Introduction
One of the primary functions of a construction contract is to allocate risk between the parties. Since risk is, or ought to be, directly proportionate to profit, risk should not be viewed as a negative. Contractors must understand the risk they take on so that they can factor the risk into their pricing. The problem that often arises is that the parties do not properly understand their risk and assume significant exposure. If a significant margin for profit is factored into the risk, the contractor has significantly better options when something goes wrong. In other words, a contractor can absorb the risk in the event the risk is realized by reducing its profits and funding the completion of the project. Surety underwriters must also understand the degree of risk that is assumed to determine whether there is a sufficient allocation of profit.
As construction lawyers, we are often provided with scenarios where it is clear there was a misunderstanding over the allocation of risk. Three of such examples are reviewed in this paper.
- The effect of warranties and guarantees;
- The implication of contractual terms by reference to the Prime Contract; and
- Battle of the forms.
Warranties and Guarantees
Contractors and estimators can become complacent in their review of construction contracts and overlook key terms that impact the allocation of risk between parties. For example, the use of a warranty or guarantee may supersede the commonly held view that a contractor’s responsibility is limited to employing the means and methods of construction, but not the design.
What is a warranty and guarantee
Warranties and guarantees are forms of security included in a contract to reassure buyers that they will get what they bargained for. The BC Court of Appeal has defined a warranty as “a promise to bear the risk of loss that will flow from a failure of a fact to occur in the future”. It is an express or implied promise by one of the contracting parties that what was contracted for will be provided. In contrast, a guarantee has been defined as “an accessory contract by which the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person”. Guarantors, themselves, are not necessarily parties to the principal contract. Rather, they are guaranteeing that should the contractor fail to execute its obligations under the contract, they will step into the shoes of the contractor and compensate the deprived party.
It is important to identify the existence of warranties and guarantees in a contract for many reasons. A contractor’s warranty or guarantee to perform work without defect or to provide a product that is fit for its intended purpose is critical in determining whether a contractor can be held liable for damages flowing from the contract.
Express Warranties
Express warranties are easy to identify and are very common. They are created by the explicit acts or words of the vendor. Different kinds of express warranties include, a warranty period during which a vendor is obliged to remedy any defect detected and reported during that period, and performance guarantees, where a vendor guarantees that a product or work will perform to a certain standard.
Implied Warranties
Implied warranties are equally as important as express warranties but require the additional step of proving an unwritten warranty should be implied as a term of the contract based on the conduct of the parties. These can be implied through Statutes, the reliance on a contractor’s specialized skills, or based on common industry practices.
GVWD v. NAP
In a recent BC Court of Appeal decision, the Court agreed that a contractor was responsible for defects even though the defect was caused by the owner’s specifications. This is because the contractor had agreed to provide a number of warranties that allocated the risk to the contractor.
Background:
In Greater Vancouver Water District v. North American Pipe & Steel Ltd., 2012 BCCA 337 (“GVWD”) the Plaintiff tendered for bids for the supply of water pipes. GVWD developed the supply agreement including the specifications of the water pipes and protective coating. The Supply Agreement also contained guarantees and warranties respecting the fitness of the pipes. Contained in provisions 4.4.3 and 4.4.4 of the Supply Agreement:
The Supply Contractor warrants … that the Goods … will conform to all applicable Specifications … and, unless otherwise specified, will be fit for the purpose for which they are to be used.
…
The Supply Contractor warrants and guarantees that the Goods are free from all defects arising at any time from faulty design in any part of the Goods.
North American Pipe & Steel Ltd. (North American), an experienced contractor that had bid on several similar tender calls, received the tender documents on November 17, 2005 and submitted its bid on December 5, 2005.
The pipes supplied by North American proved to have serious defects. Shortly after supplying the pipes, the coating, designed to prevent corrosion, began peeling off the pipes in widespread batches. North American argued that the pipe was manufactured in accordance with GVWD’s specifications and that the most probable cause for the problems was the specified application method.
Trial Holding:
At trial, GVWD argued that the defects were caused by the Manufacturer’s failure to follow appropriate methods of installation, but in any event, the Supply Agreement’s warranties made North American liable for the extra costs associated with correcting the defects, notwithstanding that the specifications were drawn up by GVWD. GVWD relied on Thorn v. London Corp., [1876] 1 A.C. 120 H.L., that held a contractor is responsible for investigating the workability of plans and specifications and bears the consequences if the product cannot be built in accordance with those plans and specifications.
