CONTRACTING UNDER STANDARD TERMS   CONTRACT OF ADHESION

It is quite frequent in commercial transactions for both the offeror

when making the offer, and the offeree when accepting it, each to refer

to its own standard terms. In the absence of express acceptance by the

offeror of the offeree’s standard terms, the problem arises as to

whether a contract is concluded at all and if so, which, if either, of the

two conflicting sets of standard terms should prevail.

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If the general rules on offer and acceptance were to be applied,

there would either be no contract at all since the purported acceptance

by the offeree would, subject to the exception provided for in Art.

2.1.11(2), amount to a counter-offer, or if the two parties have started

to perform without objecting to each other’s standard terms, a contract

would be considered to have been concluded on the basis of those

terms which were the last to be sent or to be referred to (the “last

shot”).

The “last shot” doctrine may be appropriate if the parties clearly

indicate that the adoption of their standard terms is an essential

condition for the conclusion of the contract. Where, on the other hand,

the parties, as is very often the case in practice, refer to their standard

terms more or less automatically, for example by exchanging printed

order and acknowledgement of order forms with the respective terms

on the reverse side, they will normally not even be aware of the

conflict between their respective standard terms. There is in such cases

no reason to allow the parties subsequently to question the very

existence of the contract or, if performance has commenced, to insist

on the application of the terms last sent or referred to.

It is for this reason that the present article provides, notwithstanding

the general rules on offer and acceptance, that if the parties

reach an agreement except on their standard terms, a contract is

concluded on the basis of the agreed terms and of any standard terms

which are common in substance (“knock-out” doctrine).

I l l u s t r a t i o n

1. A orders a machine from B indicating the type of machine, the

price and terms of payment, and the date and place of delivery. A

uses an order form with its “General Conditions for Purchase”

printed on the reverse side. B accepts by sending an

acknowledgement of order form on the reverse side of which

appear its own “General Conditions for Sale”. When A

subsequently seeks to withdraw from the deal it claims that no

contract was ever concluded as there was no agreement as to which

set of standard terms should apply. Since, however, the parties

have agreed on the essential terms of the contract, a contract has

been concluded on those terms and on any standard terms which

are common in substance.

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A party may, however, always exclude the operation of the “knockout”

doctrine by clearly indicating in advance, or by later and without

undue delay informing the other, that it does not intend to be bound by

a contract which is not based on its own standard terms. What will in

practice amount to such a “clear” indication cannot be stated in

absolute terms but the inclusion of a clause of this kind in the standard

terms themselves will not normally be sufficient since what is

necessary is a specific declaration by the party concerned in its offer or

acceptance.

I l l u s t r a t i o n s

2. The facts are the same as in Illustration 1, the difference being

that A claims that the contract was concluded on the basis of its

standard terms since they contain a clause which states that

“Deviating standard terms of the party accepting the order are not

valid if they have not been confirmed in writing by us”. The result

will be the same as in Illustration 1, since merely by including such

a clause in its standard terms A does not indicate with sufficient

clarity its determination to conclude the contract only on its own

terms.

3. The facts are the same as in Illustration 1, the difference being

that the non-standard terms of A’s offer contain a statement to the

effect that A intends to contract only on its own standard terms.

The mere fact that B attaches its own standard terms to its

acceptance does not prevent the contract from being concluded on

the basis of A’s standard terms.