by Jason Murphy | Apr 23, 2013

“See our standard terms and conditions” is a phrase encountered every day in the purchase or sale of goods and services. Businesses often put these terms somewhere on their standard forms or refer customers to their website for a full copy of the “fine print”.

Typically, a buyer’s standard form will set out price, delivery, payment terms and warranties. It might also require that any disputes between buyer and seller be settled in the buyer’s jurisdiction. This last term is particularly important if the buyer is selling products out of the province or country.

But what if the seller acknowledges the buyer’s order on a standard form of its own, containing very different terms that limit its legal liability for deficiencies with the product or that require the buyer to sue in the seller’s foreign jurisdiction if there is a lawsuit?

Who wins this “battle of the forms”?

The Last Shot Rule

In Ontario, the general common law rule is that the “last shot” in a battle of the forms wins. Each standard form sent between the parties is treated as a rejection of and a counter-offer to the last.

So if the buyer accepts shipment of the seller’s goods after receiving the seller’s form with its drastically different terms, the buyer may be stuck with them. On the other hand, if the buyer responds to the seller’s acknowledgment form by re-stating the buyer’s standard terms, the buyer’s form will likely prevail.

The courts’ main concern in battle of the forms cases is to understand and enforce what the parties really agreed to.  As a result, there have been exceptions made to the last shot rule.

For example, in a case where a buyer and seller exchanged numerous standard forms but the seller had at one point specifically written that it accepted the buyer’s terms, the court found that this statement reflected the true wishes of the parties. The court therefore declined to enforce the seller’s standard terms, even though it had fired the last shot.

International Warfare

Rules of engagement change a little when dealing with a non-Canadian party. In this case, Ontario’s International Sale of Goods Act (“ISGA”) will apply to the transaction.

Under the ISGA, a response by a seller to a purchase offer that contains different or modified terms will also be considered a rejection of the purchase offer. However, if the seller’s response does not “materially alter” the buyer’s original terms, the sale will proceed on the seller’s modified terms unless the buyer objects. “Material alterations” include anything that affects price, quantity, delivery, limitation of liability or where and how disputes are settled.

Winning the Battle

First, know what terms of your agreement are worth fighting over. Most standard form disputes center around warranties or where and how disputes will be resolved. So think ahead about what exactly the good you’re ordering is supposed to do and for how long it’s supposed to do it. If it breaks, must the seller simply replace it or must it refund you? What if the product damages something else in the process of breaking?  If you have a disagreement with the seller, do you want to use the courts to resolve it, or a private arbitration? Will this process take place in Ontario or elsewhere?

Second, try to fire the last shot. If you receive an “acknowledgement” from a seller that you’re not comfortable with, send back a “confirmation”. Make it your standard practice to send out or refer to your standard terms and conditions clearly with all ordering paperwork. Keep your terms and conditions up to date and available on your website.

And finally, if you sense a “battle of the forms” is brewing think about avoiding it altogether by openly discussing with the other party the terms and conditions that are critical to you. Talk about the type of warranty you need or the sort of dispute resolution procedure you can live with ahead of time, while your relationship is positive.

It’s not fun to contemplate things going wrong in any major purchase. But doing it with a supplier openly and ahead of time is cheaper and more certain than asking the courts to do it for you after the relationship has soured.