High Court Rules On “Battle Of The Forms” Dispute

In the recent case of GHSP Incorporated v AB Electronic Ltd., the High Court was asked to rule on another “battle of the forms” dispute.

Such disputes typically arise from the negotiation of the sale or supply of goods or services. The supplier insists that the contract should be on its standard terms. The purchaser is equally adamant that its standard terms should apply. In the end, the parties succumb to commercial pressures and the goods or services are supplied without the issue being resolved. The parties then fall out. The court has to decide whether there is a contract at all and, if there is, the terms on which the parties contracted.

In the GHSP case, GHSP was a US company that designed and manufactured electro-mechanical control systems for motor vehicles. AB was an English company that manufactured position sensors. GHSP placed orders with AB for the manufacture of pedal sensors for incorporation into one of GHSP's products for onward sale to Ford. GHSP and AB both traded on standard conditions. GHSP's conditions imposed liability on the supplier in very wide terms. AB's conditions excluded any liability for consequential loss or damage, restricting any liability to works of rectification or repair. AB supplied a defective batch of sensors. The use of a defective sensor could cause engine stumbling, or uncontrolled deceleration and loss of power. The resulting losses were very substantial and included various costs claimed by Ford. The parties agreed that the issue of whether AB's conditions exempted or restricted its liability should be tried as a preliminary issue.

The Judge ruled that neither party's standard conditions applied to the contract. It was simply not possible to point to one party having made an offer on its conditions that had been accepted by the other party. The Judge concluded that a contract had been made on the terms implied by the Sale of Goods Act 1979.

The result of the case should probably be seen as a partial victory for GHSP. Whilst AB’s ultimate liability may be less than it might have been under GHSP’s conditions, it is likely to be substantially greater than it would have been had AB’s conditions applied. This case is another reminder of the danger of going off half-cock before the small print of the deal has been finalised. Too often the result is messy, costly and time-consuming litigation.

If you would like to know more about the implications of this case, please contact David Dees or Nick Crook.

Filed: 27/08/2010 08:50:14