there is a significant emphasis on where one party has given ‘’reasonable impression’’ that the other party has surrendered in the battle . This approach can also be known as the ‘’objective approach’’. Putting this into context using the Butler Machine case, it was seen by the courts the moment the suppliers sent back the tear off slip gave a reasonable impression that they were accepting the terms of the second party.
The Denning contextual approach makes it difficult to establish facts, and is not always applicable to all cases. This approach is an alternative approach to the objective approach. The Denning approach is used when it’s impossible to say that a contract was finalised on the terms of either party’s. However, this is rarely the case due to the ‘’last shot’’ convention in contract law. Denning’s approach is used when there is no point at which one party gave reasonable impression that they accept the offer of the other party. This approach was never used in Butler as it was concluded that there was a reasonable impression of the sellers surrendering the battle. Nevertheless, this could be seen in cases such as GHSP Inc. v AB Electronic Ltd . This is where, the party’s standard terms and conditions prevailed as it was clear that both parties will not contract on each other’s terms. In this case, the standard terms were’’ to exclude liability for consequential loss or damage’’ . Negotiations of the contract were dependant on claimant’s terms which had no limitations on liability. However, the defendant was not willing to contract without a cap on his liability – therefore no contract was concluded. However, per Sales of Goods act 1979, if goods are manufactured then there has been a performance of a contract. The act states that parties own terms have no rite of passage in contracts. In a battle of forms, if one party wishes to not contract on other party’s terms then this needs to be made explicitly clear. However, this may be more of an issue to achieve when using the standard terms of business.
The way the law addresses battle of forms is through the Uniform Commercial Code . Common law rule has been substituted by statute in several jurisdictions to attain equality between the parties. This is evident in the UCC which converts a counter offer into an acceptance regardless of the additional terms . This was designed to deal with disputes that could arise from the last shot rule. Article 2 of UCC applies to the Sale of Goods act . The UCC states that there should be a contract as soon as documents are exchanged from both parties. Section 2-207 is superior to the mirror image rule and the last shot rule. If parties wish to enter a contract, then the contract will be formed despite the differences in standard terms. The second writing of the contract will then be viewed as an acceptance. This therefore acts as an answer to the last shot rule, nevertheless, with this, occurs many problems.
The mirror image rule, referred above, is a common-law approach, which is the acceptance of an unconditional offer which correlates with the terms proposed by the offeror. If one party wants to change terms of a contract, or wishes to add new terms, this offer would be considered as a counter offer. This is not an acceptance of the previous offer, but the new offer would be seen the dominant. This is because, the counter offer would be a rejection of the previous offer, thus destroying it. This is demonstrated in Hyde v Wrench . Seller wished to sell land for £1000, however, the purchaser put in a counter offer of £950. The counter offer was denied by courts. It was concluded that B had no right to change terms of A’s offer unless A was willing.
Evidently, with any law customs, there are many difficulties that arise. In terms of counter offers, there could be discrepancies between a counter offer and the acceptance of the previous offer. This was seen in Brogden v Metropolitan Railway co . This case is a clear example of how a counter offer was accepted by conduct. The appellant provided coal consistently to the respondent’s company, therefore both parties decided to enter a long term contractual agreement. A draft contract was conducted by the appellant and sent to the respondent in which, he accepted after marking the name of the arbitrary. This could be a counter offer; however, the appellant’s manager was satisfied with the draft and instead of an acceptance of an offer, it was placed into a file. Due to this, a dispute arose as to whether a contract was agreed. The House of Lords concluded that there was an acceptance by conduct of the appellant’s counter offer.
The ‘’last shot’’ rule determines who wins or loses the battle of forms through the acceptance of counter offers by conduct. This is demonstrated in Tekdata Interconnections Ltd v Amphenol Ltd There was a long-term arrangement between a buyer and a seller. Buyer put forward purchase orders containing its own terms and conditions, the seller would then send an acknowledgment with their own terms and conditions, these terms and conditions will prevail. The last shot was sent by the seller; therefore, the contract was on the seller’s terms. Dyson LJ believed that the last shot rule promotes efficiency in commercial relationships. There is also a knock out rule in contract law, which states that if both parties don’t agree on the terms that each party put forward then they cancel each other out and the contract is dropped.
Trebor Bassett Holdings Ltd v ADT Fire and Security plc . This case stated that ‘’some care is needed’’ when resulting to the last shot. Courts must take all the relevant communications into account, therefore, just the existence of the last shot cannot determine who wins the battle. It reaffirmed that Denning’s approach was far from conclusive when concluding the winner of battle of forms. Courts are unlikely to form contracts for two parties who have conflicting terms and conditions, unless the situation called for it.
Article 39 CESL refers to offer and acceptance of contracts. There will be an offer and acceptance which would lead to a concluding contract, even if there were conflicting terms and conditions. When a contract is formed with conflicted terms, the contract will consist of terms that are standard terms and the courts will fill in any gaps. This leads to the provision of ‘’modified acceptances’’. Essentially, a modified acceptance is a counter offer but the offer will be accepted unless the offeror makes a quick rejection to the offer. If there was an acceptance of the offer, then the terms of the contract will be that of the modified accepted conditions. The law therefore accepts the final contract that has been made from the parties based on the modified terms set.
Essentially, a battle of forms is won by the party who gets their say first. This means that if the seller put an item at a set price, and the buyer can’t take advantage of the price and put forward a counter offer unless it is specifically drawn to the attention of the seller. However, this is not found in favour of English Courts. In English law, the terms and conditions of a contract should be considered together from both parties. The GHSP case was a clear portrayal of parties not wanting to contract on one another’s terms.
To conclude, the two approaches show a positive light on battle of forms. The traditional approach encourages the idea to stick to your own terms and conditions and to prove to the courts that the other party gave a reasonable impression that they accepted your conditions. Therefore, this will see you winning the battle, however, at the risk leading to many problems in the courts if the other party didn’t give reasonable impression of the acceptance. On the contrary, contextual approach shows that battle of forms is positive as even if there is no conclusive decision, they will receive protection from the law .
Battle of forms can be restricted due to the fear from parties that nothing will be done. For example, if courts find that no contract has been formed by the parties and that no party gave reasonable impression of the acceptance of an offer then it is possible that the courts would make a decision that goes against the wishful thinking party. Due to the fear of the contract going against them, the two parties would have to meet and come to a mutual consensus and reach an agreement therefore sacrificing the battle. Therefore, the law should address with these problems via reinforcing fear into the party’s that the contract may go against their own terms.