A common question in business-to-business (B2B) is which general terms and conditions apply. An important legal question. Often, both the client and the contractor will (retrospectively) appeal to their own general terms and conditions. This conflict is referred to as 'the battle of forms'.
In this blog, I will elaborate on the question of how to know which general terms and conditions apply. In answering this question, I will distinguish two situations: national disputes (two parties from the Netherlands) and international or cross-border disputes (e.g. a client from the Netherlands and a contractor from Germany). Please note that I will leave out the consumer law side (B2C).
National disputes (first shot rule)
In national disputes (two Dutch companies), the so-called 'first shot rule' applies under Dutch law. This means nothing more than that the party that refers to its general terms and conditions in the first (online) document sent wins the battle.
Pursuant to Article 6:225(3) of the Dutch Civil Code, the second reference to the general terms and conditions has no effect if it does not also expressly reject the applicability of the general terms and conditions indicated in the first reference. Merely referring to one's own general terms and conditions when accepting an offer is therefore insufficient. For clarification purposes, here are three examples:
1. Party X makes an offer containing a reference to its general terms and conditions. Party Y accepts this offer containing a reference to its own general terms and conditions. In principle, under the first shot rule, Party X's general terms and conditions then apply.
2. Party X makes an offer containing a reference to its general terms and conditions. Party Y accepts this offer containing a reference to its own general terms and conditions and Party Y expressly rejects the applicability of Party X's general terms and conditions in that context. Party Y indicates that it only wants to do business if its own general terms and conditions apply. In this case, in principle, the general terms and conditions of party Y apply.
3. Party X makes an invitation to make an offer containing a reference to its own general terms and conditions. Party Y makes an offer containing a reference to its own general terms and conditions. Party X accepts Party Y's offer with a reference to its own general terms and conditions (of Party X) but does not expressly reject Party Y's general terms and conditions. In principle, Party X's general terms and conditions still apply in this case because Party X referred to its own general terms and conditions in the first writing (the invitation).
Vienna Sales Convention (sales contract for movable property)
In international disputes, both parties will often have included a choice of law clause in their own general terms and conditions. Therefore, when assessing the question which general terms and conditions apply, the competent court will first look at which law would apply to the contract in case the parties had not made a choice of law.
If the parties have concluded a contract of sale (movable goods), the Vienna Sales Convention often applies. In that case, the competent court will judge directly on the basis of the Vienna Sales Convention which general terms and conditions apply to the contract, and thus also which law applies on the basis of those applicable general terms and conditions.
The starting point based on the Vienna Sales Convention is the last shot rule (based on supply, demand and counter-offer). In other words, the general terms and conditions of the party who refers to them last apply.
Choice of law between parties
What if the Vienna Sales Convention does not apply? As mentioned, when both parties refer to their own general terms and conditions containing choice of law clauses different from each other, the competent court will consider which law would apply to the contract in the event that the parties had not made a choice of law. This assessment takes place under the Rome I Regulation.
An example: the contract for the provision of services is governed by the law of the country where the service provider has its habitual residence, according to Article 4(1)(b) Rome I. On the basis of the law of the country where the service provider has its habitual residence, it will be assessed which general terms and conditions apply. This can have far-reaching consequences. This is because the way countries deal with the battle of forms varies widely.
Germany, for instance, does not have the first shot rule but the knock-out rule. In Germany, both general terms and conditions are examined to see which provisions the parties agree on (consensus of wills). Any provisions that conflict are declared inapplicable. Any contractual gaps that then arise are filled in according to the applicable law.
Large international differences
I would like to note at the end of this blog that there is a large degree of uncertainty in international legal transactions with regard to the battle of forms. The outcome of the question which general terms and conditions apply depends partly (thus) on which law applies, but also which court in which country should answer this question. It is therefore advisable to make clear written agreements during contract negotiations as to which general terms and conditions apply, which law applies and which court is competent to rule on any disputes.
Want to know more?
Do you have questions about the applicability of general terms and conditions? Or would you like Wolfs Advocaten to assess your general terms and conditions? Feel free to contact one of our lawyers.