The Problem Posed by ‘the Battle of the Forms’ Illustrates that the Offer and Acceptance Model is not Working.
In any contractual agreement there must be an offer and an acceptance. An agreement is only arrived at where there is consensus ad idem. One party seeking to sell something to another has to a valid offer which the other party has to validly accept. This is when a contract can be said to have been made. When one of the parties in the contract fails to honor the agreement then will be held to be in breach of contract.
Another basic rule of contract law is consideration. Consideration tends to act as evidence that a contract existed between the parties and that it was not just a mere promise. Consideration was defined in the case of Dunlop v selfridge[1]. The basic rules of consideration include; it must be sufficient but need not be adequate. This was illustrated in Thomas v Thomas. Consideration must move from promisee to promiser according to privity of contract. Consideration must not be past, that is it must not come after the agreement. These rules are however subject to certain exceptions according to the circumstances of the case.
There is a principle that when one makes an acceptance to an offer, it should reflect to the terms of the offer. This forms the basis to the mirror image rule. In other words, its called the absolute acceptance rule. As initially stated, parties may not always accept the initial terms. Therefore, negotiations take place and an agreement may be reached by accepting those original terms of an offer.
The battle of forms refers to the challenge associated with the form of offer and acceptance. It has been observed that parties in a contract usually don’t just agree to accept the other parties’ terms. [2]Commercial enterprises contract in a variety of ways and negotiations may include disagreements, rejections, compromises and even threats before a final agreement is ever reached. Therefore, the final contract will not directly reflect the initial form of offer and acceptance.
A good illustration is the impact of counter-offers. In the modern commercial world, standard form contracts have become common. Many businesses opt to do their dealings on standard form contract as it is to their advantage. However, it becomes a challenge when one business seeks to rely on its standard form contract in dealing with another business which tries to do the same. This creates a conflict which is hereby referred to as the battle of forms. The court position has been to give effect to the final accepted counter-offer.
Parallels can be drawn in the case of Gibson v Manchester City Council[3] and the case of Butler Machine Tool v Ex Cell O Corporation[4]. In the former case the House of Lords held that the council’s letter was not an offer as it had stated “the corporation may be prepared to sell the house to you…if you would like to make formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible.” Lord Diplock stated as follows;
“My Lords, the words I have italicized seem to me, as they seemed to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr. Gibsons written acceptance of it. The words ‘may be prepared to sell’ are fatal to this; so is the invitation, not, be it noticed, to accept the offer, but ‘to make formal application form.”
In the case of Butler Machinery Tool v Ex-Cell-O Corporation[5], Lord Denning MR suggested that the traditional analysis of offer, counter-offer, rejection and acceptance is outdated. The better option would to look at all the documents passing between the parties and the conduct of the parties in order to determine whether there was an agreement. He stated that;
“It was so emphatic that the price variation clause continued through all the subsequent dealings and that the buyers must be taken to have agreed to it. I can understand that point of view. But I think that the documents have to be considered as a whole. And, as a matter of construction, I think the acknowledgement of June 5,1969, is the decisive document. It makes it clear that the contract was on the buyer’s terms and not on the seller’s terms; and the buyer’s terms did not include a price variation clause.”
In this case there was a battle of forms where the parties wanted the contract to be based on their own terms. Bridge LJ quoted the Uniform Laws on International Sale Act 1967[6]. The traditional analysis of offer and acceptance was applied even by Lord Denning.
Tekdata Interconnections Ltd v Amphenol Ltd[7]
The parties to this case are part of a chain of suppliers to Rolls Royce as ultimate purchasers. Rolls Royce need engine control systems for installation in their aero engines. They bought such systems from a company called Goodrich who themselves bought cables assembly items such as cable harnesses for internal wiring from Tekdata. In order to manufacture the harnesses Tekdata acquired connectors from Amphenol who originally manufactured them at their premises in Nottinghamshire but later moved to Whitstable. Tekdata claim that certain connectors were delivered late and were not fit for the purpose or of merchantable quality. It was contended by Amphenol that there was no contractual agreement between it and Tekdata. The court stated that in battle of forms, there could be a case in which the court would be entitled to conclude that one of the parties had not intended that the printed terms and conditions attached to its acknowledgement would apply.
Lord Justice Longmore stated “I agree with Mr. Tomson’s submissions on the aspect of the case, while accepting that, as Lord Denning said, there will be cases when one must glean from documents passing between the parties and from their conduct whether agreement has been reached. The way in which I would put it is to say that the traditional offer and acceptance analysis must be adopted unless the documents passing between the parties and their conduct show that their common intention was that some other terms were intended to prevail.”
