Does the Last Shot Win, or Is Process the Key?

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Implementing and operating appropriate internal processes and procedures when contracting with customers and/or suppliers are essential to ensure effective contract management and manage risk exposure for your business.

As businesses look to streamline their contract management process, we have seen a move away from the traditional methods of signing end exchanging paper contracts, with an increase in the use of digital signing platforms or the sending of emails with terms and conditions attached. Such instant acceptance methods bring with them an updated version of the old concept known as “the battle of the forms”, which raises the question - on which party’s terms has the contract been concluded?

This is because it can be common in the exchange of business emails when finalising contractual terms for each party to seek to incorporate their terms and conditions by either referencing such terms within their communications or attaching such terms to their emails. The situation that can arise is for the party who is last to submit their terms to be successful – known as “the last shot wins”.

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Contract signing: the importance of process

E-signing and electronic platforms are a legal and effective way of quickly signing contracts, particularly when businesses operate in different territories and time zones. However, businesses need to remain vigilant and ensure their internal processes mitigate contractual risk and help avoid a battle of the forms dispute.

In the recent case of TRW Ltd v Panasonic Industry Europe GmbH (2021), the court considered a battle of the forms dispute and unconventionally found that the last shot did not win. In this case, the relationship between the parties dated back to the 1990s, at which time Panasonic required TRW to sign a document containing its standard terms and conditions - which crucially contained a term which disapplied any terms that may be received by Panasonic that conflicted with its own terms (unless otherwise agreed to in writing by Panasonic). This document was an overarching framework agreement to govern the ongoing supplies of goods from Panasonic to TRW.

TRW issued a claim against Panasonic for faulty goods and sought to rely on its own terms that had been submitted as part of TRW’s purchase order, relying on the last shot doctrine.  

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Decision of the court

TRW issued a claim against Panasonic for faulty goods and sought to rely on its own terms that had been submitted as part of TRW’s purchase order, relying on the last shot doctrine.

The court, however, found in Panasonic’s favour on the basis that its framework agreement expressly excluded any terms in conflict with its own. The court placed emphasis on the fact that Panasonic had required TRW to print and return the original wet-ink signed copy of their terms and conditions contained within the framework agreement before supplying any goods. 

The process implemented by Panasonic and their requirement of a positive act by TRW to print and return a physical hard copy was considered by the court as fundamental in ensuring that Panasonic’s own terms governed the contract.

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Addressing the risk of a battle of the forms dispute

A business should consider implementing a range of measures to help address the risk of a battle of the forms dispute, such as:

Staff training

Conduct regular training sessions with the individuals who are responsible for issuing and managing contracts on behalf of the business. It is essential to ensure that those managing contracts stay mindful of any processes and behaviour presenting a risk to the business on an ongoing basis.

Reference standard terms in all pre-contract communications

Referencing standard terms and conditions on all pre-contractual documents can help manage the risk of your customers or suppliers asserting that their terms apply. This can be achieved by including a hyperlink on documents and within email footers to the terms and conditions featured on the business’ website.

Consider a framework agreement

Framework agreements are effective at governing long-term relationships between two businesses, such as for ongoing or regular supplies of goods or services. 

Businesses should consider including wording within the framework agreement to confirm that any conditions of the other party shall not be valid irrespective of how they are provided, for example, to help prevent a customer seeking to include their own terms when submitting an order using a purchase order form.

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Additional ways of addressing the risk of a battle of the forms dispute

Avoid making open offers

Many businesses now tender for custom by way of brochures and proposals, which include estimated costs and descriptions of the goods or services for marketing purposes. Suppliers should ensure that these pre-contractual documents are stated to not constitute as offers; otherwise, customers may try to bring a contract into existence upon receipt of such documents before the supplier’s standard terms and conditions have been presented to the customer. 

Implement a written purchase order process

Requiring customers to submit written purchase orders that are formally accepted by an email or hard-copy written confirmation can help determine when a contract has come into effect and upon what terms.

Operate on the business’ purchase order forms only

Customers may sometimes submit purchase orders to a business which references the customer’s own terms and conditions as applying. 

Businesses should train their contract management team not to accept a customer’s offer (the customer’s purchase order form) without first sending the business’ formal confirmation of order acceptance which states that their order has been accepted and is subject to the business’ own standard terms and conditions. 

Alternatively, a business can operate on its own standard purchase order form only.

Conduct periodic reviews

As part of the business risk management, conduct periodic audits and reviews of existing contracts and current internal practices and processes for issuing and entering contracts. Monitoring the business’ risk exposure can help identify any areas of concern, employees requiring additional training or problematic contracts requiring legal advice.

Whilst no procedure or drafting will guarantee success in a battle of the forms dispute (as each matter will be decided by a court dependent upon the individual facts and circumstances of the case), implementing measures such as those set out above can prove essential in mitigating such risk.

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If you have any more questions or would like more information, you can contact our Commercial Team below.

0161 941 4000