It is very important to limit the exposure in your business with respect to commercial risk i.e. unlimited liabilities, 3rd party claims, warranty, governing law (in particularly in export), intellectual property rights, which could cost your business significantly if you find yourself in the position of a commercial dispute with a customer.
You enter into discussions with a customer to provide your service. At some point in the process you issue a quotation (hopefully with your standard terms and conditions attached).
The customer issues a purchase order to you (containing the customer’s standard terms and conditions). The purchase order, which describes your goods, price, etc., plus a statement or copy of their terms.
You accept the order, supply the product. Something goes wrong, and the customer claims against you for damages.
You point to your quotation with your terms and the limited warranty and liability limitation clauses in it. The customer then points to its purchase order, which has warranty and liability provisions much more onerous to you (unlimited liability).
Whose terms govern?
Welcome to the “battle of forms”: a phrase coined by Lord Denning of the English Court of Appeal in the 1979 case of Butler Machine Tool Co Ltd. v. Ex-Cell-O Corporation (England) Ltd.
In summary Lord Denning said ”where there is a battle of the forms, there is a contract as soon as the last of the forms is sent and received without taking objection to it. In some cases, the battle is won by the person who fires the last shot. He is the person who puts forward the latest term and conditions; and, if they are not objected to by the other party, he may be taken to have agreed with them."
How can you increase your commercial protection?
The best protection is to be alert to the issue, so that you can avoid the battle and not find yourself in a commercial dispute.
END
Tim Cornes
Business Doctor
Mob: 07582 240393
Email: timcornes@businessdoctors.co.uk
LinkedIn:uk.linkedin.com/in/timcornes/
Website: http://businessdoctors.co.uk/doctors/macclesfield
Experienced Business Coach and Mentor, owner of Business Doctors covering East Cheshire and High Peaks.
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