Battle of the Forms: Where the First Shot Wins

It has been a longstanding principle in Contract law, that ‘the last shot wins’. A recent case has shown it may not always be true.

It is very common for two parties are preparing to enter into a contract, to engage in several stages of negotiations, specifically with each party putting forward their own preferred terms under which the contract will be performed. This is often referred to as the ‘battle of the forms’. In the event a dispute arises, the question of whose terms apply to the contract is inevitably asked?  It has been a longstanding principle in Contract law, that ‘the last shot wins’. In practice, this means that the last party to communicate their terms to the other, before performance of the contract will have the contract operate in favour of their terms.

However, the recent case of TRW Ltd v Panasonic Industry Europe GmbH (2021) has shown that in some cases, the ‘first shot’ may win the battle of the forms. The claim began in 2020 over a contract in 2015 for Panasonic based in Germany to supply resistors to TRW based in The UK. TRW later claimed that some of the resistors were defective and issued a claim in the UK Civil Courts.

Panasonic responded saying that the claims were not valid, as the German Courts had jurisdiction over the contract as per the terms contained in their “Customer File” which TRW had signed up to in 2011. Additionally, the Customer file also contained an ‘entrenchment provision’ which essentially said that any terms submitted in response to Panasonic by TRW would not apply to the contract between the parties.

TRW contested that although they had signed up to the Customer File, no contract had actually been entered into on the basis that there was no specific mention of goods that were being bought or sold. In other words, there was no consideration given. TRW further argued that it wasn’t until 2015 & 2016 when Panasonic performed under purchase orders issued by TRW for specific items (the resistors) that included specific quantities, costs, and delivery instructions that a contract was entered into.

The purchase orders issued by TRW included its own standard terms and conditions, one of which being the jurisdiction of English Courts. According to TRW, these purchase orders were in fact a counteroffer to the terms proposed by Panasonic and were the ‘last shot’ before performance, and therefore the terms contained within them should have been imposed.

The Court ultimately ruled in Panasonics favour reasoning that the entrenchment provision within Panasonic’s Customer File expressly prohibited any other terms being imposed unless there was explicit agreement from Panasonic and therefore TRW’s ‘shot’ attempting to impose its own terms “missed its target”. The Court went on to say that if signing up to the Customer File did not constitute a contract as TRW had argued, then signing the form would have been a completely pointless exercise, and may as well have not been done at all. Instead, the Court deemed that by signing the Customer File, TRW had agreed to Panasonics terms and therefore the German Courts would have jurisdiction over any claims arising from the contract between the parties.

There are a few takeaways from this case. The first is that this case, while it did somewhat deviate from the general rule of the ‘last shot wins’, The doctrine still remains and will continue to apply in contract negotiations. Secondly, it demonstrates that the first shot is capable of winning the battle of the forms, especially coupled with an entrenchment provision such as the one used by Panasonic.

Finally, and probably most crucially, documents that you sign up to, even if they may appear to be irrelevant or just formalities at the time, are significant, so it is always worth confirming exactly what you are signing up to.

ST1 offers a wide range of legal services including contract reviews, appraisals, and negotiations as well as general legal advice. So whether you what to understand what implications a new contract will have on your business or you are involved in a contractual dispute. Please feel free to contact our experienced dispute resolution team and we will be happy to assist you.

If you are in need of some help from our Dispute Resolution specialists, contact us today at 01353 669394 or enquiries@st1group.com

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