Battle of forms: how do you know which general terms and conditions apply?
A recurring question in the commercial business (B2B) is which general terms and conditions apply. An important legal question. Often both the principal and the contractor will (afterwards) invoke its own general terms and conditions. This conflict is referred to by the term ‘the battle of forms’.
In this blog I will discuss the question of how you know which general terms and conditions apply. In answering this question I will distinguish two situations: national disputes (two parties from the Netherlands) and international or cross-border disputes (for example, a principal from the Netherlands and a contractor from Germany). I will not address the consumer law side (B2C).
National disputes (first shot rule)
In national disputes (two Dutch companies), the so-called ‘first shot rule’ applies under Dutch law. This means nothing more than that the party that refers to its general terms and conditions in the first (online) document sent wins the battle.
Pursuant to Section 225(3) of Book 6 of the Dutch Civil Code, the second reference to the general terms and conditions has no effect if the applicability of the general terms and conditions stated in the first reference is not expressly rejected at the same time. Merely referring to one’s own general terms and conditions when accepting an offer is therefore insufficient. I will give you three examples:
1. Party X makes an offer containing a reference to its general terms and conditions. Party Y accepts this offer with a reference to its own general terms and conditions. In principle, the general terms and conditions of party X apply on the basis of the first shot rule.
2. Party X makes an offer containing a reference to its general terms and conditions. Party Y accepts this offer containing a reference to its general terms and conditions and Party Y explicitly rejects in that respect the applicability of Party X’s general terms and conditions. Party Y indicates that it only wants to do business if its own general terms and conditions apply. In this case, Party Y’s general terms and conditions apply in principle.
3. Party X requests party Y to make an offer and party X refers to its own general terms and conditions when doing so. Party Y makes then an offer containing a reference to its own general terms and conditions. Party X accepts Party Y’s offer with a reference to its own general terms and conditions (of Party X) but does not explicitly reject Party Y’s general terms and conditions. In principle, Party X’s general terms and conditions still apply in this case, because Party X has referred to its own general terms and conditions in the first document (the invitation).
United Nations Convention on Contracts for the International Sale of Good
In international disputes, both parties will often have included an applicable law clause in their own general terms and conditions. Therefore, in assessing the question of which general conditions apply, the competent court will first look at which law would apply to the contract in the event that the parties had not made a choice of law.
If the parties have concluded a purchase agreement (‘movable goods’), the Vienna Sales Convention often applies. In that case the competent court will immediately assess on the basis of the Vienna Sales Convention which general conditions apply to the contract, and thus also which law is applicable on the basis of those applicable general conditions.
The starting point based on the Vienna Sales Convention is the last shot rule. In other words, the general terms and conditions of the party who refers to them last apply.
Applicable law clauses
What if the Vienna Sales Convention does not apply? As mentioned above, when both parties refer to their own general terms and conditions containing applicable law clauses that differ from each other, the competent court will look at which law would apply to the contract in the event that both the parties had not made a choice of law. This assessment takes place on the basis of the Rome I Regulation.
An example: the contract for the provision of services is governed by the law of the country where the service provider has his habitual residence, according to Article 4(1)(b) Rome I. On the basis of the law of the country where the service provider has his habitual residence, will be assessed which general terms and conditions apply. This can have far-reaching consequences. The way in which countries deal with the battle of forms differs widely.
For example, Germany does not have the first shot rule but the knocked out rule. In Germany, both general terms and conditions are examined to see which provisions the parties agree on. Any provisions that conflict are declared inapplicable. Any contractual gaps that then arise are filled in according to the applicable law.
Wide international differences
At the end of this blog I would like to note that in international disputes there is a large degree of uncertainty with respect to the battle of forms. The outcome of the question of which general terms and conditions apply depends partly (thus) on the question of which law is applicable, but also on which court in which country must answer this question. It is therefore advisable to make clear written agreements during the contract negotiations about the question of which general terms and conditions apply, which law applies and which court is competent to decide on any disputes.
Questions?
Do you have questions about the applicability of general terms and conditions? Or would you like Wolfs Advocaten to review your general terms and conditions? Please feel free to contact one of our lawyers.
Author: Lars Kroese
Contributing Advisors
