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Standard terms and conditions - overviewPros and cons of standard terms
Standard terms and conditions may be used by a party in both the sale and the purchase of goods and/or supplies to:
ensure favourable terms are in place (which will naturally differ whether a party is selling or buying goods and/or services)
enable the party or its employees to conclude contracts without recourse to legal advice and/or senior employees as applicable
reduce costs and expenses in completing transactions, and/or
standardise the terms used in the business
Incorporating standard terms
In order for a contract to exist between two parties there must be:
a valid offer
acceptance
consideration, and
an intention to create legal relations
The use of standard terms raises various issues relating to the difficulties involved in ensuring that the other party accepts the standard terms without amendment or in substitution for using their own standard terms, as well as the need to ensure that both statute and common law are complied with.
The main issues that need to be considered are:
the effective incorporation of standard terms: it is important that standard terms and conditions are brought to the attention of the other contracting party at the earliest possible opportunity to ensure that they are considered as the terms on which the parties have contracted. It is not possible to impose standard terms after a contract has been performed: eg printing the standard terms on the back of an invoice will not be sufficient
the battle of the forms: when both parties to a contract seek to impose their own standard terms it may be difficult to identify which terms prevail. If a party seeks to introduce new terms when accepting an offer then this results in a counter-offer rather than an acceptance. The general rule is that the last set of terms that are despatched prior to performance are the terms and conditions that will prevail
a course of dealing: if a party can show that there has been regular trading between the parties over a period of time and that such trading has been on consistent contract terms then it may be possible for a party to establish that their standard terms have been incorporated into the contract. This may be the case even when the standard terms were introduced after the initial performance of the contract
Sales and marketing
Sellers must be aware of the risk that pre-contractual representations poses with respect to liability.
Care should be taken to exclude any written or oral statements made prior to the conclusion of the contract as:
although under the 'parol evidence rule' it is not usually possible for a party to argue that part of a written document should be disregarded or interpreted in a way inconsistent with its obvious meaning, this rule is only a presumed intention, and may be challenged for a number of reasons including if it is determined that a pre-contractual statement relates to a matter of great importance to one or other of the parties to the contract, the time that the statement was made or the parties have a 'private dictionary'
a pre-contractual statement may give rise to a collateral contract and as such bind the issuer
a pre-contractual statement may give rise to a party being liable under common law and/or the Misrepresentation Act 1967 for fraudulent, negligent or innocent misrepresentation leading to the possible rescission of the contract, a potential claims for damages or both
Exclusion and limitation of liability
A seller will seek to limit its liability, exclude any statements made in its sale brochures etc and exclude any implied terms as to quality to the extent possible.
A buyer will seek express warranties, usually as to quality and performance, indemnities and other specific remedies in respect of any failure of the seller to perform its obligations under the contract.
Statutory control
Any contract, including standard terms, may be subject to statutory control at some level. Terms may be implied, under the Sale of Goods 1979 or the Supply of Goods and Services 1982, or the exclusion of certain terms may be prohibited under the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999, to protect the contracting parties involved, particularly where there may be an inequality in bargaining power between the two parties.
Common law
The courts have developed a number of rules which, although applicable to all the contents of a contract in their entirety, have been used to limit the scope of exclusion clauses contained in contracts. These rules relate to incorporation (ie a clause must be incorporated into a contract to be effective at excluding any liability) and construction (ie the rule of contra proferentem - any ambiguity within a clause will be interpreted against the party relying on it).
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