Battle of the forms

The problem

A battle of the forms exists when two businesses want to enter into a contractual relationship, but each want the transaction to be governed by their standard terms. When such a battle is entered into, two questions arise: (1) is there a contract between the parties; and (2) if so, on what terms.

The courts have tended to assume that if, despite the battle, one party eventually rendered some kind of performance (albeit perhaps defective) to the other, the answer to (1) is always going to be ‘yes’. See, for example, the leading ‘battle of the forms’ case, Butler Machine Tool v Ex-Cell-O Corpn (1979), where a machine was offered for sale on the suppliers’ terms. The suppliers’ terms included a price variation clause allowing them to charge more if the machine turned out to be more expensive to produce. The buyers ordered the machine, with their terms and conditions attached. These terms and conditions obviously did not include a price variation clause. The suppliers sent back a tear-off slip at the bottom of the order, acknowledging that it had been received, together with a letter saying that they had pleasure in acknowledging the buyers’ order for the machine, which would be delivered in accordance with their standard terms. The machine was subsequently delivered to the buyers, but the suppliers demanded that the buyers pay more for it under the price variation clause. Lord Denning MR observed, ‘No doubt a contract was…concluded.’ For him, the only issue was issue (2) – ‘But on what terms?’

Suggested answers to question (2)

The applicable case law suggests two approaches to determining what terms governed the contract that will (the courts seem to suppose) exist between two businesses that have engaged in a battle of the forms and then gone ahead and performed.

(i) The traditional approach

The traditional approach – favoured by Lawton and Bridge LJJ in Butler Machine Tool and endorsed by the Court of Appeal in Tekdata Interconnections Ltd v Amphenol (2009) – is to see whether there is any point where one party to the battle of the forms can be said to have reasonably given the other party the impression that he (the first party) was agreeing to deal on the second party’s terms. Given the emphasis placed, under this approach, on seeing whether there is some point, at any point, where one person can be said to have reasonably given the other party the impression that he has surrendered in the battle, an alternative name for this approach for resolving a battle of the form is the ‘objective approach’.

In Butler that point was reached when the suppliers sent back the buyers’ tear-off slip. Despite the letter accompanying it, the Court of Appeal found that at that point, the suppliers had done enough reasonably to give the buyers the impression that they had agreed to deal on the buyers’ terms, which did not include a price variation clause.

In Tekdata, Longmore LJ put a case where a buyer offers to purchase goods from a seller, on the buyer’s terms. The seller acknowledges the purchase order, and encloses a copy of his, the seller’s, terms. The seller then delivers the goods, which the buyer accepts. In such a case, Longmore LJ thought that ‘other things being equal’ there would exist ‘a contract on the seller’s terms.’ The reason for this is that by accepting the goods without objection, the buyer would at that point have given the impression that he was agreeing to purchase the goods on the seller’s terms.

This last example may account for why the traditional approach to determining the terms of a contract when there has been a battle of the forms is sometimes called the ‘last shot’ approach. The seller fired the last shot before delivery by insisting when acknowledging the buyer’s order that the deal be on his, the seller’s, terms. By accepting delivery, the buyer has surrendered in the battle. However, as was acknowledged in Butler, the term ‘last shot’ is misleading as a summary of what the courts are looking for under the traditional approach. As Lord Denning MR remarked in that case, ‘In some cases the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back: and the buyer orders the goods purporting to accept the offer – on an order form with his own different terms and conditions on the back – then if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller’ (emphasis added).

(ii) Lord Denning’s approach

Lord Denning’s approach to determining what the terms of a contract are between businesses that have engaged in a battle of the forms is often presented in the contract textbooks as an alternative to the traditional, or objective, approach to resolving this question. That is one way of looking at. But an alternative is to see Lord Denning’s approach as kicking in when under the traditional, or objective, approach it is not possible to say that a contract was concluded on the terms of either business. So Lord Denning’s approach would only apply when there is no point at which we can say that one party reasonably gave the other party the impression that he was surrendering in the battle. What do we do in that case? In Butler, Lord Denning suggested that in a case where ‘There is a concluded contract but the forms vary…[t]he terms and conditions of both parties are to be construed together. If they can be reconciled to give a harmonious result, all well and good. If differences are irreconcilable – so that they are all mutually contradictory – then the conflicting terms may have to be scrapped and replaced by a reasonable implication.’ Denning never had to do this in Butler itself, as in that case he agreed with his colleagues that the suppliers had reasonably given the buyers the impression that they would deal on the buyers terms. But in a couple of cases – Lidl UK Gmbh v Hertford Foods Ltd (2001, CA) and Ghsp Inc v Ab Electronic Ltd (2010, Burton J) – the courts have found that the battle of the forms was so intractable that neither party’s standard terms could be said to apply, and that the terms of the contract were either supplied by the minimum terms that the parties did agree on (Lidl) or by the general law as represented by the Sale of Goods Act 1979 (Ghsp).

My suggested solution

I think the current law just encourages businesses to engage in battles of the forms. The traditional approach encourages businesses to stand their ground in the battle in the hope that they will be able to convince a court that the other side did something at some point to give the reasonable impression that they were conceding the battle. And Lord Denning’s approach reassures the parties to a battle of the forms that even if neither side backs down (or reasonably gives the impression of backing down) they will still enjoy a great deal of protection from the law of contract, which will enable them to sue for late payment or defective performance, even if it does not allow them to take advantage of their extra special standard terms that they were wanting to get into the contract.

The only way to stop battles of the forms occurring is to follow a simple rule: If a battle of the forms breaks out, the courts will find that there was no contract between the parties unless it is clear that the parties subjectively agreed as to what the terms of their contract would be. Such a rule would wonderfully concentrate the minds of both parties to a battle of the forms. A buyer who was insisting on dealing on his standard terms would worry that if the courts found that there was no contract, he would not be able to sue for defective performance. (The law of tort does not generally allow actions for receiving – this a phrase from Tony Weir – no good goods.) A seller who was insisting on dealing on his standard terms would worry that if the courts found that there was no contract, he would be reduced to suing under the law of restitution for a reasonable sum (in Latin, quantum valebant – ‘as much as they are worth’) for any goods he delivered to the buyer. Both parties would have a substantial incentive to call a ceasefire in the battle, talk things over and reach an agreement.

So I suggest that in this area, the courts should take the exceptional step of abandoning their objective tests for determining whether the parties reached agreement, and if so on what terms, and should instead require that the parties reach a consensus ad idem (a meeting of minds) before they will find that there existed a contract between the parties. So the courts should stop skipping past question (1) by assuming that there was a contract between the parties, and should stop thinking that the only issue arising out of a battle of the forms is question (2) – on what terms? They need to show themselves far more willing to answer question (1) in the negative if the parties to a battle of the forms have not genuinely settled their differences. If they did that, in a few years’ time, battles of the forms would never trouble the courts again.

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