Guest Blog: 5 key steps to successfully negotiating a contract

A "battle of the forms" occurs when two businesses are negotiating the terms of a contract and each party wants to contract on the basis of its own terms and conditions.

This frequently occurs when Business A offers to buy goods from Business B on Business A's terms and conditions of purchase, but then Business B tries to accept the order on the basis of Business B's terms and conditions of sale. However, in law this is not an acceptance and is considered to be a counter offer, which can be: (1) refused by Business A; or (2) accepted by an unequivocal acceptance by Business A, or by performance of the contract.

In practice, this means that the last set of terms dispatched before the acceptance or performance of the contract will usually prevail.

At this point, you may be thinking that this doesn't apply to me because my terms and conditions say that they apply to the exclusion of all other terms and conditions. Even assuming that you have such a clause, there remains the question of how (and if) it forms part of the contract. In the above scenario, if Business A provides terms and conditions to Business B which include such a clause and Business B attempts to accept the order but on the basis of its own terms, then generally speaking the terms and conditions - including that clause - of Business A have not been accepted by Business B and so will not apply to the transaction.

It should also be remembered that you do not have to refuse all of a set of terms and conditions - you can accept some of the terms and negotiate with the other party in respect of the rest of them. However, this is not a particularly efficient solution in terms of expenditure of time and money.

When negotiating a contract, keep the following general points in mind:-

1. Send your terms and conditions as early as possible. Sending them with the invoice will be long after the contract has been agreed and will therefore usually be too late for them to be enforceable;

2. Be aware that a "battle of the forms" may arise. Scrutinise all communications from the other party and check what documents or wording they seek to incorporate into the contract - the bottom line is nearly always that the "last shot" wins;

3. Emphasize to all of your staff that they must look at all documents coming across their desks - quotations, purchase orders, specifications - there are a variety of pre-contractual documents which may contain or refer to terms and conditions. Be aware of the flank attack as opposed to a direct approach - referring, for example, to terms and conditions that you've never seen may be difficult to enforce, but you should assume the worst and action accordingly;

4. If you receive terms and conditions saying that they will apply to the exclusion of all other terms always remember that you can still refuse those terms and conditions and seek to incorporate your own into the contract;

5. Make sure your terms and conditions are where you say they will be. If your order form says they are on the reverse of the order form make sure they are on the reverse of the order form.

In practice, much is likely to depend on the relative bargaining strength of the parties. If Business A is a large multi-national and Business B is a sole trader, then Business B can probably "take it or leave it" as far as Business A is concerned. However, there is still room for strategic thought. Business B in the above example may, for example, wish to bear in mind any additional risks being foisted on it by Business A's terms and conditions, when setting its prices.

The above is intended only as a general outline of the law. For advice on how the law affects your business contracts, please contact us.

Neil Killick