BATTLE OF FORMS

INTRODUCTION

Contract law is a ubiquitous practice used through the ages since it converts a promise into a legally binding act wherein the parties have performed or abstain from performing the promise. Non-performance of the contract would lead to paying compensation and damages which ensures a moral and economic code in the society[1]. Law of Contract is a dynamic law as it evolves with the technological development in society and how we do business. However, the battle of the forms is a continuing issue that has led to interesting discourses by academics and international forums. To understand the nuanced discussion, we shall delve into understanding what the term ‘Battle of forms’ entails. As the name indicates, this problem arises when the business parties are dealing with the ‘forms’ i.e. the printed forms which contain the standard terms of a contract (boilerplate provisions). This is due to the transaction being the product of mass production and mass distribution wherein both the parties exchange their distinctive contract terms and act in an impulsive manner which leads to being bound by terms which they are unaware of. This leads to the questions like how should law look into these discrepancies, which terms are to be followed and whether this will result in severability or void ab initio.

To inspect the nitty-gritty of the issues, we can draw analysis from the landmark case, Butler Machine Tool Co. Ltd. V. Ex-Cell-O Corporation[2], wherein the sale agreement went back and forth in which one party had quoted certain terms and conditions and price variation clauses and the other party had different terms along with additional installation cost. However, the last exchanged contract contained a price variation clause and a revised date of delivery. Such transactions are which are back and forth in nature not considered to be accepted since they have different terms and conditions and can be construed as counter-offers that are to be accepted or rejected. The two pivotal governing rules of the law of Contracts are, rule of acceptance must be unqualified and meeting of minds. These are violated in the current scenario and to aid the problem, the following discourses are available.

THE LAST-SHOT RULE

This is a traditional common law approach which was taken in the Butler case by Lord Denning wherein he stated that the last of the form will govern the terms and conditions of the contract since the other party never objected to it and has accepted by conduct or words to proceed with the contract. This rationale is drawn from the general principle of offer and acceptance under the English law but it fails to resolve the question of meeting of minds and uses acceptance by conduct as a vessel to cover it up[3]. The court first attempts to analyze if the parties have agreed on all the material points and then tries to reconcile the terms and conditions of both parties in a harmonious way. If the difference is irreconcilable, they are scrapped and replaced by a reasonable implication.

MIRROR-IMAGE RULE

The theory of ‘The last word’ was modified by the German Civil Code and The Courts decided to only accept a contract when both the parties have identical terms and conditions in a contract[4]. This was an attempt to create an equal platform since most of these cases were inclined towards the seller’s side since the buyer would usually accept it by conduct without realizing the discrepancies in the term. Despite this, contracts were been formed but the question of what terms is to be followed remained unanswered and the courts attempt to fill the gap by dictating reasonable terms to both parties to solve the issue of missing terms[5]. This leads to the imposing of terms that are rejected by one party or both find it arbitrary, making transactions very time-consuming and economically draining for parties.

KNOCK OUT RULE

Under article 2.1.2 of UNIDROIT Principles of International Commercial Contracts (also known as “PICC”), states that to the extent the parties’ terms were in agreement they are to be a part of the contract unless either party explicitly state otherwise without any delay[6]. The rest of the contract is to be ineffective or get knocked out of the agreement. In late 1980, Germany could see the shortcoming of the Mirror-Image Rule, they applied this new rule extensively only if both the parties agree to be bound by it[7]. This allowed for the contract to continue and give the parties a chance to work in good faith and fair dealing and decide what should be done to the discrepancies unlike just using it superfluously.

UNITED NATIONS CONVENTION ON CONTRACT FOR THE INTERNATIONAL SALE OF GOODS

To uniformly cater to the intent of the parties, the drafters of CISG established provisions to look into the battle of the form in a global scenario[8]. Unless the parties in writing do state their intention to make it part of the offer, a subjective intent can be interpreted by applying reasonable person standard as per Art. 8(2) of the Act. Art. 19(1) of the Act was drafted to look into the issue of the battle of forms and they reinstated the mirror-image rule[9]. However, Art. 19(2) came with an exception to this rule to allow objections to discrepancies that are made by altering material terms of offer without any delay. The term what constitutes as the material is then defined in clause (3) which specifies a wide range of terms that are ‘considered material’ which makes the entire clause redundant since it now only deals with mere discrepancies of the contract[10]. The substratum of Act was in line with parties acting in good faith, co-operation and owing duty of information which used superfluously.