The holding in Thorn was followed by the Supreme Court of Canada in Steel Co. of Canada v. Willard Management Ltd., [1966] 1 S.C.R. 746. In Steel Co., the contractor argued that a guarantee of fitness did not extend to damage occasioned by the failure of material selected and specified by the owner. The Supreme Court rejected this argument on the basis that the contractor was experienced in the area, had participated in an open tendering competition with other bidders and had expressly undertaken to “carry out the work.” The Supreme Court further held that, where the terms of a contract are clear and unambiguous, the court is bound to give effect to them without stopping to consider whether they are reasonable.
North American argued that the Steel Co. holding did not apply where the defect in goods is attributable to the owner’s design specifications. The trial judge accepted this argument and held the guarantees and warranties contained in the Supply Agreement conflicted and could not be relied upon. In doing so, the trial judge accepted that the GVWD had proven the pipes were defective. However, she further held that the cause of defect was attributable to the GVWD’s own specifications. She found that it had failed to do so.
The trial judge distinguished Steel Co. on the ground that the GVWD had a staff of experienced engineers that were tasked with the job of designing the specifications. As such, she held that the relevant issue was not whether North American had the relevant skills and experience to consider the design but whether the GVWD relied on North American for those skills and experience.
Appeal Decision:
On behalf of the Court of Appeal, Justice Chiasson allowed the GVWD’s appeal holding the trial judge had incorrectly applied the law. Justice Chiasson stated:
Clauses such as 4.4.4 distribute risk. Sometimes they appear to do so unfairly, but that is a matter for the marketplace, not for the courts. There is a danger attached to such clauses. Contractors may refuse to bid or, if they do so, may build in costly contingencies. Those who do not protect themselves from unknown potential risk may pay dearly. Owners are unlikely to benefit from circumstances where suppliers and contractors are faced with the prospect of potentially disastrous consequences. Parties to construction or supply contracts may find it in their best interests to address more practically the assumption of design risk.
North American was obliged to deliver pipe in accordance with the GVWD’s specifications and agreed to do so, pursuant to clause 4.4.3. Pursuant to clause 4.4.4, it further warranted and guaranteed that the supplied pipe would be free from defects arising from faulty design. The Court of Appeal noted these were separate contractual obligations and reflected a distribution of risk. Despite any conflict in these contract provisions, the language of the contract was not unclear. As such, the background context of whether the owner relied on the contractor for its skill and expertise did not alter the distribution of risk to which the parties had agreed.
Take Away:
North American guaranteed the supplied pipe would be free from defects arising from faulty design. It reviewed the specifications prior to bidding on the contract. It then explicitly guaranteed the fitness of the pipes and that the pipe would be free from design defects. North American could have chosen not to bid, to bid with altered specifications or to incorporate the risk into its bid amount. It instead argued that it could not be held to its contractual obligations. Essentially, North American attempted to recover all the benefits of the supply agreement without any of the detriments. This approach ultimately proved unsuccessful and resulted in costly litigation and resultant damages.
Contractors and owners alike should take heed of this holding and incorporate the distribution of risk into their contracts as they see fit. Failure to do so could result in lengthy litigation and much higher costs.
Managing Risk: Incorporating Prime Contract Terms
Parties involved in a construction project manage their expectations and risks through contractual terms. In general terms, there will be a “prime” or “head” contract between the owner and the general contractor. The head contract sets out the owner and general contractors’ expectations of what will be built, when it will be built, how it will be built and the consequences of failing to meet these expectations. The contract is executed after each party has considered and bargained for the contained terms and binds the owner and the general contractor.
To effectively manage risks, general contractors and subcontractors need to also understand what each other’s risks and expectations are. Construction projects proceed through a bundle of documents including the drawings, specifications, contracts, subcontracts and tender conditions. Each of these documents cannot set out all the terms and conditions of the other documents because it would result in overly long, unworkable documents. The result is that terms of the documents are incorporated by reference. This type of term is common in the construction industry and can be found in the standard form CCDC wording. Incorporation by reference clauses are commonly used in construction contracts but not always understood. Incorporation by reference clauses are particularly important in agreements between the general contractor and the substrade that, incorporate terms of the Prime Contract.
Incorporation by reference clauses have been considered by numerous courts. They have been considered and upheld in cases involving incorporation of specifications, tender conditions, specific work, force majeure clauses, profit sharing and performance bonds. Incorporation by reference clauses has also been considered and rejected in cases involving liquidated damages, guarantee periods, insurance clauses, dispute resolution and security for liens.
