This case surrounded the so-called battle of the forms. That is where each side refers to their own terms and conditions applying in their documents such as quotations, orders, order acknowledgements, etc. The two sets of terms and conditions contain diametrically opposite provisions, so which applies? It is often thought that the last party to fire the shot before the contract is formed wins. That is sometimes true. But what if it is clear that the parties make it clear that they will each not agree to the other's terms?
In this case, G supplied products to Ford. E was a supplier of components to G. E's products were defective, causing G to incur big losses. G wanted to claim those losses from E. The question was whether E's terms (which severely limited its liability), G's terms (which required E to have unlimited liability) or some other terms applied? Each side referred to their own terms and conditions applying in their relevant order documents. However, it was clear that the parties did not agree to the other side's terms. They were both hoping to negotiate a mutually agreeable limit on liability, but this was not done.
On these facts, the High Court ruled that neither party's terms and conditions applied. It was clear that they were not accepting the others' terms. There was clearly a contract, so which terms did apply to the contract? The court said that the terms implied at law – ie in the Sale of Goods Act – applied because of the clear deadlock.
Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: 'This case highlights the dangers of entering a contract without agreeing the terms. Parties often hope for the best if there is a sticking point, but if and when something does go wrong and one party suffers big losses that they want to claim from another, that is generally not the best time to agree what to do. Consequently, the parties can end up in dispute, costing them management time and money.
'In this particular case, with the court finding that neither terms apply and the underlying legal position did, that would involve no limit on liability. That means that G effectively won. Is that what E would have wanted from the stalemate?'
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