UNIFORM COMMERCIAL CODE

Under 2-207 of the Code, the last-shot rule is given importance but the philosophy of ‘deal is on’ is limited in its scope. Here, ‘any definite and reasonable expression of acceptance or a written confirmation has to be additionally sent within a reasonable time’ for the contract with additional or different terms to be held valid. These strict means was adopted to know whether the acceptance is qualified in its absolute sense and to not leave it to the offeror’s good nature to not add any disadvantageous terms and conditions[11]. Contracts that are formed under the code are divided into two, merchants and Non-merchant. The terms, ‘additional’ and ‘different’ were being used interchangeably so a higher standard approach was adopted when additional terms were added in contracts between the merchants. These terms would be viewed as a part of the contract unless the offer expressly limits acceptance to the terms of the offer” or there is any material alteration or objection to the additional terms have been notified[12].

While in the contract between non-merchants, additional terms stated in the acceptance would be seen as a proposal for addition. Furthermore, any discrepancies are to be knocked out under section 2-207 (1) of the Act. This works as a double edge sword, for instance, if the parties have agreed for notice of non-conformity of goods and the difference is their period is of around 15 days, the entire clause will get knocked out and national laws are then applied which are disadvantageous to the parties. So this rule should not be used for every transaction but judicial minds should be used to analyse the scenario before applying the rules since they are made to benefit the commerce.

DOMESTIC LAWS

Most of the courts and commentators prefer the issue to be uniformed solved according to the international standards rather than resorting to domestic laws[13]. According to the evaluation, if a country practices standard contract terms, the CISG overrides the jurisdiction since formal validity is covered under it[14]. However, if the case were to be solved in India, Section 8 of the Indian Contract Act[15], follows the acceptance by conduct rule wherein if you are doing something that is asked by the contract, you are deemed to be accepting the contract and acting on it. Section 7 of Act[16], does that that a promise to a contract should be absolute and unqualified in nature which would result in applying the knockout rule since anything that is not an absolute yes is not part of the contract. The stance that Indian courts have taken is a combination of the Mirror Image Rule along with the last Shot Rule. A broader interpretation of Section 7 of the Act could lead us to an efficiency-based best-shot rule wherein the court decides the formation of the contract and uses their judicial minds to come to an agreed reasonable standard form.

Drawing from the precedence and rules set out by different countries, it is pertinent for the courts to use a combination of these tests as they aren’t catered for every situation that is arising today. The usage of standard contracts has increased across the globe and it becomes difficult to ascertain meeting of minds. It would be advisable to not use standard contracts but when a situation like this arises, applying judicial mind to these issues is of the essence.

Author(s) Name: Aaryata Agarwal (OP Jindal Global University, Sonipat)

References:

[1] Atiyah P, Introduction To The Law Of Contract (Oxford University Press 2006)

[2] Butler Machine Tool Co. Ltd. V. Ex-Cell-O Corporation [1979] 1 All ER 965.

[3] Jacobs E, ‘The Battle Of The Forms: Standard Term Contracts In Comparative Perspective’ (1985) 34 International and Comparative Law Quarterly

[4] Giesela Ruhl, ‘The Battle of the Forms: Comparative and Economic Observations’ (2003) 24 U Pa J Int’l Econ L 189

[5] Ibid.

[6] Arthur Taylor Von Mehren, The Battle of the Forms: A Comparative View, (1990) 38 Am. J.

Comp. L. 265.

[7] Ibid.

[8] Giulia Sambugaro, Incorporation of Standard Contract Terms and the Battle of Forms under the 1980 Vienna Sales Convention (CISG), (2009) Int’l Bus. L.J. 69.

[9] Ibid.

[10] Ibid.

[11] Giesela Ruhl, ‘The Battle of the Forms: Comparative and Economic Observations’ (2003) 24 U Pa J Int’l Econ L 189

[12] Ibid.

[13] Giulia Sambugaro, Incorporation of Standard Contract Terms and the Battle of Forms under the 1980 Vienna Sales Convention (CISG), (2009). Int’l Bus. L.J. 69.

[14] Ibid.

[15] The Indian Contract Act, 1872 Act No. 9 of 1872.

[16] Ibid.

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