LEGAL ADVICE: Battle Of The Forms

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Byline: Luke Patel

Most businesses tend to have their own standard terms of business and when they enter into a contract with another business, the question usually arises which business’ standard terms apply? This is known as “the battle of the forms”. Usually, the “last shot” wins i.e. the party who is the last to provide its terms of business is the party whose terms become incorporated into the contract. However, in the recent case of TRW Limited v Panasonic Industry Europe GmbH and Another the High Court decided that the “first shot” had won.

That case concerned the sale of resistors by a German seller (Panasonic) to an English buyer (TRW Limited) and the question which the Court had to decide was which out of the two jurisdiction clauses contained in the parties’ respective standard terms applied.

While the sales contracts in question had been concluded in 2015 and 2016, in 2011 TRW signed Panasonic’s “customer file” which stated that the buyer had “received and acknowledged” Panasonic’s standard terms. Panasonic’s standard terms provided for German law to apply and for any dispute to be dealt with in the German courts whereas TRW’s standard terms provided for English law and for disputes to be dealt with in the English courts.

A number of the resistors supplied by Panasonic to TRW were defective and so TRW commenced proceedings in the English High Court seeking damages. However, Panasonic applied to set aside service of the proceedings and sought a declaration that the English courts had no jurisdiction on the basis that the German jurisdiction clause in its standard terms applied to the contract.

The High Court agreed with Panasonic and held that the German court had exclusive jurisdiction and the proceedings issued in the English court should be set aside. The Court rejected TRW’s argument that the “customer file” which it had signed did not incorporate Panasonic’s standard terms, pointing out that TRW’s signature would have been pointless if that had been the case. The Court found that Panasonic’s standard terms prohibiting contrary terms (unless they were confirmed in writing by Panasonic) was effective to protect Panasonic “against falling victim to what in English law is called the last shot doctrine”.

Once TRW had agreed to Panasonic’s standard terms in 2011, its only remedy, if it did not want to bound by Panasonic’s standard terms, was either not to buy from Panasonic at all or to persuade Panasonic to agree in writing to change its standard terms. However, TRW had done neither. The Court concluded that in this particular case the “last shot” had missed its target.

This case demonstrates that it is possible for a party to word its standard terms to enable it to win the “battle of the forms” and avoid the risk of finding themselves bound by the other party’s standard terms. The case also highlights the dangers for a party to assume that its terms of business will apply because they were introduced last and demonstrates the need to consider all terms in a contract very carefully.

Blacks Solicitors can assist with the preparation of contracts or dealing with any disputes arising from contracts, please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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