Battle Of Forms Under Contract Law
Concept: According to Thomson Reuters, a battle of the forms arises "when two businesses are negotiating the terms of a contract and each party wants to contract on the basis of its own terms". The condition arises when the two contracting parties are in conflict among each other as to the terms of the contract, i.e. the party proposing the offer of contract wanting the contract on its own terms and on the other hand the party accepting the contract is giving its acceptance on separate conflicting terms from that of the offerer.
Illustration:- The landmark case law for the concept is Butler Machine Tool Co. Ltd. V. Ex-Cell-O Corporation (England) Ltd. The facts of the matter are that the petitioner Butler Machine tools company contracted the respondent company for the sale of Machine tools worth some amount. The offer to contract made by the petitioner consisted of certain terms and conditions which included price variation clause, delivery date, etc. However, the acceptance of the respondent was made by filling an order form which also had certain terms and conditions written on its back which included additional cost and contradictory delivery date. Post this acceptance by the respondent, another acknowledging form was sent by the Butler Machine company which made the term of date of delivery as earlier.
The above illustration is a clear example of the Battle of Forms, as various contradictory terms exist between the contradicting parties such as in regard to the date of delivery.
Resolution of Battle of Forms:-
Following are the principles used for resolving the battle of Forms:-
1. Last Shot Rule: The Common Law principle of Last shot rule provides that the party who puts forward the terms and conditions at the last gets all of its terms accepted as it fired the last shot in the exchange. In many of the cases, the offeree becomes the part of the last shot. In the matter of Balmoral V. Borealis Ltd., the facts of the case were that during their business dealings Balmoral (Petitioner) sends an order of a certain amount along with his own terms and conditions. However, on the contrary, the respondent Borealis also sends an invoice that contained his own contradictory terms and conditions. The court in its decision held that "when Balmoral signs on the invoice and makes the payment of the order, the conditions mentioned in the invoice are said to be accepted by him". Here, the last shot rule is used to decide the battle.
2. Mirror Image Rule: The principle of Mirror Image rule is one which states that an offer is said to be accepted only when the terms and conditions of both the parties are an exact mirror image of each other, i.e. both the parties must have same terms in mind in order to give a valid acceptance to the contract. The rule makes a clear differentiation between giving acceptance to offer and making a counter contract. It is said that when an acceptance varies in the terms of the offer, then such acceptance becomes a counter-offer. This operates as a rejection of the original offer and the acceptance consequently made is termed as acceptance to the terms of a counter offer. Therefore, the mirror image rule is said to apply and offer is said to be accepted only when both the parties agree to the same terms for contract and the battle of forms is solved.
In the case of Hyde V. Wrench where Wrench on 6th June offered Hyde to sell his farm at the price of £1000. Hyde made another offer to purchase the farms at £950. However, on 8th June, Wrench refused to accept Hyde’s offer. Subsequently, on 29th June, Hyde agreed to buy the farm at £1000, but Wrench refused to sell him the farm. The court also held that "there is no existence of contract because by applying the Mirror image rule as no meeting of mind happened in regard to terms of the contract between the parties, therefore no contract has formed between the two".
3. Knock-Out Rule: This rule is an additional extension to the Mirror Image rule which says that in case of the battle of forms, a contract is said to be concluded on only the terms which parties have mutually agreed upon and are common in substance. Therefore, in a contract, all the additional or different terms of the contract get knocked out and become inapplicable upon the parties. The knock-out rule usually applies in the United States, Germany, and France. Additionally, it is the rule prevailing under the UNIDROIT Principles of International Commercial Contracts (1994) and the Principles of European Contract Law (1998). This principle is enshrined in article 2.1.2 of UNIDROIT Principles of International Commercial Contracts and applies to parties only if both the parties agree to be bound by it.
Position of India with respect to the Concept:-
Under Indian law, a mixture of the Mirror Image Rule and the Last Shot Rule is used to tackle the Battle of Forms. Under Section 3 of the Indian Contract Act, 1872 read with Section 4, it is stated that a proposal is said to be accepted when the other party communicates or has the effect of communicating the acceptance by the other party. This depicts that the terms of both parties should be identical. Section 8 of the Indian Contract Act, 1872 states that acceptance can also be made by conduct, specifically by performing the conditions of the proposal. This section intends to move towards the Last Shot Rule from the Mirror Image Rule.
It can be easily understood from above that none of the above rules is perfect. Therefore, it is suggested that a new solution should be applied in the battle of the forms cases: an efficiency-based best-shot rule. Under this rule, a court decides about the formation of the contract by looking for the bargain-in-fact of the parties and determines the terms of the contract by picking the most efficient standard form.
ABOUT THE AUTHOR:
Jayant Upadhyay is a 4th Year student of BA.LLB course currently studying in K.L.E. Society’s law college, Bangalore. As he writes this post, Jayant is interning with us.
You can contact him at https://www.linkedin.com/in/jayant-upadhyay-731856131/
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