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How to gain the upper hand: Battle of the Forms Update



United Kingdom

A ‘battle of the forms’ arises where two parties enter into negotiations with the intention of entering into a contract but each attempts to conclude the contract on their own standard terms and conditions.

In such a case, it will be necessary to determine firstly whether a binding contract has been entered into and, if so, which party’s terms and conditions have been incorporated into the contract.

The above scenario often arises in negotiations between commercial suppliers and buyers of goods who each want to conclude a contract on their own standard terms and conditions. For example, purchase order forms usually have standard terms and conditions of purchase printed on the reverse and suppliers frequently have conditions of sale printed on their acknowledgement of order forms etc. To decide which party’s terms apply (if any), the court will analyse when the contract was concluded and whose terms were incorporated at that stage.

The General Rule

The general rule has long been that the battle of the forms will often be won by the party who had the “last shot” in the contractual negotiations. That is the last party who put forward their terms and conditions which were not explicitly rejected by the recipient.
In practice, this would mean where a buyer places an order on a standard purchase order form and receives an acceptance of an order with the supplier's terms and conditions on it, then the supplier has not, in fact, accepted the order but has made a counter offer.  If the goods are delivered, this constitutes acceptance of the counter offer and the contract is on the supplier's terms as the supplier had the "last shot".

Generally, a party that was the last to submit their terms and conditions could rely on some degree of comfort knowing that their terms and conditions are likely to be the ones that would apply. However, the recent case of TRW Ltd v Panasonic Industry Europe Gmbh (2021) has thrown some uncertainty on the situation as in that case, Mr Justice Kerr exceptionally held that the party having the ‘first shot’ had won.

TRW Ltd v Panasonic Industry Europe Gmbh (2021)

The dispute in this case relates to the sale of resistors by Panasonic Industry Europe GmbH (the seller) to TRW Ltd (the buyer). The buyer had signed the seller's ‘customer file' which stated that the buyer had ‘received and acknowledged' the seller's standard terms. The seller's standard terms provided for German law to govern and the jurisdiction of the German courts in Hamburg; and the buyer's standard terms provided for English law to govern and the jurisdiction of the English courts. The question before the court was which party's standard terms had been incorporated into the relevant sale contracts.

Mr Justice Kerr exceptionally held that the ‘first shot’ had won. He did so because the buyer in that case had, at the outset, agreed to the seller’s standard terms which precluded any contrary terms proposed by the buyer from applying. The court explained that, once the buyer had agreed to the seller's standard terms in 2011, its only remedy, if it did not want to be bound by the seller's standard terms, was to either not buy from the seller, or to convince the seller to agree in writing to renounce its standard terms. However, the buyer had done neither. The court concluded that, although it is unusual, ‘the last shot' doctrine was displaced on the facts here.

Practical implications of this case

This is an important decision because it demonstrates that parties firing the ‘last shot’, cannot safely assume that their ‘shot’ will always win; and that there are ways for the party firing the ‘first shot’ to ensure that its terms prevail instead. This highlights the importance of reviewing terms and conditions to check for provisions that may potentially affect the outcome of the battle of the forms.

Similarly this case also highlights the danger for a party to simply ignore the other party's terms and conditions and simply send across their own version. All the contract terms passing between the parties should be reviewed, and a prior agreement to certain terms, even if it did not lead to any supply of goods or services in the first instance, may result in any subsequent exchange of standard terms being ineffective.

If you require any further information in relation to this area please don’t hesitate to get in touch with our Commercial practice

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