Thursday, 7 October 2010

The dance of the lawyers

Once upon a time there were two companies. Company A had a product which company B needed for its business. The company owners met and agreed a deal. The price was paid, the goods were delivered, and everyone lived happily ever after.

But sometimes things are not that easy. Perhaps company A has difficulty paying for the goods, or company B has problems delivering them. Or there are quality problems, and before long company A wants its money back, or at least wants company B to repair or replace the products. Or a number of other things can go wrong, and both companies want to find some way to protect themselves.

So they call in the lawyers, and the lawyers write a document called the “Terms and Conditions”. The aim of these terms and conditions is often to make the other company responsible for as much as possible, and to keep the obligations of the company which defines the terms and conditions to a minimum. Sometimes the terms and conditions are fair and reasonable, but sometimes they appear rather biased.

There is one clause in particular which I always find intriguing. In German terms and conditions, for example, we often find something like this:
These General Terms of Business shall apply to all business transactions between us and our clients, even if they are not explicitly confirmed by the other party. Any general terms of business which deviate from, contradict or supplement these terms of business shall not become part of the contract, even if we are aware of them, unless their validity is explicitly confirmed by us in writing. This shall also apply even if the other party to the contract makes reference to its general terms of business and we do not contradict this.”

Terms and conditions in the UK often contain a similar provision:
These conditions shall prevail over any terms or conditions contained in the customer's order, acceptance or other communication and shall be deemed to have been accepted by the customer in preference to such other terms or conditions. Any provision, stipulation or condition in the customer's conditions of order or otherwise which conflicts with or in any way qualifies or negates any of these terms and conditions shall have no effect and these terms and conditions shall prevail. No variation of these terms and conditions shall be valid unless it has been specifically agreed in writing and signed by a director of the company.”

In B2B dealings (“business-to-business”), often both parties will have their own terms and conditions. If we examine them closely, we will find a number of conflicting provisions, and usually a clause excluding the other party's terms and conditions.

So how do they get any business done at all? If company A says “We will deliver the goods, but only after you have confirmed our terms and conditions”, and company B says “We want the goods and we are willing to pay for them, but only after you have confirmed our terms and conditions”, where do they go from there? If both parties insist on receiving a confirmation, they will be on a perpetual merry-go-round that leads them nowhere. Neither of them will get any goods, and neither will receive any payment. Business will come to a standstill.

In practice, the companies usually include their terms and conditions in their paperwork, but otherwise ignore them and hope for the best. In most cases this actually works – business transactions are completed as if there were no terms and conditions, and many companies do, in fact, live happily ever after.

But what happens if things go wrong and the matter goes to court? Naturally, this creates work for the lawyers. But apart from that, the outcome will depend on the specific circumstances of each case. I have come across various scenarios in my reading on this subject and in conversations with legal experts:
  • The doctrine of offer and acceptance. Contracts under the laws of England and Wales generally involve an offer by one party and an acceptance by the other party. The “offer” normally includes the terms and conditions, so by accepting the offer, the other party could be said to accept the terms and conditions. But there are a number of factors that make this more complicated. For example, the concepts “offer” and “acceptance” have very specific definitions, and there are other concepts such as “counter-offer” and “invitation to treat” which could change the character of the individual case.
  • Cancel everything that is not explicitly agreed. I have heard of cases both in Germany and in the UK in which the court examined the terms and conditions of both parties and compared them with the requirements of the law. The court cancelled all provisions which went beyond the requirements of the law, unless both parties agreed on individual provisions in their terms and conditions. In one case that I read about, both parties had their own terms and conditions, including a provision excluding the terms of the other party, but they conducted their business largely over the phone without reference to the paperwork. The court suggested that each party knew about the terms of the other party, but that they had not even tried to agree on which terms should apply. It concluded that the parties did not intend to apply either set of terms and conditions, so their business relationship would be governed mainly by the general requirements of the law.

A question for my readers: have you come across any other strange provisions in general terms and conditions? Have you noticed differences between different jurisdictions? Have you seen the tendency to ignore the legal terms and conditions and simply get on with business as if nothing could ever go wrong?

Important note: I am not a lawyer, and this article is mere opinion, not legal advice. If you have any legal business related to the content of this article, you will need to consult a lawyer. However, please feel free to contact me if you need any legal translations from German to (UK) English.

1 comment:

  1. Very interesting Victor. Although it's slightly off-topic, I remember a strange provision in a contract. An agency asked me to agree with this: "[the agency] reserves the right to conduct audits of Translator's facilities, business practices, and any other matters reasonably relating to the performance...". Obviously, I declined politely.