Contract – Terms of Business, Battle of the Forms and Letters of Intent

The buyer (a company that made control systems for vehicles) placed orders with the seller (a company that supplied pedal sensors). Both parties traded on their standard terms of business, the key difference between the two being, as it is usual to expect, the extent of the liability, if something went wrong under the contract. The buyer’s conditions sought to impose unlimited liability on the seller for certain breaches, while the seller’s conditions purported to exclude any liability for consequential loss or damage and restricted its business liability to repair.

The sensors were defective resulting in serious problems, including uncontrolled deceleration and loss of power. The buyer suffered substantial losses as a result, including the cost of inspections and replacement of parts. It sought to argue that the contract was formed on its business terms and sought to recover its losses from the seller. The seller argued that the contract was formed on its terms and that its liability was limited to repair, in accordance with its standard terms, which the buyer had accepted by taking delivery of the sensors; while the buyer argued that the seller’s liability was unlimited (in accordance with its standard terms).

So, the preliminary question before the Court was on which terms the contract between the parties was formed.

In an unexpected decision, the Court decided that, the contract did not include either set of standard terms, because the parties had not reached agreement on their precise wording and there was no conduct that could be interpreted as accepting the other’s terms. The Court, therefore, held that the contract terms were governed by the Sale of Goods Act.

The Court, in giving its decision, summarized some of the key principles from previous cases, where there was a “battle of the forms”:

• The contract must be read objectively;

• In most cases, a contract is formed once the last set of terms is sent and received, without the recipient objecting;

• One party can be found to have accepted the other party’s terms by its conduct, but such conduct must be clear (looking at it objectively) with the intention to accept those terms; simply taking physical delivery of the goods is not enough;

• Where parties have not agreed which set of standard terms applies, the only inference that can be drawn is that, the contract was made on the basis that neither set would apply.

In conclusion, terms must be agreed between the parties before the contract is signed or executed. Even expressed wording in contract terms stating that the standard terms will prevail over others may not be effective where it can be shown that no agreement was reached, whether expressly or by way of conduct.

Another recent decision of the Supreme Court addresses two key points. The first is the need to have agreed contract terms, before work starts under a contract and the second that, where a letter of intent is signed and work starts due to it, that a contract must be finalized as soon as possible after that. In this case, the parties entered into a contract formed by a letter of intent. When the letter of intent expired the work continued on, before the terms of the detailed written contract had been finalized.

The Court in its decision reiterated that in terms of letters of intent, it will not impose binding contracts where none existed and therefore each case will depend on its own facts, taking into consideration what is communicated between the parties by words or conduct. Where contracts are negotiated “subject to contract”, the Court noted that, it will not always infer that a contract has been agreed on those business terms that are “subject to contract”.

However, in this case, the Court decided that the parties had agreed a binding contract and that the binding contract was not subject to contract for the following reasons:

• Given the parties agreement over price, it was unrealistic to infer that the parties did not intend to create legal relations;

• All the essential terms had been agreed and variations were agreed without stating that they were “subject to contract”. The actions and communications of the parties indicated that they had accepted the contract terms and formed a legal contract, without the necessity to require a formal written contract; and

• The parties had negotiated in detail the clauses which comprised the terms as amended and as such the clauses had been essentially agreed and varied.

This case highlights the dangers inherent in starting work before a formal written contract is in place and such letters of intent should always be treated with caution.

However, if a letter of intent is inevitable, this should:

• Clearly specify those contract terms that have been agreed and those that remain outstanding, so that there is no uncertainty over what has or has not been agreed between the parties; and

• State that, no binding contract is to come into effect, except to the extent set out in the letter and that neither the letter nor any work done or payment made under the letter shall be deemed to be a waiver of the requirement to provide a binding contract.

Finally, every effort should be made to finalise the contract as soon as reasonably practicable after the letter of intent has been signed.

This article is for general purposes and guidance only and does not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

Practical Internet Marketing – Why Even Your Internet Business Needs to Have a Plan

You have likely heard the saying, “If you fail to plan, you plan to fail”. This is especially true when it comes to your internet marketing business because without a very specific plan of action to follow, you will have no true way of knowing if your business is succeeding.

Being without a proper marketing plan for your business is like a general without a battle plan. Imagine how long a general would be in charge if they had no plan of attack. Well your business is no different. You cannot expect to get sale, gain customers, or beat the competition without knowing how to do it.

Now even the most seasoned military leader went through a process of being battle tested. He had to learn how to fight the battles first, then he applied those strategies in order to win one battle after another. You too must learn the tactics that will propel your business to the forefront of the business battlefield.

Build your internet marketing business (battle) plan.

Here are some basic steps you will need in order to get your business plan started:

Research your business model. Make sure you take the time to understand your own chosen business model. When it comes to internet based marketing, an e-commerce store can be quite different then creating your own informational products.

Learn what your business plan needs. As all businesses are different, so too will every business plan also be different. When you learn your business model, then you can also learn what specific requirements that will meets the needs of your business. Make a list of these needs.

Feeling industrious, write your own plan. A business plan can be quite simple or could read like a government budget plan. Do not make it harder then it has to be. You want to be able to understand it. Write a basic plan in a notebook that you can refer to often. You can always change it as you go.

Have one written for you. If you not an expert, then have a professional plan writer create one for you. This is often only needed if you want to get money from banks, but will still be good to have. Expect to pay a decent price for it, but it is well worth it.

To avoid this in the future, simply always make a plan. Even if it is a simple one.

Lack of planning in your business leads to a lack of growth and a lack of direction. You need to know where your going and how to get there if you want your internet marketing business to be successful. By creating a simple plan of action for yourself, even if it is on a napkin, you get an idea of how your business will work out in the long run and will be in a better position to map out your long term business strategy.

Small Business Battle of US and China

It turns out that the Chinese are incredibly superior businessmen, and one would have thought living in such a strained out and socially strict cultural society in the past, would have prohibited that from going on. But times have altered and the people of China are in fact often considered more improved capitalists than the citizens of the United States. There have been many business people come from rags to riches and become billionaires in the People’s Republic of China.

However, the best thing that is happening now and coming quicker than ever before, growing at a rapid pace is the rise of the Chinese small business social class. They are starting small businesses on the internet, small businesses on the street corners, and many are showing no fear in their pursuit of large money. This is a prosperous series of time for China to take advantage of on their small commerce power.

Most people do not understand it but in the United States seventy-five percent of the nation are employed by medium to small businesses and ten percent of the residents own a business. The USA is small-business, and it really is the spine of our financial system. Some people believe that the big corporations are the ones that make our market so sturdy, but that is not really even close to the truth. It is the small and medium size companies that make the disparity.

Even though the United States is still one of the top economies in the world they are quickly being downgraded due to the economy collapsed and the spread of capitalist globalization. Many experts predict that within around ten to twenty years the Chinese GDP will surpass the United States and will keep growing trending towards the positive for the next twenty years after that. For those living in the United States it may be of worry as the dollar is also being downgraded but in all reality the whole words business arena is changing and every country will have to adapt or be left behind. The United States has always been known to adapt to situations especially with business so it will be interesting to see which country emerges as the powerhouse of the 21st century.