The formalists will take the approach of looking at the documents in totality as Lord Wilberforce ,in New Zealand Shipping CO. Ltd v A. M. Satterthwaite & Co Ltd[8], provided. In this view the document that will be used to decide will be the one of counter-offer which shall be accepted by the parties to take effect. The realists on the other hand will be of the traditional approach of offer and acceptance which was applied by the House of Lords in Butler Machine Tool case.
In the case of Moran v University College Salford[9], the defendant university offered Moran a place which he accepted. The University claimed that it had made a clerical error and did not mean to offer him a place. It was held that a contract had been formed. The university’s intention was to offer Moran a place and Moran had acted reasonably in accepting. The university was therefore in breach by refusing to honor its part of the contract of providing Moran a place in the college.
In Dunlop v selfride[10], Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at a discounted price on condition that they would not resale the tyres at less than the listed price and that any reseller who wanted to buy them from Dew had to agree not to sell at a lower price either and that they would pay 5 Euros in damages if they violated this agreement. Selfridge proceeded to sell the tires below the price he promised to sell them for. It was held that there was no contract between Dunlop and Selfridge. For the contract to be complete Dunlop, as the promisee, was required to provide consideration which he did not.
In the above two cases it observed that offer and acceptance is not enough for a contract to be complete. There must be consideration which is sufficient to distinguish the agreement from a mere gratuitous promise.
Communication of acceptance
For a contract to be valid there must be reasonable and clear communication of the offer and acceptance. It will be absurd to claim a valid contract where there is no clear communication. In Powell v lee, the claimant had applied for a position as headmaster. The interviewing committee decided to appoint him but did not relay the same information to the claimant. Later on the committee decided to appoint another person. Powell claimed that the committee had already accepted his offer to work. The court rejected this since Powell had not received official communication from the committee.[11]
Forms of communication
Communication can be in any form, there are no rules on how acceptance can be communicated unless the offeror strictly indicate a particular method of acceptance.
In assessing the different forms of communication of acceptance, it is important to shed light on the postal rule. The postal rule is an exception to the general rule that direct communication of acceptance is required to make a contract valid. Since a contract becomes valid when the acceptance has been posted. This rule however is outdated as there are modern ways of communication that render postal communication irrelevant. The telephone, for instance, is an instantaneous means of communication and can be regarded to be similar to face to face communication. This was illustrated in Entorres v Miles Far East [1955] where communication was made by Telex and hence the postal rule could not apply. The court also held that communication should be within office hours.[12]
Unilateral offer
The general rule regarding unilateral contracts is that communication of acceptance is not mandatory since performance and acceptance are likened to be the same thing. To contextualize this, where there is a reward for whoever finds a lost dog, there is no need for a party to reply to the person offering the reward, saying “I am looking for your lost dog” It will be regarded sufficient acceptance when the party finds the dog and claims the reward. The leading case in this subject is Carill v the carbolic smoke ball co ltd [1893].[13]
Another important aspect to elucidate is whether silence can amount to acceptance. The leading English case regarding the subject of silence in relation to acceptance is Felthouse v Bindley [1862]. Felthouse who was a builder in London wanted to buy a horse from his nephew. They discussed about the horse by writing letters. After a letter from the nephew, the uncle replied saying “If I hear no more about him, I consider the horse mine at 30.15 euros. The nephew was busy and failed to reply. He instructed Bindley, the man running the farm, not to sell the horse but he sold it by accident. The uncle needed to demonstrate that a contract existed between him and his nephew for the sale and purchase of the horse. The uncle’s action against the auctioneer failed since he could not prove a valid contract. The court could not accept the nephews silence on the matter as an indication of acceptance.[14]
Conclusion
The battle of forms, as observed in the cited decisions, poses different challenges in the modern world of commercial transactions. The traditional approach of offer and acceptance has however continued to be applied in deciding whether there was a contract or not in regards to offer, acceptance and consideration.
[1] Dunlop Pneumatic Tyre Co. Ltd. V Selfridge & Co. Ltd., [1915] AC 847
[2] Chris Turner, Formation of A Contract; Offer and Acceptance; Unlocking Contract Law; Routledge Taylor & Francis Group, 2014.
[3] [1917] 1 All ER 972
[4] [1977] EWCA Civ 9
[5] Ibid 1
[6] Paragraph 2, Article 7 of Schedule 2, ‘However, a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance unless the offeror promptly objects to the discrepancy; if he does not so objects, the terms ot the contract shall be the terms of the offer with the modifications contained in the acceptance.”
[7] [2009] 1 Lloyd’s Rep 357
[8] [1975] AC 154
[9] [1993] CA 27
[10] Ibid 2
[11] Turner, C. Unlocking Contract Law. 4th edition 2014.
[12] Entorres v Miles Far East Corporation [1955] EWCA civ 3,QB 327
[13] Ibid 1
[14] Felthhouse v Bindley [1862] EWHC CP J35 142 ER 1037
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