In order for a business to be able to enforce a clause in its Terms of Business, the first point to be considered is whether the business is able to demonstrate that the Terms of Business have been incorporated into the contract.
1. Timing
In order for Terms of Business to be incorporated into a contract, they need to be provided to the other party before the contract is formed. This means that, in most cases, it would be too late for the Terms of Business to be included on the Delivery Note or the Invoice.
A contract is generally formed when one party makes an offer and the other party accepts that offer. The contract is formed when the offer is accepted.
For example, a business may be requested to provide a quotation. If an Order is placed in response to that quotation then if all terms are agreed at that point, the contract is formed when the order is placed.
2. Acceptance of Terms of Business
In some cases, the Terms of Business are set out in a written contract that the other party is asked to sign. Alternatively, the other party may be asked to tick a box or confirm in writing that they accept the Terms of Business.
Terms of Business can be incorporated by being referred to in the contractual documents. For example, the documentation or correspondence may refer to the Terms of Business being available at a website address.
Terms of Business can be deemed to be incorporated by conduct. If a customer is provided with the Terms of Business prior to the contract being formed and proceeds without questioning the Terms of Business, then this would suggest that the Terms of Business have been accepted by the customer.
3. Previous Dealings
If you have dealt with the customer on previous occasions and the Terms of Business were supplied to the customer on a previous occasion (or numerous previous occasions) then the Terms of Business can be deemed to be incorporated by previous dealings.
4. Battle of the Forms
Issues can arise where both parties to a contract have provided their Terms of Business to the other party and wish to rely on their own Terms of Business. This situation is known as a “battle of the forms”.
The court would seek to determine the “last shot fired”. This means that it is likely to be the case that the Terms of Business provided last prior to the formation of the contract (or on formation of the contract) would apply.
5. Onerous Terms
If there are any particularly onerous or unusual clauses in your Terms of Business then in order for those clauses to be incorporated and enforceable, they must be specifically brought to the attention of the other party.
This article deals with whether Terms of Business have been incorporated. There may also be arguments around whether particular clauses are reasonable and, therefore, enforceable.
If you require further information, please contact Anna Barnes in our Dispute Resolution Team (lab@salehs.co.uk or 0161 434 9991).