When You Agree Terms and Conditions

When you do business with someone else, it is important to agree the applicable terms and conditions - merely exchanging terms can be a recipe for dispute, as a recent case shows.The case involved a US company, which ordered goods from a British company. Both companies used standard terms of business, which were (of course) different. In particular, the US company’s terms of business contained a clause that made a supplier liable without limit for consequential losses to the purchaser resulting from certain breaches of the contract. The vendor’s terms limited its liability in such circumstances.The goods supplied were defective and caused a considerable loss to the US company, which then sought compensation. The defendant argued that because the purchaser had taken delivery of the goods after having been sent a notification of its terms and conditions, its terms and conditions applied. The purchaser argued that by accepting the order in its terms and conditions, those applied.The court held that:

  • a contract will be formed on the most recent set of terms and conditions supplied unless the recipient objects;
  • acceptance of one party's terms can be inferred in certain cases by the behaviour of the other party. However, merely taking delivery of the goods would not be sufficient to justify that inference; and
  • where there are two 'competing' sets of terms and conditions and no agreement as to which applies, the inference is that neither does.

 Accordingly, neither set of conditions applied. Because the applicable law was that of England, the provisions of the Sale of Goods Act 1979 applied instead.'It is critical to make sure that when you form a contract, the terms of the contract are known and agreed by both parties,' says Bill Duncan.Contact Bill Duncan on 01752 292362 for more advice.

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