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.