02 Jan
02Jan

A ‘battle of the forms’ happens when two businesses enter negotiations with the intention of entering into a contract and each tries to conclude the contract on their own standard terms and conditions (T&Cs).

Why it's important to win 

For good reasons, each side will want their own T&Cs to prevail and form part of the contract, as they will have been prepared very much with their particular business interests in mind and contain their preferred terms on such things such as:

  • control and mitigation of important risk factors
  • payment and credit terms  
  • ordering processes
  • delivery terms
  • ownership of products
  • service standards
  • termination rights
  • exclusions of and limits to liability
  • warranties of services and products
  • dispute resolution (e.g. court vs arbitration)
  • governing law and jurisdiction (see below the Panasonic case)

Conversely, losing the battle, could mean that the other party's T&Cs actually govern the contract that is eventually formed. This could happen even without the 'losing' party in the battle realising it has lost, until it's too late and a dispute has broken out. 

By that time, clawing back the lost ground is often very difficult (maybe even impossible) and the losing party will be left to contest the issues that have arisen based on the 'winning' party's T&Cs, which is all likelihood will not be as beneficial and could result in significant disadvantages.

When competing T&Cs are involved in negotiations, it's necessary to determine if a binding contract has been entered into between the parties and, if so, which party’s have been incorporated into the contract, if any. 

There are some general rules and guidelines that help determine the answers to these important questions. 

When is the contract formed?

The key issue will be to identify precisely when the contract was concluded. This will involve analysing the exchanges between the parties in terms of offer and acceptance.

This has to be decided objectively based on the facts of each case. The basic rule on contract formation is that there has to be offer made by one party that is accepted without conditions by the other party. See also our Commercial Contracts Guide

Where there are multiple exchanges going on between traders in the course of negotiations, as is often the case, a general rule has been developed over time through decided court cases (as there is nothing prescribed by statute) to help resolve the question. 

The 'last shot' doctrine

The ‘last shot’ doctrine provides that the terms and conditions which prevail to govern the parties’ rights and obligations under the contract are generally those which were sent last and received without objection being taken to them.

The leading case on the ‘last shot’ doctrine is Butler Machine Tool v Ex-Cell-O in which the seller offered to deliver goods to the buyer on the basis of the seller’s terms and conditions, contained on the back of the seller’s quotation. The buyer responded with an order which differed from the seller’s offer and contained the buyer’s terms and conditions and a tear off acknowledgement for signature and return, which the seller signed and returned. The court concluded that the contract was made when the seller returned the acknowledgement and that this constituted an acceptance of the buyer’s counter-offer on the buyer’s terms and conditions. The court dismissed the seller’s argument that a covering letter it had sent with the acknowledgement had re-incorporated the seller’s terms into the contract (since it stated that delivery was to be in accordance with its quotation). The letter was irrelevant because it simply referred back to the identity of the goods and the price; it was not sufficiently different to be regarded as a counter-offer.

But the 'last shot' doctrine is not always the one that decides the result in a battle of forms.

The 'first shot' doctrine

It does not always follow that a contract will be concluded on the basis of the last terms and conditions conveyed between the parties. 

It is always necessary to look at all the relevant documents to see whether the ‘last shot’ is determinative of what terms and conditions are incorporated.

In Sterling Hydraulics Ltd v Dichtomatik Ltd [2007], it was the party who fired the first shot (in this case, the buyer) who was successful in incorporating its terms and conditions, which were contained in a purchase order sent by the buyer to the seller. 

The seller, in its faxed acknowledgement of the buyer’s purchase order, included no terms and conditions but referred to them with a general statement ‘Delivery based on our General Terms of Sale’, which was included on the acknowledgement of order and on the delivery slip which accompanied the goods

However, the seller’s ‘last shot’ was held by the court to be insufficient to incorporate the seller’s terms and conditions because it was not an effective counter-offer. 

This was for two main reasons: 

First, the seller’s payment terms were not that different (if different at all) from those proposed by the buyer and 

Second, the words used by the seller ‘Delivery based on our General Terms of Sale’ were not sufficient to convert the acknowledgement into a counter-offer where there was no evidence that the buyer received the 'General Terms of Sale' which were printed on the reverse of the faxed acknowledgement. The seller’s acknowledgement was therefore held to have constituted acceptance of the buyer’s offer on the buyer’s terms and conditions.

In a more recent case, TRW Ltd v Panasonic Industry Europe GmbH [2021], it was held that the ‘first shot’ had won 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 even if the seller ‘had effected delivery or rendered services without reservation’ against a purchase order incorporating such terms, unless the seller had agreed to such terms in writing.

This is an important decision for parties doing business on standard terms, because it demonstrates that it is possible for a party to appropriately word its standard terms so as to win the ‘battle of the forms,’ and thereby avoid the risk of finding themselves bound by their counterparty’s standard terms instead. 

This case highlights the danger for a party (usually the purchaser or recipient of services) that assumes that its ‘shot’ will always win because it is the last one. All the contract terms passing between the parties must be considered, and a prior agreement to certain terms, even if it did not lead to any supply of goods or services, could ensure that subsequently exchanged standard terms fail to have the intended effect.

This case also provides an example of how the counterparty’s rival terms can substantially prejudice the party: the buyer was unable to apply English law and jurisdiction and was forced instead to litigate in Germany under German law. On the other hand, the seller, by ensuring that its standard terms were appropriately worded and the buyer’s agreement to those terms was obtained at the outset, was able to require all claims to be brought in its home jurisdiction (Hamburg) under its home law (German law).

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Note: This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only.

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