Contracts 101 – Part 7: Battle of the Forms : StevenClark.com.au

Contracts 101 – Part 7: Battle of the Forms

Disclaimer: I’m not a lawyer and I have no claim that this advice should be taken as legal advice in replacement of seeking out professional help. What I hope to do is educate you over a series of small posts about what constitutes a contract and you should be able to figure out when you might need to see a real lawyer. Although this series is in the Australian context many of the principles apply in other countries.

Following on from Contracts 101 Part 6, the Battle of the Forms is an area where courts try to figure out where the offer was actually made and the offer accepted – in fact, which contract is applicable to the situation. In the to-and-fro of negotiation it can be the finer points of law that define the contract, and after you think about it for a time you’ll realise that if you can’t work out between you what the contract is then the court is going to do that for you.

The following case is a good example to walk through the Battle of the Forms. Note that reading the Butler Machine Tool Case in this case study will be essential to your understanding of this synopsis (its not very long – please give it a read).

Brief Synopsis of the Butler Machine Tool Case

In the Butler Machine Tool case… The Butler Machine Tool Company Ltd v Ex-Cell-O Corporation (England) Ltd (1977), party A was to sell an expensive piece of equipment to party B. Party A sent an offer to sell with conditions on the back that specifically stated that prices could be increased given external market forces and some other conditions, and they noted that these conditions would hold regardless of Party B imposing any conditions in their acceptance / contract.

Party B, rather than simply accepting the terms, communicated to the seller (A) that they would purchase the equipment on certain amended conditions which were written on the back of the acceptance. They also added a slip for signature of A to say that A accepted the new version of conditions – namely, no option to raise the price on delivery to B regardless of market forces. Further, the time stated by A to make and deliver the equipment was not realised and Party B had to wait extra time before receiving the equipment, and this impacted on their business processes and organisation.

Party A received the amended conditions and sent a letter to B stating that their original conditions still applied from May 23rd, but the slip was signed and returned with the letter (falling under the Postal Acceptance Rule… Henthorn v Fraser (1892); Household Fire & Carriage Accident Insurance Co Ltd v Grand (1879). This letter from Party A was an acceptance of an offer to Party B’s (the buyer’s) conditions… Elizabeth City Centre Pty Ltd v Corralyn Pty Ltd (1995) – an acceptance in its own right.

The issue boiled down in judgement to being a case where A’s original offer had been killed by B’s counter-offer, so A’s conditions did not apply and the price could not be raised on the late delivery of the machine to B. In short, this was an acceptance by Party A of Party B’s conditions.

Legal rules or principles arising from the case

Battle of the Forms… Hyde v Wrench (1840). An agreement in a contract comprises of an offer and an acceptance. The four rules of an offer are:

Must be distinguished from an invitation to treat
Can be made to a specific person or to the whole world
Must be communicated
Can be withdrawn at any time prior to acceptance

When ascertaining the Battle of the Forms, it is crucial to realise that a counter-offer rejects a previous offer and makes a new offer… Trollope & Colls Ltd. & ors.v. Atomic Power Constructions Ltd (1963). Also, relating to this counter-offer and acceptance, it is deemed that a contract exists at the last form that is sent without objection taken to it… Brogden v Metropolitan Railway (1877); B. R. S. v Crutchley (1968). Identification of the last offer and acceptance is the crucial element of figuring out which contract applies.

The acceptance at the point of the seller signing the slip and returning it to the buyer (the counter-offer) as applying to the Butler Machine Tool Case, met all nine criteria; specifically the six applicable:

There was reliance on the offer
It was complete and unqualified
There was unconditional assent
It was clear and certain
It was express
It was communicated

Irrelevant to the legal argument, the Postal Acceptance Rule applied to the supplier’s acceptance and mailing of the letter and signed slip. The contract had acceptance on the posting of the letter of acceptance.

Conclusion

As you can see from the preceding case, and especially so if you read the actual Butler Machine Tool case, there is a definate process the court will place on determining the true nature of a disputed contract. Therefore, as a business operator, it is important to be familiar with the rules of an offer and those of acceptance. In Part 8 of this series the second element of a contract will be discussed – consideration. I should assure you that the remaining five elements are significantly briefer than those of the agreement; however, they are equally as important.

Note: Resources used for this series are identified in the first installment – Contracts 101 – Part 1: Outline.

Installments in Contracts 101

This entry was posted on Friday, November 13th, 2009 at 6:59 am and is filed under business, contracts 101, legal. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

stevenclark.com.au