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If you are a Business owner, you would have undoubtedly encountered various documents in your commercial transactions with other business owners or even customers. Such documents typically include Quotations, Purchase Orders, Invoices, and Tax Invoices. Have you ever questioned whether these documents offer your business the legal security you believe they provide?
Each of the above-mentioned documents comes with its own set of terms and conditions related to the price, quantity, delivery date, and so on. A crucial issue may arise regarding which of these documents constitute the contract to which the purchaser and seller have agreed to be bound – an issue known as the “battle of forms”.
Typically, Sellers and Buyers would communicate via different channels (Email, SMS, and even WhatsApp), and these will be taken into account when the parties’ intentions to form a contractual relationship are questioned (First stage of inquiry: has a contract been concluded?). The second stage of inquiry revolves around: What are the agreed terms of the contract?
The Legal Position
In determining whether an agreement has been reached between the Purchaser and Seller, the United Kingdom (UK) decision of Butler v. Ex-Cello-O Corporation (England) Ltd 1 WLR 401 provides guidance in this area – a fine example of a battle of forms contract law.
In Butler, the seller offered to sell a tool to the buyer using the seller’s standard terms, which included, among others, a variation clause on price. The buyer sought to order the tool by sending a purchase order on its own standard terms, providing a fixed price with no room for variation — a situation that fell into the battle of forms category. The purchase order included a tear-off acknowledgement slip of acceptance of the buyer’s business terms. The seller promptly signed and returned the acknowledgment slip to the buyer.
However, the returned slip was accompanied by a letter from the seller stating that they were carrying out the order on the terms of the original offer. Subsequently, the seller varied the price and sought to invoke the clause in their standard terms.
In this case, aligned with the principles of the battle of forms contract law, it was decided that the contract was formed on the buyer’s terms and as such, the Seller’s price variation clause was not incorporated. This illuminates the “last shot rule” in the battle of forms scenario.
Traditional Mirror-Image Approach
In Contract Law, the traditional approach that Courts use is the Mirror-Image Approach, directly influencing the battle of forms of contract law. In this approach, the Court views that documents exchanged between parties must feature a clear and rebuttable offer that is mirrored by a clear and unequivocal acceptance, short of which would not form a valid contract.
Under this approach, the acceptance of an offer must not contain additional or different terms compared to the original offer. If other or different terms are proposed, this would, in fact, be a counteroffer, fitting into the “battle of forms” or “battle of the forms contract law” scenario. These terms would be binding and incorporated into the contract, highlighting the “last shot rule” in the battle of forms.
Is there a different and broader approach?
Lord Denning MR, while arriving at the same conclusion, questioned the reasoning of the other Judges. He rejected the traditional mirror-image approach — an important aspect to remember for mirror image conveyancing — and pointed out what he perceived to be the limitations in an offer and acceptance approach:
Lord Denning notes, “The better way is to look at all the documents passing between the parties – and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points – even though there may be differences between the forms and conditions printed on the back of them.”
Lord Denning’s approach offers a degree of discretion for the courts to reconcile inconsistent terms between parties where there is a lack of consensus about the terms to be bound by. It brings a unique spin on the battle of forms contract law and mirror image conveyancing. However, this approach has not gained widespread acceptance due to the uncertainty it brings to commercial transactions.
The Singapore Position
In the Court of Appeal decision of Gay Choon Ing v Loh Sze Ti Terence Peter and Another Appeal 2 SLR 332, the Court of Appeal adopted the traditional mirror approach, finding an agreement where, on the objective approach, there has been a final and unqualified acceptance. It is also worth noting that Lord Denning’s broader and “somewhat more fluid” approach was not adopted in the Singapore context.
The Singapore Courts, however, will examine the whole course of negotiations between the parties. To strike a balance between the different approaches, the court accepted that a “less mechanistic or dogmatic application” of the offer and acceptance approach should be the way forward in dealing with battle of forms contract law situations.
Conclusion
In the exchange of documents/forms between the Seller and Purchaser, the party firing the last shot in the battle of forms will have their terms incorporated into the contract, unless the other party objects to the material alteration of the offer, and this objection is made known to the offeror who is effectively giving a counter-offer. An “acceptance” that does not provide unqualified assent to all the terms and conditions put forth in the original offer, and introduces material new terms, is in reality not an actual acceptance. Instead, it constitutes a counteroffer, which wholly extinguishes the original offer.
In sum, understanding the principles surrounding the battle of forms contract law and the various approaches taken in different jurisdictions can significantly aid businesses and individuals in navigating the legal complexities in commercial transactions.
How we can help
At I.R.B. Law LLP our teams of experienced Civil Litigation Lawyers will be able to draft clear and unambiguous contracts that will protect your business interest. We will also be able to advise you on the legal aspect of your commercial affairs thus preventing you from entering a situation that less than favourable.
Furthermore, our Lawyers will be able to guide you and explain to you the finer nuances in Contract Law so that you are well-informed throughout your business dealings. Our first consultation is usually free. You can contact us at Hello@irblaw.com.sg or call us at +65 6298 2537 to schedule an appointment with us today.
