Companies often use their general terms and conditions as a basis for commercial and contractual negotiations. When a supplier and a client reach an agreement, they may both refer to their own general terms. In this case, the discussion may arise on which agreement and/or general terms and conditions apply.
New article 5.23 of the Belgian Civil Code (CC) offers the solution to this so-called “battle of the forms”.
Article 5.23 CC takes the specific arrangements negotiated by the parties as a starting point. In case these specific arrangements derive from one party’s general terms and conditions, the former will prevail. This makes sense: a tailor-made deal takes priority over standard clauses. However, how do we proceed when parties have made reference to different sets of general terms and conditions?
Consider this example. A supplier sends a price quotation to the client where he refers to his own sales conditions. On the other hand, the client accepts the price quotation by e-mail. The email disclaimer states that all transactions of the client will be ruled by his purchase terms. The sales conditions and purchase terms establish different rules on payment.
The knock-out rule
According to new article 5.23 CC, the contract between supplier and client shall be lawfully concluded and both sets of terms will apply. Only the contradicting provisions of both terms and conditions – in this example: the payment terms – are not applicable. The Belgian legislator thus assumes that the parties did have the common intention to close the deal, despite their contradicting general terms. This is called the “knock-out rule”.
Suppletive contract law shall act as a safety net for the parties and fill in the possible gaps due to not applicable deriving general terms. Nonetheless, it is possible that one of the parties in our example wishes not to contract under these circumstances.
The mere fact that parties handle contradicting terms and conditions is not sufficient to allege the non-existence of the contract. Therefore, one party may not wish to be bound by the contract. In this case, she should indicate this explicitly as soon as possible. In our example, the supplier should inform the client he will not go through with this deal. And he should do so as soon as he receives the acceptance e-mail with the disclaimer.
You do best to include a very clear applicability scope in your own general terms and conditions. And even so, caution is advised for companies (and their sales departments!). Always double-check whether or not business partners include (any reference to) general terms and conditions, that may find their (silent) way into your commercial relationship.
Laura Van Gompel
Lawyer – Managing Partner
- Corporate law
- Technology & Privacy
- International Contracts