Your business probably enters contracts with suppliers that are governed by standard terms and conditions. Your T&Cs are likely to be attached to your purchase orders, quotations, order confirmations, standard order forms or any other standard form you use in the course of your business.
The problem is, the businesses you contract with are doing the same thing. Your customers and suppliers may respond to your quotation with their order confirmation, that incorporates their own T&Cs.
So whose terms apply to the contract? And why does it matter?
What’s the problem?
If your T&Cs can be read together harmoniously with your supplier’s, then it’s not necessarily a problem. It’s perfectly accepted (although not ideal) to construe the terms together, and both sets of terms apply.
However, if there are irreconcilable differences between your T&Cs when read together, you need to know which terms apply.
For example, let’s consider the scenario in which you want to purchase an expensive piece of machinery for your business. Your seller sent you a quotation and offered to sell the machinery to you in 10 months’ time. They attach terms and conditions which allow them to vary the price according to the market conditions at the time of delivery. You send your order confirmation to say you’d like to buy the machinery, but your T&Cs contain no provision for price variation.
Can the seller charge the higher price if it’s an increase on the original quote?
Or to take another example – As a company that supplies fire safety equipment, your T&Cs include a clause that limits your liability for damages by fire to £20,000. Your customer agrees to buy your equipment and sends you a standard order form, which does not limit your liability at all. If there’s a fire causing £1 million of damage, does your limitation apply or is your business exposed to the full cost of those damages?
How to protect your business
The general rule is that you operate under the terms of the party who “fired the last shot”. That means, whoever sent the last document attaching their T&Cs will probably come out on top if you fight about it, so long as there were no express objections to the terms.
As is the case with most legal analysis though, it’s not always black and white. Recently (in 2021) the last shot principle was called into question[1]. Now it appears that if you sign an overarching master agreement, or umbrella agreement, the terms of that overarching agreement will prevail, regardless of the number of purchase orders you send containing your own T&Cs.
It’s a reminder of the weight of a signature. If one party has signed a document that incorporates the others’ T&Cs, that will be good evidence that the other side’s T&Cs will apply.
Practical takeaways
How can you make sure you’re not caught out by your supplier’s less favourable T&Cs usurping your own? Here are a few practical tips to help protect your business:
- Read the small print
It sounds obvious, but it can be easy to gloss over standard terms and conditions. Make sure you know what you’re signing up to if you accept the terms in front of you.
- Object if you’re not happy
If you receive T&Cs which include clauses that you’re not happy with, expressly object to that clause. Tell the other side that you cannot accept that term and ask for it to be deleted or revised. Alternatively, object and assert that your own terms will govern the agreement between the parties.
- Request a signature
If you intend to do repeat business with a customer or supplier based on a master framework agreement, ask them to sign the master agreement which contains your T&Cs.
If you’d like an expert to look over T&Cs you’ve received, or to double check your own T&Cs, please give us a call. We can also help you with your processes to give your business more robust protection when it comes to contracting with suppliers and customers.
