The Battle of the Forms’ (or Don’t Sleepwalk into a Bad Contract)

By Andy Atkinson

In a dynamic environment such as the offshore oil and gas industry it is entirely understandable,
although not desirable, that some details may not be addressed in the tendering for and securing
of contracts. The temptation may be to move on to the next bid or award and hope that the
paperwork is sufficient. Lack of attention to detail in the final contract is rarely an issue with
large projects but contracts with a smaller value may slip under the radar as smaller contracts are
often bid with the contractor’s standard terms forming part of the offer. However, they may be
awarded by a purchase order which includes the buyer’s standard terms. The key question is: “In
the event of a dispute, whose contract terms apply?” This dilemma is referred to as ‘The Battle of
the Forms’.

The Last Shot Doctrine & Case Law

In English law, the answer to the question posed above is: “the terms of the party, who presented
their terms last, before the contract was formed, will apply.” This is also known as ‘the last shot
doctrine’and is decided by analysing the initial offer, counter offers, rejections and final
acceptance to determine who made the final offer before the contract was formed. The conflict is
then resolved using the standard terms of the party to make this final offer.

This is however a gross oversimplification and, as is often the case in law, the answer will be
subject to a number of conflicting issues. Three cases in English law serve to demonstrate both
the principles and complexities of the battle of the forms and the last shot doctrine. These are
BRS v Arthur V Crutchley Ltd [1968].Butler Machine Tools v Ex-Cell-O Corporation [1979]
and Transformers & Rectifiers Ltd v Needs Ltd [2015].

BRS v Arthur Crutchley

In BRS v Arthur Crutchley, BRS (the contractor) delivered several cases of whiskey to Crutchley
(the client) for storage, and the driver handed a delivery note that included BRS’s terms to
Crutchley. However, Crutchley then stamped the note as being accepted under Crutchley’s
terms. The court held that Crutchley’s acceptance note counted as a counter offer, and that BRS
accepted this counter offer when they handed over the goods. Here, then, handing over the goods
counted as implied acceptance of the terms set out in Crutchley’s acceptance note (the ‘last shot’
in this case).

Butler Machine Tools v Ex-Cell-O Corporation

More than ten years later, our understanding of the ‘last shot doctrine’ changed in response to
Butler Machine Tools v Ex-Cell-O Corporation, a case in which the court of appeal overturned
the decision of the court of first instance after considering the communications between the
parties as a whole rather than just their last exchange. The events of the case began on 23 May
1969, when Butler Machine Tools sent a letter to Ex-Cell-O offering one ‘Butler’ double column
plane-miller for a fixed price. Delivery was to be in 10 months. Butler included their standard
terms in this offer, which featured a price variation clause providing that any price increase
would be passed on to Ex-Cell-O. Ex-Cell-O’s reply on 27 May said that they would order the
machinery on the basis of Ex-Cell-O’s own standard terms, which did not include a price
variation provision. Butler then replied on 5 June using the tear-off slip from Ex-Cell-O’s terms.
The bottom of this slip said, ‘We accept your order on the terms and conditions stated therein’.
But Butler also added a letter stating that the contract was to be performed under Butler’s terms.

This series of offers and counteroffers meant that the parties were not operating under a shared
set of clearly defined terms and conditions. Thus, when Butler delivered the machinery in
November 1970, they requested the original price plus an additional amount pursuant to their
price variation clause. However, Ex-Cell-O refused to pay the increased costs. Butler raised an
action, against Ex-Cell-O to recover the cost of the variation. The court of first instance held that
Butler’s price variation clause continued throughout the dealings and, consequently, they were
entitled to rely on it.

Ex-Cell-O appealed. On appeal, the court held that the documents involved in the transaction
between Butler and Ex-Cell-O should have been considered in their entirety, and that the
decisive document was the acknowledgment slip. Consequently, although Butler ‘got their blow
in first’ and included a provision that their terms and conditions would prevail over any in Ex-
Cell-o-Corp’s order, the court found that the correspondence from Ex-Cell-O on 27 May negated
Butler’s original offer. Thus, by signing the acknowledgement slip, Butler had accepted Ex-Cell-
O’s offer and the contract was formed at this point on Ex-Cell-O’s terms. Butler’s final letter of 5
June, attached to the acknowledgement slip, was therefore introduced after the contract was
formed and never accepted by Ex-Cell-O.

In the case above, then, we can see how it is not simply the timing of a communication that
determines its relevance for resolving a battle of the forms, but also its place within an ongoing
exchange of correspondence. Ex-Cell-O’s reply on 27 May was decisive here, which meant that
Butler’s terms and conditions no longer applied.

Transformers & Rectifiers Ltd v Needs Ltd

In the more recent case of Transformers & Rectifiers Ltd v Needs Ltd [2015], the court held that
neither party had successfully incorporated their terms, despite the fact that they had exchanged
their respective terms and conditions. Needs, the contractor, made an offer to Transformers and
Rectifiers (T&R), the client. T&R sent a PO to Needs with T&R’s standard terms and conditions
printed on the reverse. Needs acknowledged the PO with a reference to their own terms and
conditions. A dispute then arose when T&R claimed that the goods delivered did not meet the
contractual requirements agreed and sued Needs for damages. Needs, meanwhile, maintained
that the contract was based on their terms and conditions, which included a provision limiting
their liability to the contract price. Moreover, the parties had a long-standing commercial
relationship and Needs argued that they had contracted on Needs’ terms and conditions in the
past. Consequently, Needs claimed that since they had included their terms and conditions in this
offer, as they had done during previous dealings with T&R, the contract for supply of goods was
based on Need’s terms once more.

The court, however, held that neither party’s terms could be used because neither had explicitly
stated that they intended their terms and conditions to be the basis of the contract: T&R had only
printed their terms in pale writing on the reverse of the PO, and Needs had only referred to theirs
as opposed to including them. The court pointed out that for any set of terms and conditions to be
used as the basis of a contract, there must be no possibility of misunderstanding. Thus, if one
party wants to rely on its own terms and conditions, they must make this explicit for the other
party to the contract. And this had not happened in the contract between Needs and T&R. With
regard to the previous dealings between the parties, the court said that while the terms and
conditions had been similar from one contract to the next, they had not been consistent. And in
the absence of such consistency, the court held that the terms and conditions from previous
dealings did not hold in this case. Here, then, we see how important it is to make the terms and
conditions one wishes to use explicit for the other party.