The Writ p Stuff
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It's no longer good enough for hauliers to shake hands when agreeing terms with a customer—a written contract is vital to protect both parties.
Standard conditions of sale are the contractual basis on which a business deals with its customers. They formalise the basic day-to-day terms on which a business trades. At worst a good set of conditions may protect the haulier from liability or other risks. At best the conditions can act as a sales aid for the operator. For example, they can demonstrate the business's 'competitive payment terms.
The first issue is whether the conditions of sale have been properly "incorporated" as part of the contract between the business and its customer. In other words, are they part of the contract at all? If they are not, their worth is somewhat less than the ink they have been printed in! A classic problem is where the conditions are printed on the reverse of invoices. Because invoices are usually issued only after an order is taken and accepted (that is, after the contract has been made) reliance on the conditions in this situation is impossible.
Every reasonable effort must be made to bring the conditions to the customer's attention at the time the customer gives the order.
Reference to conditions of sale may be met by the customer countering with his own conditions of purchase when placing an order. In this "battle of the forms", the court usually adopts the view that the last set of conditions to be stipulated before contractual performance will apply.
In this situation there is clearly a need to reject the customer's conditions of purchase. Failure to do so might mean that the courts decide that neither set of conditions apply. Instead certain terms will be implied by the general law. This may result in a better situation than the buyer's conditions but invariably will be worse than the business's own conditions of sale.
The importance of controlling the cashflow position is clear. There are three principal issues.
First, quotations. It is all too easy for a customer to sit on a quotation for some time as the cost of transport or the labour charges increase. To counter this possibility, the conditions of sale should specifically limit the time period for which the quotation will remain valid.
The price of what is being quoted needs to be clearly stated. If this is done it should be possible to avoid disputes as to whether a specific item was or was not included in the price. Particular points need to be carefully considered by the business. For example, are delivery and VAT to be charged separately?
Finally, payment. Credit risk management necessitates the taking of a deposit by the business. This should be as large a percentage of the price for the job as is commercially possible. The balance, if possible, should be payable on completion or the number of days for payment should be clearly specified. To encourage payment, it is passible to include an interest clause. This will permit the business to charge interest on the outstanding balance until the date of payment.
If delivery is delayed, will the business be liable? If the products are damaged or stolen before delivery, who bears the loss? There are a number of statutory provisions regarding delivery and passing of ownership which apply where the contract is silent on these subjects. Certainly delivery is a basic obligation of a supplier of goods. Any attempt to exclude this obligation is arguably subject to the Unfair Contract Terms Act.
• Limiting liability This act imposes restraints on the extent to which any business can seek to avoid obligations for limiting liability by relying on the contract. As a result conditions which state that, for example, delivery dates are intended as estimates and seek to exclude the business's liability for delayed delivery, will only be enforceable if they are considered to be reasonable.
One of the tests for reasonableness is whether the customer knew, or ought reasonably to have known, of the existence and extent of the relevant condition. Other terms include the strength of the bargaining position of the parties relative to each other, whether the customer receives an inducement to agree a particular term and to what extent it is open to the parties to protect their positions by insurance.
Recent court decisions have suggested that it is desirable for any condition limiting liability to be highlighted in some way so as to bring it to the attention of the customer. However, the danger is that it will draw the attention of the customer to conditions which are designed predominantly to protect the business's position.
• Void and ineffective What is clear is that the act provides that any condition excluding or restricting liability for death or personal injury resulting from negligence is void. At the same time limitation of liability provisions will be ineffective in excluding statutory product liability where the products are unsafe and cause death or personal injury or damage to other property If the business can overcome the hurdle of showing that the conditions are part of the contract, there may be certain situations where there is a need to show that there is a valid retention of title clause in order to get the products back. In its simplest form, a condition providing that property in the products does not pass to the customer until payment for them has been made, is unobjectionable as long as carefully drafted. The difficulty arises where the products are sold or lose their separate identity by being combined in some way with some other items.
Despite these limitations, conditions of sale have an important role to play in providing protection to the haulier's business. They are disregarded by hauliers at their peril—both in respect of their customers and where their suppliers seek to take advantage of them!
CI by Steve Sidkin
Steve Sidkin is a commercial law partner in City law firm Fox Williams and specialises in trading agreement