Do you print your standard terms and conditions on the back of every invoice and/or at the end of every contract document? Are you sure?

Do you know where all of your signed contracts are? Yes or no?

You may think that the above questions are pretty basic and you might then conclude that this blog is not for you but in the case of Allen Fabrications Limited v ASD Limited, ASD made some fundamental mistakes that we can all learn from.

In brief, the case of Allen v ASD was a claim for a contribution to £7 million of liability for breach of contract or negligence.  It was alleged that the defendant failed to deliver enough of the fixtures and fittings needed to secure a metal grating safely or to warn the claimant that more fixings were required.  The parties could not agree whether the defendant’s standard terms and conditions (which limited the defendant’s liability) had been incorporated into the contract for the grating and fixtures.

The judge had to look at the following questions before he was able to reach a decision:-

• Were ASDs terms and conditions incorporated into the contract?
• If incorporated, what was the effect of 2 specific contract clauses on Allen’s claim and
• Were the 2 specific contract clauses reasonable or unreasonable?

Let’s take a closer look at these questions and the conclusion reached by the judge:-

Were ASDs terms and conditions incorporated into the contract?

The judge decided that they were because:-

(i) Allen signed a credit facility form. 

(ii) Allen was a commercial customer.

(iii) Allen had a previous course of dealings with ASD.

(iv) Allen would have seen ASD’s standard terms and conditions before.

 

If incorporated, what was the effect of the 2 specific contract clauses on Allen’s claim?

In general, the clauses in question limited Allen’s claim to the price of the goods unless the judge found that the clauses were unreasonable.

Were the 2 clauses reasonable or unreasonable?

The judge decided that the 2 specific clauses in question were reasonable which meant that ASD’s terms and conditions had been incorporated and Allen’s claim was limited to the price of the goods in question. 

The judge felt that matters may have been very different if there had been no signature and the parties were simply relying on a course of dealings.

ASD made 2 simple mistakes which could have meant that they were held liable for a lot more.

Mistake 1

ASD thought that it printed its standard terms and conditions on the back of every invoice but in actual fact they did not.  This clerical mistake could have meant that they were exposed to more than just the price paid.

Mistake 2

ASD said that Allen signed a form to get credit but it was unable to produce the form Allen had signed.  Luckily on the evidence, the judge accepted that a form must have been signed.  However, if ASD had been able to produce the signed form they may have been able to avoid this costly piece of litigation!

In order to try and ensure that you do not make the same mistakes as ASD here are 5 simple tips for your business.

5 tips

1. Review your terms and conditions;
2. Ensure that your terms and conditions reflect current business practices and that the clauses used are clear and unambiguous (if in doubt, ask a lawyer to check over them);
3. Check that your terms and conditions appear on all relevant documents in the correct place (this is very important to ensure that they are incorporated and that you can rely on them if a problem arises);
4. Ensure that you have a robust filing system in place so that important documents are not misplaced and/or lost;
5. Audit tips 1-4 frequently (at the very least once a month).

Note

Case citation: Allen Fabrications Limited v ASD Limited [2012] EWHC 2213