Every business will no doubt have had problems with terms and conditions (T&Cs) in contracts, and their interpretation. If incorrectly written, or missed out, any terms you thought applied will be utterly useless; the courts will not add them in. Here is advice on how to make sure your standard T&Cs of business are incorporated into the agreement between you and your customers.

The problem

Businesses often give their standard T&Cs of business low priority until a dispute arises, by which time it may be too late. It is not uncommon for a sales department to issue quotations or accept orders using either terms that are out of date or copied from the internet, or even to be conducting business on the customer’s terms, because the customer has successfully substituted their own T&Cs for yours.

Incorporation of terms

T&Cs will be useless unless proper procedures are followed to ensure they are incorporated and prevail over any competing T&Cs. They will not bind your customers unless they have been incorporated.

The common law rule is that after a contract has been formed by offer and acceptance between the parties, new contract terms cannot be introduced (unless by mutual consent). Therefore, the all-too-frequent business practice of sellers seeking to impose their T&Cs by printing them on the back of their invoices will not be sufficient to incorporate their T&Cs into the contract, as invoices are traditionally despatched after the contract has been made.

What if your T&Cs are not incorporated?

Clearly there is some form of agreement between you and your customer. If a court does not accept that the transaction was conducted on your T&Cs (and there are no other express terms - see Battle of the forms, below), it will imply terms into the agreement on the basis of an inference that the parties must have intended such terms to be incorporated. They will do this where:

• it is necessary to give business efficacy to the contract, so that even though the terms seem complete, there is something without which the contract will not be able to work in the way it was intended. For example, you haul apples to a bakery and they pay you an agreed sum - there would be an implied term that the apples not be rotten;

• the implied term represents an obvious (but unexpressed) intention of the parties. Courts will be slow to imply terms where two commercially mature parties have entered into a detailed written contract, but will be more forgiving where there are no written terms at all. For example, where the court is not satisfied that your T&Cs have been incorporated, but that your customer is not relying on theirs;

• it is implied through custom. There must be an invariable, certain and general custom of a particular trade or place; or

• it is implied through a previous course of dealing. Where you and your customer have dealt with each other previously on similar contracts and consistently gone about things in a certain way, the court will be prepared to imply a term relating to that previous course of dealings if there is no express term in the current contract.

It is, of course, far better to be able to rely on your T&Cs rather than having to waste the time and expense of trying to persuade a court to imply a term into the agreement between you and your customer.

Battle of the forms

While seller’s T&Cs are more usual, it is not uncommon to see customers trying to do business on their T&Cs. If both parties try to force the transaction to occur on their terms, difficulties arise in deciding which ones prevail. In practice, it is usually the last set of T&Cs sent between the parties before acceptance or performance that will prevail. l

Ben Hopps is a partner specialising in litigation at Sykes Anderson LLP.