Deal done – but whose terms apply to the contract?
19th August, 2015
David Le, Corporate & Commercial Solicitor, Genus Law
When working together, businesses rarely expect that they will need to refer to their standard terms and conditions: whether it be the supplier or the customer. These are just documents that ‘everyone has in place’ but no one ever reads….right? Well, not quite. Whilst suppliers will usually include their standard terms with an order form, customers may also look to impose their own standard terms on a supplier – so whose terms apply if something goes wrong? David Le, corporate and commercial solicitor at Genus Law outlines some top tips.
At various points during the contracting process, quotes, order forms, offers, counter offers, order acknowledgement forms, delivery notes and invoices may all be exchanged between the parties. Each may seek to incorporate either the supplier’s standard terms or the customer’s standard terms into the contract. Often businesses pay little attention, day to day, to ongoing agreements with customers and suppliers. A closer inspection is usually only triggered when something goes wrong, such as where the goods or services supplied are not up to scratch or where the customer fails to pay. The question then arises, which party’s standard terms actually apply when it was not made apparent at the time the parties entered into the contract?
Standard terms usually include, amongst other things, important provisions on:
• the quality of the goods or the standard of the services to be supplied
• how and when the customer should pay the supplier
• how and when the contract can be terminated
• the extent to which the supplier and the customer will be liable under the contract
Firstly, it is important that your standard terms truly reflect how your business operates. They should be adequately tailored to your business’s needs and be drafted in its favour; so they hold up should they ever come under scrutiny from your customers or suppliers.
Secondly, it is important to impose your standard terms on other parties where possible. That way they provide your business with protection and both parties know where they stand. From a contract management point of view, this makes it easier for you to manage your supplier and customer relationships.
Impose sounds like a strong word, but in reality, this means that you make it clear that it is your standard terms alone that will apply to the contract and reasonably draw the attention of the other party to your standard terms. The problem is the other party may also be doing the same thing. In law, an acceptance that seeks to vary an offer, is deemed to be a rejection of that original offer, and becomes a counter-offer. Generally speaking, the party that imposes its standard terms last will have its standard terms govern the contract but only where that offer is not rejected and the recipient can be said to have accepted those standard terms.
Here are some practical tips to ensure your standard terms apply:
1. Never assume that your standard terms will apply, even where you have a long established business relationship
2. Send a legible copy of your standard terms to the other party at the earliest opportunity and explicitly state that it is your standard terms that will apply to the exclusion of all others. If you are the supplier, this may be when sending out a quote / order form and if you are a customer, this may be when accepting a quote / placing an order. The important point to note is that, both parties should be clear about the basis on which a quote or order is being accepted
3. Each time the other party communicates with you seeking to impose their standard terms, make sure you don’t expressly or inadvertently accept their offer e.g. by supplying goods or services, paying for them or accepting delivery. Make sure you impose your standard terms on the other party last!
4. Actively bring your standard terms to the attention of the other party by referring to them on the front of all communications e.g. purchase order forms, invoices, letters, email footers etc. and let the other party know where they are found
5. Make sure your standard terms can be found where you say they can be found! In particular, remember to copy and include standard terms printed on the back of correspondence when you are faxing or photocopying and make sure web pages are working if referring to them in email correspondence
6. Make sure you retain evidence that the other party has accepted your standard terms
Finally, if you are bold enough to contract on someone else’s standard terms or if you have no other choice but to do so, be sure to get the provisions checked over so at the very least you will have some idea of what you will be getting yourself into.
For help and advice in drafting and asserting standard terms for your business’ relationships, contact our Corporate and Commercial team on [email protected] or call 0113 320 4540.