Simply because one of these terms has been rejected by a court does not mean it will be upheld for a similar clause in another contract. As such, it’s important to understand what courts look at in deciding whether to hold a party to a term incorporated by reference. In Dynatec Mining Ltd. v. PCL Civil Constructors (Canada) Inc.(1996) 25 C.L.R. (2d) 259, the court held that the extent to which a term has been incorporated by reference is a question of construction of the subcontract. The court will review the subcontract. If the manifest intention of the parties was to exclude a term of the head contract, it will not be incorporated by reference, even though there is a general incorporation by reference term. Likewise, if a clause in the head contract creates a significant obligation, it may not be incorporated by reference if the parties overlooked it during bargaining.
Recent Statement of the Law:
In 1510610 Ontario Inc. (c.o.b. Central Welding & Iron Works) v. Man-Shield (NOW) Construction Inc., 2012 ONSC 302, the Ontario Superior Court of Justice recently considered incorporation by reference clauses. The case arose from the construction of an elementary school. The head contract contained a term that the contractor had to post security for construction lien actions. The general contractor argued the subcontractor had to post the security because the subcontract referenced and incorporated the terms of the head contract. After the subcontractor had executed the subcontract, the general contractor sought to have them execute an amended form with an express provision that the subcontractor would post security. The subcontractor refused to execute the provision.
The general contractor argued that the provision was incorporated into the subcontract by the provision that “insofar as applicable, generally or specifically to the labour and materials to be furnished and work to be performed under the Subcontract.” The clause specifically stated that the subcontractor had reviewed all relevant tender documents and the main contract.
The court held that the requirement to post security was not incorporated by reference into the subcontract. Justice F.B. Fitzpatrick stated:
The extent to which the terms of a principal contract are incorporated by reference into a subcontract is a question of construction of the subcontract. (Dynatec Mining Ltd v. PCL Civil Constructors (Canada) Inc. 1996 Carswell Ont 16 25 C.L.R. (2d) 259 OSC). A subcontractor is only bound by the terms of the prime contract to the extent its terms are referenced or incorporated in the subcontract. In construction cases, the contract between the contractor and a subcontractor often incorporates by reference some parts, or even much of, the prime contract as is applicable to the particular work in question. When done, this does make the terms and conditions of the prime contract, to the extent they are incorporated, a part of the sub contract. If there are inconsistencies, those inconsistencies and the extent to which the terms of the prime contract have been incorporated by reference, is a question of interpretation of the subcontract (Goldsmith & Heintzman, Goldsmith on Canadian Building Contracts 4th ed (Carswell:Toronto 1988) as adopted in Online Constructors Ltd. v. Speers Construction Inc. 2011 Carswell Alta 104, 2011 ABQB 43 .
In my view, incorporation by reference of a significant obligation such as the requirement to post security for liens filed by subcontractors of the party can only be accomplished by distinct and specific words…
[Emphasis added]
To ensure that a key term is incorporated into a contract, you will need to consider whether it is a significant obligation. If the obligation imposed is significant, it’s important that the term is brought to all parties’ attention. This will allow the parties to effectively manage their risk and avoid expensive litigation.
Liquidated Damages:
Head contracts often contain a term that, in the case of project delay, the measure of damages will be a set amount per day. This is known as a liquidated damages clause. To be enforceable, the clause must be a genuine pre-estimate of the party’s damages caused by the delay.
In construction projects, delays are often caused by a subcontractor failing to meet its contracted timeline. This delay may in turn delay another part of the project or the delay may be able to be made up because of built-in lags in construction. Where it does delay other aspects of the project, this can result in delay in the completion of the project. Can the general contractor then argue that a liquidated damages clause, contained in the head contract, is enforceable against a subcontractor where the terms of the head contract are incorporated? Or vice versa, can the subcontractor argue that the only measure of damages is the liquidated damages clause?
In Niagara Structural Steel (St. Catherines) Ltd. v. W.D. Laflamme Ltd. (1985) 14 C.L.R. 70, the plaintiff, a supplier of structural steel, argued that the measure of damages for delay it caused should be a liquidated damages clause in the head contract. The defendant was a general contractor specializing in bridge and dams that entered into a bridge-widening project.
The head contract provided that the bridge had to be complete within a certain number of working days, rather than a set completion date. The subcontract provided that the plaintiff would provide the steel by a set completion date. The subcontract incorporated by reference the general provisions and the specific provisions of the head contract.
Due to a strike at the raw steel supplier, the plaintiff was unable to meet its completion date. This delay did not count against the general contractors working days to complete the project but it did result in the project’s completion being delayed. The head contract provided that the general contractor would be responsible for the costs of the project until completion, resulting in the general contractor incurring costs for the delay. The general contractor subsequently only paid a portion of the contract price to the plaintiff and refused to pay the balance because of the additional expenses incurred. The plaintiff claimed for the remainder of the contract and the defendant counter-sued for the delay expense.
