Battle of the Forms in Contract Law: Legal Insights for Business Owners

If your business supplies goods or services to customers, you must carefully draft and control your contracts to make sure they protect your business interests and are legally enforceable. Without clear terms, your business risks various problems, from late payments to scope creep and unexpected liabilities. Businesses sometimes refer to negotiating contractual terms as a battle of the forms. However, even well-drafted terms will not protect you unless you properly incorporate them into your commercial agreements. This article explores how standard terms can help strengthen your contractual position as a business-to-business supplier, the legal rules determining which terms apply when both parties propose different terms, and some steps your business should take to minimise contractual uncertainty.

How Can Standard Terms Strengthen Your Business’ Position?

As a supplier delivering to many customers, your business should plan its contracting process efficiently. Standard terms and conditions can help your business finalise deals quickly and ensure transaction consistency. Instead of negotiating bespoke terms for every deal, your business can apply uniform conditions that set clear expectations for all customers. Your standard terms should define key commercial points such as payment terms, delivery obligations, and liability limitations.

However, having favourable terms is not enough. If your business does not adequately incorporate the customer’s terms into contracts, the latter may take precedence. A lack of clarity over contract terms creates uncertainty and makes enforcing key protections, such as payment deadlines or termination rights, harder.

When Does a Battle of the Forms Arise?

Timing is critical in contract negotiations, especially when your business trades on standard terms. The best way to protect yourself is to plan, introduce your terms from the outset, and actively reject any conflicting terms.

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A battle of the forms occurs when two businesses negotiate a contract but try to impose their standard terms. This can happen when suppliers and buyers exchange documents (such as purchase orders, order confirmations, or invoices), each referencing their terms.

Your business should be aware that when this happens, it can be unclear whether a binding contract exists and whose terms apply. If both parties proceed with performance without agreeing on terms, a dispute may arise over which terms govern the deal. This uncertainty can result in delayed payments, unenforceable liability protections, or contractual obligations that neither party intended initially.

What Determines Which Terms Govern the Contract?

In the event of a dispute, the courts will review the entire course of dealings, including how each party exchanged, communicated, accepted, or rejected the terms.

Under the traditional last-shot rule, the party who submitted the last terms without explicit rejection often prevailed. However, this is not an absolute rule, and courts now assess the entire course of dealings, including conduct and whether a party correctly incorporated the terms. In more complicated cases, the courts have sometimes decided that no contract exists or arose through conduct.

If you do not incorporate your terms correctly, your business could face unexpected obligations if a customer’s terms apply, such as unfavourable payment terms or indemnities that shift risk to your business. To avoid this, your company should take control of the contracting process from the outset and ensure that your terms, not the customer’s, apply.

How Can Your Business Protect Itself From Risk?

Your business should proactively avoid uncertainty and strengthen its legal position.

Some key steps to consider include the following:

• introduce your terms as early as possible. Referencing them in proposals, quotes, and order confirmations ensures you can help push for your terms before your customer submits their own terms. If the other party sends conflicting terms, your business should not remain silent but confirm in writing that your terms apply and override any conflicting terms;
• your standard terms should clearly state that they apply to the exclusion of any other terms which may help your argument; 
• seek to obtain written confirmation of acceptance rather than just assuming acceptance. A signed contract, purchase order confirmation, or explicit acceptance email will strengthen your position and help avoid disputes; and 
• standardise your contract process across your business. Train your sales team to roll out standard terms properly and incorporate them into customer agreements.

A commercial contracts lawyer can help your business draft enforceable standard terms and incorporate them correctly into contracts. Your business can also seek legal guidance on structuring contract processes that reduce risk and prevent disputes over conflicting terms. Every business is different and may enter into contracts differently, so a lawyer can advise on the best course of action for your ease. 

Key Takeaways

A battle of the forms happens when both parties attempt to impose their own terms in a contract. Your business should take control of the contracting process early to avoid uncertainty and ensure its terms apply.

Introducing your terms at the outset, rejecting conflicting terms in writing, and obtaining clear customer acceptance can strengthen your position.

If your business needs support with terms and conditions or advice on your contracting process, our experienced contract lawyers can help. As part of our LegalVision membership, you gain unlimited access to solicitors who can review contracts, negotiate terms, and provide tailored advice. Call us today on 0808 196 8584 or visit our membership page.

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