Many companies have standard terms and conditions for contracting. For such terms and conditions to bind counterparties, they must be incorporated into the contract. There is often a mass of communication between parties comprising pre-contract enquiries, orders, negotiation of terms and ultimately agreeing a bargain. Where a signed contract is not put in place, difficulties can arise in establishing which communications form part of the contract. Standard terms and conditions are a useful way of achieving contractual certainty in such circumstances.

However, if a party fails to incorporate its standard terms and conditions, the rights and obligations under the contract may be significantly altered. There is also potential for lengthy and expensive litigation to determine if the standard terms form part of the contract.

How will a court determine if standard terms and conditions have been incorporated into a contract?

If a party wishes to incorporate its standard terms into a contract then it must ensure that its counterparty is given notice of these terms and that they form part of the contract. Fair notice is key.

Method of incorporation

Courts have formed the view that effective incorporation of terms into a contract requires sufficient notice of their applicability.

The best way to incorporate standard terms is to expressly refer to their incorporation before any contract is concluded and to provide the counterparty with a copy. Standard terms can be incorporated into a contract by reference however by stating prior to contract conclusion that they are available online or on request but the safest option is to supply a copy to the counterparty and retain evidence of doing so.

Timing of incorporation

The timing of attempts to incorporate terms into a contract is fundamentally important. Unless there is an established course of dealing between parties, standard terms printed on the reverse of invoices comes too late as an invoice is a post contractual document. A party's attempt to incorporate standard terms will only be successful if it comes before any final "acceptance" of the contract terms. Where each party seeks to incorporate its own standard terms into the contract, the last shot rule applies whereby the party putting forward its terms to the exclusion of all others, immediately prior to contract conclusion is successful.

Conclusion

Incorporation of standard terms and conditions is a useful way of achieving contractual certainty for commercial dealings and contracting in a manner that meets business objectives. Attempts to incorporate standard terms and conditions can lead to contentious disputes so parties should be careful to ensure that prior to contract conclusion clear notice is given to the counterparty of the applicability of such terms.