UK: Contract Formation: Battle Of The Forms

Last Updated: 19 September 2011
Article by Jeremy Glover

In the case of Trebor Bassett Holdings Ltd & Anr v ADT Fire & Security, [2011] EWHC 193 (TCC), Mr. Justice Coulson had to consider a wide range of issues relating to the formation of the contract. These included the classic contractual question of whose terms and conditions actually applied.

This case arose out of a fire which destroyed a large confectionery factory. ADT had been engaged to provide the fire protection system. Many different issues arose, the first of which was on whose terms and conditions the parties had contracted. This "battle of the forms" is fairly common, albeit here the stakes were rather high. ADT's conditions purported to limit liability to just under £14,000 as opposed to Trebor's claim for approximately £110million. In these circumstances, the approach of the court will typically be this:

  1. the test is objective, albeit that the court must take into account the factual matrix – i.e. what actually happened;
  2. Usually, a contract is formed once the last set of forms is sent and no objection is taken. The "last shot" prevails;
  3. acceptance by conduct can be inferred, although conduct will amount to acceptance only if it is clear that the party intended to accept the terms. Acceptance of a delivery of itself may not be enough;
  4. where the parties have not agreed which set of standard terms applies, then the only inference that can be drawn is that the agreement was made on the basis that neither set of standard terms would apply;

Here, Mr. Justice Coulson suggested that care needed to be taken with the notion that the critical act may be the firing of the last shot. He referred to a CA decision, Tekdata Interconnections Ltd v Amphenol Ltd. Here, the sellers quoted on their terms, the buyers sent a purchase order which stated that the purchase was on their terms but when the sellers acknowledged that order, they repeated that their own terms applied. The Judge at first instance said that whilst the traditional view would be that the acknowledgement was the last shot, it appeared that the parties intended that the buyers' terms should apply. There was a commercial history of the parties contracting on the buyers' terms. The CA disagreed. Where there is a battle of forms, the traditional analysis had to be adopted unless the parties' previous conduct clearly showed a common intention that other terms were intended to prevail. Dyson LJ said:

"The rules which govern the formation of contracts have been long established and they are grounded in the concepts of offer and acceptance. So long as that continues to be the case, it seems to me that the general rule should be that the traditional offer and acceptance analysis is to be applied in battle of the forms cases. That has the great merit of providing a degree of certainty which is both desirable and necessary in order to promote effective commercial relationships."

This all mattered here because Trebor argued that there was a previous course of dealing between the parties which incorporated their own terms and conditions. The principal problem with this argument was that none of the witnesses of fact were able to demonstrate that such previous contracts had been agreed on that basis. The fact that ADT had been given a "vendor number" meant merely that ADT had entered into contracts with Trebor before, not that they had necessarily expressly previously agreed to the terms and conditions.

The relevant specific background to the contract was that Trebor wanted to move their 'oil pop' popcorn production lines. Those production lines were protected by a CO2 suppression system. Unless Trebor were specifically advised, either by the specialist fire prevention contractor or their own Group Risk Department, that a CO2 suppression system was inappropriate in all the circumstances, they were going to replicate the CO2 system at their existing plant in the new facility. So Trebor had decided on a CO2 suppression system before making any contact with ADT. Although ADT was provided with very little information on which to quote, it was invited to quote for this work because they were the suppliers of the fire systems at Monkhill. And so:

  1. On 28 August 2003, ADT sent Trebor a quotation on its terms and conditions;
  2. On 3 September 2003, Trebor sent to ADT a purchase order which was based on their own terms and conditions;
  3. Work commenced; and
  4. On 17 September 2003, ADT produced an updated quotation and specification.

What was the last shot? The answer was the 3 September 2003 purchase order. Although the evidence suggested that the revised specification and covering quotation were dated 17 September 2003, there was no evidence that the documents were every received by Trebor. In addition to that, the critical work was carried out by ADT in accordance with the exchanges made at the end of August and the beginning of September. Therefore work was taking place in accordance with the 3 September 2003 purchase order. This meant that the "specification of 17 September" was immaterial, because the work was being undertaken pursuant to earlier documents. Whilst the Purchase Order accepted the quotation for work it said nothing that could be possibly construed as an acceptance of the defendant's terms and conditions. What were the terms and conditions on which the quotation was being accepted? Here there was no express agreement to be bound by ADT's terms and conditions.

ADT were not finished there. They also argued that they had received no notification of Trebor's terms and conditions. Although the Purchase Order referred to them, they were not provided, had never been seen and so could not be incorporated. The same was of course equally true of ADT's terms. However, there was reference in the Purchase Order to the terms and conditions having been "already supplied". Therefore the words on the Purchase Order would in the view of the judge not only have alerted ADT to the existence of Trebor's terms and conditions, but would have also alerted to them at least the possibility, if not the probability, that they already had those terms and conditions, because they had already contracted on them in the past. In other words, "the ball was in the defendant's court". If they did not have a copy, they should have asked for it.

This article is taken from Dispatch, the monthly Fenwick Elliott newsletter. To see past issues please go to www.fenwickelliott.com/dispatch.

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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