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Catherine Mathews comments on the recent case of Tekdata Interconnections Ltd v Amphenol Ltd.

Two essential ingredients for the formation of a contract are offer and acceptance. An offer must be made by one party (A) and accepted by another party (B).

 If B does not unequivocally accept A's offer and instead seeks to vary the terms of the offer, B is deemed to have rejected A's offer and put forward a counter offer that A can choose to accept or decline. Where each party purports to contract on the basis of its own non-negotiable standard terms of business, this is known as a "battle of the forms".

A typical battle of the forms arises where A offers to buy goods from B on its (A's) standard terms and B purports to accept the offer on the basis of its own standard terms. If the parties start to perform the contract without formally agreeing whose terms apply, the courts will try to characterise the parties' behaviour and communications as offer and acceptance. Acceptance is generally found in one party beginning to perform the contract, and the "last shot" doctrine holds that the last communication exchanged by the parties which was not explicitly rejected by the recipient constitutes the offer.

Applying the traditional offer and acceptance analysis and the last shot doctrine, an offer to buy on the purchaser's terms which is followed by an acknowledgement of purchase containing the seller's terms which is followed by delivery will (other things being equal) result in a contract on the seller's terms.

However, in Butler Machine Tool Company v Excell-O Corporation, which involved a battle of the forms, Lord Denning suggested that a different approach might be appropriate. He commented:

"In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out of date... The better way is to look at all the documents passing between the parties - and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points - even though there may be differences between the forms and conditions printed on the back of them."

However, in the recent case of Tekdata Interconnections Ltd v Amphenol Ltd, the Court of Appeal held that Lord Denning's comments in Butler Machine Tool Company were no basis for abandoning the traditional offer and acceptance principles to resolve a battle of the forms case.

Tekdata Interconnections Ltd (Tekdata), had bought components from Amphenol Ltd (Amphenol), over a period of more than 20 years. A dispute arose concerning the supply of the components, which turned on the issue of which party's standard terms governed Tekdata's purchases.

The trading relationship between the parties was such that Tekdata would place an order for components which stated that the purchase was to be on Tekdata's standard terms of business. Amphenol would then send an acknowledgement of the order to Tekdata, which stated that Amphenol's standard terms of business were to apply, following which delivery would be made.

At first instance the judge relied on various aspects of the relationship between the parties and Lord Denning's guidance in the Butler Machine Tool Company case to find that, despite the terms of Amphenol's acknowledgement, it was never intended that Amphenol's standard terms should apply because the parties had always intended that Tekdata's standard terms were to apply.

Amphenol appealed the decision and the Court of Appeal allowed the appeal. While accepting Lord Denning's comment that there will be battle of the forms cases when one must look at the documents passing between the parties and their conduct to establish whether agreement has been reached, the Court of Appeal held that the Butler Machine Tool Company case was no precedent for abandoning the traditional offer and acceptance analysis.

The Court of Appeal decided that the traditional offer and acceptance analysis should be adopted in battle of the forms cases unless the documents passing between the parties and their conduct showed that their common intention was that some other terms were intended to prevail. While the judge had been entitled to look for indications that the traditional offer and acceptance analysis should be displaced, and the context of the parties' relationship was very important, the evidence did not support such a finding.

Applying the traditional offer and acceptance analysis, the earliest that a contract between Tekdata and Amphenol for the purchase and sale of specified components could come into being was when Amphenol acknowledged Tekdata's order. Accordingly, Amphenol's terms applied to the contracts between the parties because no further documents passed between the parties after Amphenol sent its acknowledgement referring to its standard terms and before Tekdata took delivery of the components.

The Court of Appeal acknowledged that the context of a long term relationship and the parties' conduct could be strong enough to displace the traditional analysis, but it would always be difficult to displace the traditional analysis unless it could be said that there was a clear course of dealings between the parties.

This case is a reminder that a buyer will usually find it difficult to win a battle of the forms unless it is particularly persistent in negotiations. A seller is inherently better placed to benefit from the last shot doctrine as it can simply delay beginning to perform until the buyer acquiesces to its terms, but still needs to be conscious that it is possible to displace the doctrine.

If you have any queries or concerns about a related issue and would like advice, please contact Catherine Mathews. Catherine specialises in commercial and contract litigation and is a member of the Dispute Resolution Team in Exeter. The Team is described as "exceptional" in the Legal 500 2010 independent directory.