UK: Are You Contracting On Your Own Terms?

Last Updated: 27 September 2010
Article by Siobhan S. Creely

Businesses often give their standard terms and conditions of business (T&C) low priority until a dispute arises, by which time it may be too late. It is not uncommon for a sales department to issue quotations or accept orders using terms that are out of date, copied from the internet or even be conducting business on the customer's terms because the customer has successfully substituted their own T&C for yours.

Terms & Conditions will be useless unless proper procedures are followed to ensure they are incorporated into the contract and prevail over any competing T&C. They will not bind your customers unless they have been incorporated.

The common law rule is that after a contract has been formed by offer and acceptance between the parties, new contract terms cannot be introduced (unless by mutual consent). Therefore the all too frequent business practice of sellers seeking to impose their T&C by printing them on the back of their invoices will not be sufficient to incorporate their T&C into the contract, as invoices are traditionally despatched after the contract has been made.

The recent case of Rooney & Anor v CSE Bournemouth Ltd (t/a CSE Citation Centre) CA (Civ Div) 9 June 2010 examined the manner in which standard conditions may be incorporated into a contract by simple reference on the face of a work order form.

CSE an aircraft maintenance company appealed against a decision that its standard conditions of trading were not incorporated into a work order form.

CSE had entered into a contract to maintain and manage the airworthiness of an aircraft. It was CSE's practice for the scope of maintenance works to be carried out to be defined on a work order form. CSE's work order forms contained the statement 'terms and conditions available on request'. On a particular occasion, CSE negligently carried out works, pursuant to a work order form, on the aircraft with the result that it sustained damage on a subsequent flight.

The owners subsequently brought a claim for losses incurred as result of the damage suffered by the aircraft. They applied for summary judgment in their claim on the basis that, among other things, CSE had no real prospect of showing that the work order form was a contractual document or that it incorporated CSE's terms and conditions. The judge held that although it was reasonably arguable that the work order was a document intended to have contractual effect. The judge held that the statement 'terms and conditions available on request' was not sufficient to incorporate CSE's standard conditions of trading into that contract because they conveyed no more than that there were terms and conditions available, and they did not purport to incorporate any particular terms and conditions into the contract.

On appeal CSE contended that the judge had erred by adopting too linguistic an approach and had failed to look at the commercial context in which the work order form and the statement on it was made. They argued that the Judge ought to have found that it was at least arguable that it was intended that work carried out by CSE pursuant to a work order form was subject to its conditions of trading.

The Court of Appeal held that the judge had correctly considered the applicable principle as to the construction of commercial contracts; whether reasonable people would have understood the words used as referring to contractual terms upon which CSE had agreed to do the work.

The Court also held however that the judge had erred in finding that the words used could not be said to have incorporated CSE's standard conditions of trading. The work order form was a contractual document used in a contractual maintenance scheme, whereby the work order form activated the work (and nature of work) to be done. While the judge's interpretation of the words used might have been correct grammatically, in a business context it would be unusual if a contractualy binding order, such as the work order form, contained no commercial terms. It was at least arguable that a reasonable person would have understood the words used as referring to contractual terms upon which CSE had agreed to under take the work on the aircraft.

Whilst the company in this case may have been able to rely upon its T&C despite the somewhat unsatisfactory manner of their incorporation other may not be so fortunate and it is therefore important for all companies, no matter whether they supply goods or services, large or small, to ensure that their T&C up to date and correctly incorporated. If you are not sure whether your practices are sufficient to correctly incorporate your T&C into every contract then you should seek legal advice. This advice could be quick and easy and could save you a significant amount of time, inconvenience and expense in the long run!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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