I consistently receive questions from my clients and seminar attendees relating to the Battle of the Forms. In this age of e-contracting, one might assume that this issue is no longer relevant.
However, unless both the buyer and seller sign (or click their assent to) a single agreement under which they agree to do business, the parties will be operating in the uncertain realm of the Battle of the Forms.
Below are some basic guidelines to keep in mind in “fighting” the battle and answers to often asked questions.
- If you don’t provide the other side with your terms and conditions (of either purchase or sale), you are not engaging in the Battle of the Forms…..and you will lose. That is to say, you may have inadvertently agreed to the other side’s terms even if you never signed their form.
- If you sign the other side’s form, you will have lost the battle….even if you provide the other side with your terms – previously or after the fact.
- One of the most important clauses to include in your terms is a clause which objects to those terms in the other side’s form that differ from or are in addition to your terms. (See example language in answer to Question 2 below)
- Bad news for Sellers: Sellers will almost always lose the battle regarding limitations of liabilities if the customer provides the seller with its terms of purchase. The only effective way to limit your liabilities with your customer is to negotiate and sign a master agreement.
- While every business person involved with the exchange of RFP’s, proposals, POs, acknowledgement forms, and the like should be familiar with the Battle of the Forms, the most efficient use of time and productive approach is to focus on the major issues and ensure agreement in those areas.
BATTLE OF THE FORMS QUESTIONS
QUESTION #1: We include in our Bid package our terms and conditions of purchase and we state that any terms and conditions contained in the supplier’s proposal will not apply. In those cases where the supplier includes its terms of sale, whose Ts and Cs have superiority?
A: This is a classic example of the “Battle of the Forms”. If you have included a set of terms and conditions of purchase in your RFP and the supplier responds with their terms and conditions of sale, neither document would supersede the other. The outcome would be as follows: In those areas where your terms are in agreement with the seller’s, those terms would apply. However, most terms will be in conflict with one another, in which case, neither clause would apply. In the event of a dispute regarding a clause with which there has been no agreement, the courts would look to the Uniform Commercial Code (if the contract involved the sale of goods) or General Contract Law (for service and other contracts) for resolution.
QUESTION #2: What is a good example of language that should be on the buyer’s form that takes exception to the terms in the seller’s forms?
A: The following language mirrors section 2-207 of the Uniform Commercial Code which addresses the battle of the forms issue:
“This purchase order is limited to the terms and conditions contained on the face and the reverse. Any additional or different terms proposed by Seller in any quotation, acknowledgment or other document are hereby deemed to be material alterations and notice of objection to them is hereby given. Any such proposed terms shall be void”.
(NOTE TO SELLERS: Change “purchase order” on line 1 to “proposal”. Change “Seller” on line 2 to “Buyer”. Change “quotation, acknowledgment” on line 2 to “request for proposal, purchase order”.)
QUESTION #3: We have a Master Agreement with a supplier. After we issue our P.O. release document, our supplier provides its acknowledgment form (with terms on the back) and it also submits an invoice with terms on the back. Are these binding and do they supersede the negotiated terms of the Master Agreement?
A: While terms on the back of the supplier’s form will not supersede a provision of the Master Agreement, they might ADD TO the Master Agreement. Let’s say, for instance, your Master Agreement did not address the right to cancel an order. If your supplier’s acknowledgment form has a clause that assesses a 25% restocking fee if you do cancel, that term might be considered part of the overall agreement between the companies.
The way to avoid this from occurring is to include language in your Master Agreement similar to the following:
“This Master Agreement shall apply to all proposals, purchase orders and other documents issued by either party in connection with the purchase and sale of Products (referred to as “releases”). No inconsistent or additional term or condition in any release shall be applicable to a transaction within the scope of this Master Agreement”.
NOTE TO SELLERS: The above clause also protects the seller from additional terms contained in a buyer’s P.O. or other document.