Your sales team sends a quote with your terms and conditions attached. The customer replies with a purchase order. On the back, in small print, are their terms.
Nobody reads either. The goods ship. The invoice goes out.
Six months later something goes wrong. A batch is faulty, a delivery is late or the customer is paying on 90 days instead of 30. Now everyone wants to know whose terms apply.
The answer may not be yours.
Why this happens
Lawyers call it the battle of the forms. Each business sends its own standard terms, each document says its terms apply, and the deal goes ahead without anyone agreeing which set wins.
For a growing business selling to larger customers, this is common. Big customers have procurement teams, standard purchase orders and supplier portals. Their terms usually favour them: longer payment periods, unlimited liability, wide rights to reject and cancel.
How the courts decide
The courts start with the usual rules on how a contract is formed.
A response that introduces different terms is not an acceptance. It is a counter-offer. The contract is formed when one side accepts the other's last set of terms, often simply by acting on them, such as delivering the goods or taking delivery.
In practice, this often means the last set of terms sent before the goods move wins. That is why it is sometimes called the "last shot" rule.
The courts look at the whole exchange, so it is not purely mechanical. A long history of dealing on one party's terms can point the other way. But as a working rule, whoever fires the last shot before performance usually has the advantage.
Four ways suppliers lose the battle without realising
- Accepting the purchase order as it stands. If the customer's purchase order is the last document before you ship, you may have agreed to their terms by delivering.
- Signing their paperwork. Returning a signed order acknowledgement slip that refers to the customer's terms can hand them the win, even if your quote said your terms apply.
- Relying on a "our terms prevail" line. A statement that your terms override anything else does not win the battle on its own. What matters is what was sent, in what order, and what each side did next.
- Putting terms on the delivery note or invoice. Terms first shown after the contract has been made usually come too late to count.
When nobody's terms apply
Sometimes the exchange is so muddled that the court finds neither set of standard terms was agreed. That might happen if terms were referred to but never actually provided, or not fairly brought to the other side's attention.
Then the contract is made up of what was agreed, such as the goods, price and quantity, plus the terms the law adds automatically. For a supplier, that can mean:
- no cap on liability
- no limit on claims for lost profits
- no retention of title, so you lose ownership of the goods before you are paid
- statutory promises on quality and fitness for purpose that you have not limited
In other words, you are carrying risk you thought your terms dealt with.
How to make sure your terms apply
- Send your terms early. Attach them to every quote, or include a clear link with wording that says the quote is made on those terms. Terms sitting on your website with no reference to them are unlikely to apply.
- Acknowledge every order on your terms. When a purchase order arrives, reply with a written order acknowledgement confirming the order is accepted on your terms only. This is often the most important document in the chain.
- Do not sign the customer's forms without checking. If you must return their slip, add a note that it is accepted on your terms, or raise it before you sign.
- Highlight unusual terms. Terms that are particularly onerous, such as a large cancellation fee, need to be clearly drawn to the customer's attention, not buried in the small print.
- Watch supplier portals. Clicking "accept" when registering on a customer's procurement portal can mean agreeing to its terms for every order that follows. Read before you click.
- Train the people who handle orders. Sales and operations teams decide this battle every day, usually without knowing it. A one-page process for quotes, acknowledgements and purchase orders goes a long way.
For key customers, agree terms once
If a customer orders regularly, the cleanest answer is a signed framework or supply agreement. Agree the important points once: price review, payment terms, liability, delivery and returns. Then each purchase order simply places an order under that agreement.
Include a clause stating that the framework agreement overrides any terms on purchase orders, acknowledgements or portals. Because both sides have signed it, that clause carries real weight.
A note on late payment
If you do end up without agreed payment terms, the law still gives you some protection. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business that pays late can be charged interest at 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 depending on the size of the debt.
That is a fallback, not a plan. Clear payment terms that you have actually agreed are far better.
Summary
- When quotes and purchase orders carry different terms, the last set sent before the goods move often wins.
- Signing a customer's paperwork or relying on a "our terms prevail" line will not protect you.
- If no terms are agreed, the law fills the gaps, often in the customer's favour.
- Send your terms early, acknowledge every order on your terms and train the people handling orders.
- For regular customers, sign a framework agreement and settle it once.
If you are not sure whose terms your biggest customer contracts are really on, book a free 20-minute call with the Ethiqs team.