The importance of document retention for a party seeking to argue that its standard terms have been incorporated has been emphasised by the Court's decision in Allen Fabrications Limited v ASD Limited. Liane Bylett from our Commercial Disputes Team considers the points of best practice arising from this decision.

The "battle of the forms" describes the process by which one party's standard terms of business is incorporated into the contract. The general rule is for whichever party "fired the last shot" to win i.e. the last set of terms referred to will usually (but not always) apply. Problems can arise when the parties cannot prove which of them fired the last shot because the paperwork has been lost, as was the case in Allen Fabrications Ltd v ASD Ltd [2012].

In looking at this case, it is accepted that paperwork may not just be a scrunched up docket at the back of a filing cabinet, but also an item of electronic data held on a sophisticated database. References to paperwork and documents should of course be seen in the context of current technology as well - the maxim will remain "keep it safe".

Allen Fabrications contracted to provide parts for a steel platform for Bembridge Marine Limited. Allen Fabrications sub-contracted the supply of grating and clips to ASD. One of Bembridge's employees, Kevin Cleightonhills, fell through the platform and sustained serious head injuries. Judgment was entered against Bembridge in favour of Mr Cleightonhills and damages were agreed in the sum of circa £7m. Proceedings were brought against Allen Fabrications for a contribution and, in turn, Allen Fabrications sued ASD.

ASD sought to rely upon its Standard Conditions of Sale which limited liability to the price of the goods supplied (which was naturally far less than the amount claimed). The initial quotation and other documents did not make any reference to either party's terms and conditions. However ASD claimed that when the goods were delivered to Allen, it would always have been accompanied by an Advice Note (with the terms on the reverse) to be signed as proof of delivery. However neither party had retained a copy of the Advice Note. Only once proof of delivery was obtained would an invoice would be generated. The invoice made reference to ASD's standard terms and ASD claimed that the terms were printed on the reverse of the invoice, but this turned out to be incorrect. The paperwork was therefore far from conclusive.

ASD argued that its standard terms must apply because Allen Fabrications made a written application for a credit facility some years previously which required specific agreement to the terms. ASD also relied upon a course of dealing between the parties of over 250 transactions, each involving the sending of an Advice Note and an invoice to Allen Fabrications. Luckily for ASD, the Court agreed that ASD's standard terms applied to the contract. Although the paperwork had been lost, the Court was satisfied that there must have been an Advice Note in order for an invoice to have been produced.

Many businesses do not retain paperwork (or, if they do, it is only for a very short period) and it is a fact of life that sometimes paperwork gets lost or misfiled – particularly when parties are doing business together on a regular basis. However when a dispute arises it is always better if a paper trail can be provided to evidence the agreement between the parties. As a matter of best practice, businesses should:

  • Make sure you get the other party to sign a document which clearly refers to your standard terms.
  • If your standard terms are given on the reverse of the document, you should make sure that there is clearly visible statement on the face of the document referring to them.
  • You should also draw the other party's specific attention to any core terms, e.g. limitations of liability. It will then be more difficult for the other party to argue that your limitation of liability was not sufficiently brought to its attention.

You should ensure that documents are filed away safely and ideally retain documents for a period of at least six years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.