Battle of the Forms
April 17, 2014
Conflicting Terms and Conditions – Who wins?
We are all well versed in the fact that, whenever we purchase anything particularly on-line, we are asked to agree to the company’s terms and conditions which will form part of the contract. What happens however when two businesses enter into a contract and each attempts to incorporate its own terms and conditions and there is a conflict between them? Who wins?
Examples of this are until a customer pays, who retains ownership of the goods? As the seller your terms may say you do but what if the buyer's say that ownership transfers on delivery? Then what happens if your customer goes out of business? Commonly during the recession, if you were selling to retailers to on payment terms of 30 days, the retailer's terms required 2% discount if they paid promptly i.e in less than 30 days – do you have to allow them to take a discount?
If the conflicting terms come to light before any dispute has arisen, rather than ‘burying its head in the sand’ a business should ask the other party to agree to a variation before entering into the contract. If a dispute arises later, the agreed variation will stand.
Normally, however, the conflicting terms only come to light after a dispute has arisen. In these circumstances, although there is still the option of asking the other party to agree to a variation, it is less likely that they will agree in view of the dispute so the courts will inevitably be asked to intervene.
The first step taken by the courts is to look to see whether there has been a mistake. Is it clear and unambiguous from the conduct of the parties what the correct terms ought to have been and what the parties actually intended? This is a heavy burden to discharge and there must be clear, non-conflicting evidence in support to prove that your terms should be preferred.
Another solution may be that the terms of the contract have subsequently been varied by the conduct of the parties. For example, if the conduct of both sides is consistent with one of the terms.
If the court cannot determine the terms of the contract, it may decide that either the particular term, or even the contract as a whole, is void. This is obviously an unhelpful result as in most cases it is clear that the parties intended to enter into a binding contract.
Businesses should always take care when entering into contracts to ensure that there is no conflict in the terms and both parties understand whose terms they are working to.
The information contained in this article is intended for general guidance only. It provides useful information but it is not a substitute for obtaining legal advice as the articles do not take into account specific circumstances. So do please Contact US for legal advice on the issues raised.