Terms and Conditions: They may be water tight but are they incorporated?
Whilst businesses are often rightly concerned about whether their terms and conditions offer enough protection, this is probably of secondary importance to the main issue – making sure they are incorporated in contracts to begin with.
Similarly, from the perspective of the party upon whom terms and conditions are being imposed, the question arises: What amount of notice needs to be given about those terms and conditions in order to be bound by them?
Questions that typically arise include: Must a copy of the terms be provided? Can they simply be referred to? Do they need to have been read?
This was well demonstrated in a recent Court of Appeal case, Rooney v CSE Bournemouth Ltd, which found that the words ‘terms and conditions available on request’, could be effective to incorporate a party’s standard terms and conditions.
The case concerned an aircraft owner’s (Rooney) claim for damages following negligent work carried out by the defendant (CSE). CSE provided repair and maintenance services to Rooney’s aircraft. CSE’s practice was to define the scope of maintenance works to be carried out on a work order form, which contained the statement ‘terms and conditions available on request’. Each work order was to be signed by Rooney before CSE began work on the aircraft.
In June 2008, CSE negligently carried out maintenance work on Rooney’s aircraft, resulting in damage to the aircraft during a flight. Rooney took action against CSE.
CSE claimed in its defence that it carried out the work on its standard terms and sought to rely on a number of those terms to limit or avoid liability to Rooney. Rooney argued that the work order was not a contractual document, and in any event its wording was insufficient to incorporate CSE’s standard terms of trading.
The judge at first instance held that the words ‘terms and conditions available on request’ conveyed no more than that there were terms and conditions available, and they did not purport to incorporate any particular terms and conditions into the contract. That decision seems commercially odd as it suggests that, in such circumstances, terms and conditions will only be incorporated if the customer requests a copy.
The Court of Appeal took a different view. It held that the ultimate question was whether reasonable people in the position of the parties would understand the words ‘terms and conditions available on request’ as referring to contractual terms upon which CSE agreed to do the work.
It was held that these words were, in principle, capable of being understood as an intention to incorporate a party’s standard terms and conditions into a contract. While the first instance judge’s interpretation of ‘terms and conditions available on request’ might have been correct grammatically, it was not correct when viewed in a business context.
What does this mean?
While the Court of Appeal’s commercially prudent construction provides a degree of optimism to parties using ambiguous words of incorporation, the conflicting judicial opinion on the correct interpretation emphasises the need for clear and precise drafting. Precision is important if you are to avoid the possibility of being drawn into lengthy and expensive court cases.
What should you do?
- Say exactly what you mean – in order to incorporate your standard terms, use clear, precise and express wording. If it is your intention to rely on your standard terms, it is always best to provide the other party with a copy of those terms and conditions and make it clear that they will form the basis of any contract.
- Always request a copy – when negotiating the terms of a contract with another party, it is essential to request terms and conditions and to agree any necessary.