Incorporation of terms of business into a contract

When asked the question “Do you have standard terms and conditions of business?” almost every commercial client I have acted for will say yes. It is not always as straightforward as the terms and conditions of a contract must be brought to the attention of the contracting parties before the point at which the contract is entered. You must also be careful to ensure that the other contracting party has not put forward their own terms and conditions anywhere which amounts to a counter offer as to the terms upon which the contract is to be concluded (the “battle of the forms” scenario).

The Court of Appeal in the case of Rooney and another v CSE Bournemouth Ltd [2010] has recently considered whether the phrase “terms and conditions available on request” on a purchase order would be sufficient to incorporate terms and conditions which one of the contracting parties may not have even seen.

The defendants (CSE) operated the aircraft under a management agreement between the parties which included repair and maintenance obligations. It was CSE's practice to require a work order to be signed by Rooney, or on Rooney's behalf, before CSE began work on an aircraft. Most work orders included at the foot of the page, just below the signature box, the words "terms and conditions available upon request".

In June 2008 CSE carried out some maintenance work on the aircraft. The work described in the work order was carried out negligently, resulting in damage to the aircraft. Rooney claimed damages. CSE claimed in its defence that it carried out the work on its standard terms and relied on a number of those terms. 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 Court of Appeal felt that the ultimate question was whether reasonable people in the position of the parties would understand the words used as referring to contractual terms upon which CSE agreed to do the work. The work order was a contractual document which took its place within the contractual framework of an aircraft maintenance agreement. The work order, a signed document, activated work being done under the contract. Given the nature of the contract and an expectation there would be commercial terms, Hedley LJ said that the words "Terms and conditions available on request" must bear some meaning. In those circumstances the Court concluded that the phrase “terms and conditions available upon request” was sufficient to incorporate the standard terms and conditions as the terms and conditions of the contract.

This decision emphasises the importance of checking documentation and being certain as to the terms upon which you are contracting or proposing to contract. It is advisable for businesses to ensure that their order forms either include their terms of trading, or make clear and unambiguous reference to them if they want them to form part of the contract.

For more information about this or any other matter involving construction projects, professional's duties and dispute resolution please contact Mairead McErlean or telephone her on 01908 689334.