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It is a common practice for businesses to have their own standard terms and conditions which are specific to their business. However, an issue may arise when two businesses are looking at working with one another, but each party seeks to apply their own terms and conditions.

Battle of the Forms & the “Last Shot” rule in Australia

A battle of forms arises when an offer (say by way of a quote) from Party 1 is made with attached terms and conditions and the offer (say by way of a purchase order) is accepted by Party 2 but according to Party 2’s own terms and conditions.

Historically, the legal rule used is the party who fires the “last shot”. In our example above, Party 2 issuing the purchase order has fired the last shot which was not rejected by Party 1.

If more paperwork is issued, say at the time of delivery, Party 1 making the delivery then provides an invoice with Party 1’s terms and conditions, then Party 1 making the delivery with the invoice has fired the last shot. Therefore, Party 1’s terms and conditions attached to the purchase order will be applicable to any dispute about the contract between the parties.

However, this “last shot” rule has been challenged in the UK case of TRW Ltd v Panasonic Industry Europe GMBH (2021) (Panasonic case)

The key issue in the Panasonic case was whose terms and conditions prevail as it would decide the jurisdiction of the court hearing namely Germany (as per Panasonic Industry Europe GmbH’s (Panasonic) terms and conditions) or England (as per TRW Ltd’s terms and conditions).

The sequence of events were:

1. In 2011, TRW Ltd, whom were the customer in this situation, signed Panasonic’s ‘customer file’ which stated that TRW Ltd had “received and acknowledged” Panasonic’s standard terms and conditions which were printed on the reverse, and included that any dealings were to be held under German jurisdiction unless the parties agreed otherwise in writing.
2. In 2015 and 2016, TRW Ltd placed orders which said that the goods were to be delivered according to TRW Ltd’s standard terms. The document said that the supplier was aware of and deemed to have accepted the terms.

In this instance the court found that the “last shot” rule did not apply despite TRW Ltd being the last party to provide their terms and conditions on the basis that Panasonic’s standard terms and conditions (printed on the reverse) had been drafted to create a barrier against any further “shots” being fired. Therefore, in this rare instance Panasonic’s “first shot” won.

Recommendations

Although this English doctrine has not been tested in Australian courts, businesses must be aware that a “first shot” may prevail.

It is recommended that, in addition to firing the “last shot”, businesses should ensure that no barrier exists to prevent their own terms and conditions being the form that applies to the contract.

We have put together the following suggestions for businesses when dealing with multiple standard terms and conditions:

1. Keep good written records of all contract negotiations and ensure the other party’s terms and conditions are expressly rejected in writing.
2. Where possible, have the other party sign your terms and conditions to confirm that they have read and acknowledged them.
3. We recommend that every email correspondence which include your terms and conditions, should end with the words “Other than these commercial terms negotiated, our standard terms and conditions to prevail at all times.”
4. Ensure that your standard terms and conditions have specific wording to act as a barrier to any other terms and conditions applying.
5. Expressly reference your standard terms and conditions in all quotes and purchase orders and where possible, ensure that these are printed or attached in documentation to the other party.
6. Ensure the other party’s terms and conditions are expressly rejected in writing or secure acceptance by other party (in writing) of your terms and conditions.
7. If at all possible, ensure that your standard terms and conditions are the last document exchanged between the parties.

This can be as simple as an email acknowledging delivery but stating again that acceptance of delivery is subject to your terms and conditions or implementing a receiving protocol whereby all deliveries should be stamped with date, time and proper acknowledgement of whose terms and conditions prevail.

Need assistance drafting a protocol for your business? Our commercial team are here to help.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.