The Battle of the Forms

If your customers send purchase orders when they buy your product, you may be agreeing to contract terms you don’t even know about. The scariest part… you might have your own term sheet you send along with your product, and still be agreeing to different terms in the final contract. And if you are the one sending the purchase order… you aren’t really any better off. Welcome to the battle of the forms.

The classic “battle of the forms” happens every day. Company A makes a product and includes some terms and conditions on the product order form. Company B wants to buy the product, but has its own terms and conditions on the standard purchase order. Both companies send their forms by fax, both companies sign the paperwork, and nobody bothers to read the fine print to realize something is wrong. Now the terms do not match and there is no clear language deciding important contract terms, so when things go to litigation a court could choose either Company's language or something else entirely.

What’s an easy example? You make a deal with your supplier to sell you building supplies at a much needed discount. According to your purchase order, the discount is permanent – you get a certain percentage off of whatever the vendor’s list price is. According to the vendor’s term sheet that comes in the box with the building supplies, the vendor can change the discount after 12 months with written notice. So who wins?

The answer is surprisingly difficult to figure out. It can change depending on which state law you apply (which can be a point of argument on the forms). In any case though, the litigation can take months to work out, which is too long for any kind of profitable deal to survive. So the best thing to do is avoid the situation. Here are some easy steps to side step the battle of the forms in your business:

1. Make sure your offer to sell or purchase goods is explicitly only good under your terms, and that you will reject any other terms unless you say otherwise in writing.

2. If other terms come, reject them in writing. Do not just verbally agree to go with certain terms, make sure the forms match your verbal agreement.

3. When contracts come up for renewal, make sure all the changes you make in your business partner’s forms carry over onto the contract extension. It does no good to cross out a line in the original contract if five extensions afterwards are all signed without any changes.

4. Most important of all. If you see two sets of terms, don’t just assume the above is enough. No matter what you write, if there is no evidence that the contracting parties actually discussed the conflict and resolved it, you can never be certain that the next battle of the forms will not include your otherwise flawless term sheet.

And if you are stuck in a battle of the forms, you will definitely need to speak to an attorney.