The court stated the following about the plaintiff’s argument for the liquidated damages clause:
First it argues that under the subcontract, incorporating the general conditions and special provisions of the head contract, the consequences of any delay were limited to liquidated damages. It argues that once the parties agreed that the liquidated damages would compensate for breach of contract by delay the defendant was not entitled to prove its actual damages but must sue for liquidated damages alone. The plaintiff relies on the learned author of Mayne and McGregor On Damages (12th ed.), p. 211 who states the principle to be:
“In most cases where the plaintiff has recovered his liquidated damages the stipulated sum has been greater than the actual, or at least the provable, damage. However, just as this cannot diminish his damages, so he cannot increase them by ignoring the liquidated damages clause in the rare case where the actual damage is demonstrably greater than the stipulated sum, . . .”
While this may apply in most cases, in my opinion, the principle is limited by the intention of the parties in each case as expressed in the contract between them.
Here the plaintiff and the defendant expressly incorporated the special provisions dealing with liquidated damages into their subcontract. Was it their intention that these provisions be applicable to the events which took place affecting their respective positions? …
[Emphasis added]
After considering the specific facts of the case, the court rejected the plaintiff’s argument that the liquidated damages clause should be incorporated by reference, stating:
Both the Laflammes testified that had the defendant been required to pay any liquidated damages to MTC it would have sought to pass them on to the plaintiff. Mr. Bigwood for the plaintiff said the plaintiff was aware of the liquidated damages provisions and accepted them. This is consistent for liquidated damages payable under the head contract by the defendant but does not deal with damages between the plaintiff and the defendant. Therefore I find that the whole concept of liquidated damages was not in contemplation of the plaintiff and defendant as between themselves and that the defendant is not precluded from suing the plaintiff for its actual expenses by the special provisions.
[Emphasis added]
If the general contractor had paid liquidated damages to the owner, it could have sought recovery over those damages from its subcontractor. In Niagara Structural Steel, the court ultimately found the general contractor was not entitled to any damages because its conduct following the breach of the subcontract had waived its rights to recover.
Take Away:
To effectively manage risk, it is important that all contractual parties are aware of and review all terms in the contract. This will allow each party to make their bargain accordingly.
Incorporation by reference terms is common in the construction industry. To effectively make use of incorporation by reference clause, each party will need to consider the various terms of the contracts. If a term is a significant obligation, it will need to be brought up during negotiations to ensure that it is incorporated. This will, in turn, allow the parties to effectively bargain for the risk imposed by the significant obligation.
In situations where a subcontractor delays a project, resulting in the main contractor paying liquidated damages for the delay, the general contractor will likely be able to recover the liquidated damages, if they actually paid them to the owner. The general contractor may also be able to recover any other damages they incur, not simply the liquidated damages.
If the general contractor did not actually incur the liquidated damages, as was the case in Niagara Structural Steel, the general contractor will not be able to recover the liquidated damages.
Subcontractors should be aware of liquidated damages clauses because they may ultimately be enforced against them. Likewise, general contractors should be aware that actions following the breach of contract might waive their rights to pursue damages from the subcontractor.
Battle of the Forms
Another area of confusion we, as construction lawyers, often see is where two parties attempt to impose their own conditions through separate forms into a construction contract. This is what we call battle of the forms.
While some construction projects use standard form construction contracts (e.g. CCDC) with some scope for negotiation on all key terms, many more use standard-form purchase orders, quotations and invoices that include certain terms and conditions. For example, a mechanical contractor submits a quote to a client for services that includes certain terms and conditions but may not include all key terms. The client responds by delivering a purchase order for the work that includes conflicting terms on the reverse side of the form — thus leading to a “battle of the forms” in determining which document’s terms make up the contract.
Battle of the forms cases involves contracting parties who purport to offer and accept (or counter offer and accept) through the use of standard form language. The disputes in these cases arise from each party seeking to impose its terms upon the other and avoid being bound by the other party’s terms. Such terms are often communicated through quotations, but can also involve situations where verbal agreements are reached with the specific terms to be altered by the standard forms. Generally, the court will not apply rigid rules in determining disputes of this nature but will look to general principles. The judicial task is to determine, through these principles, the reasonable expectations of the parties based on an objective test.
The key difficulties arise in determining when the contract was formed and on which terms. Butler Machine Tool Co. v. Ex-Cell-O Corp., [1979] 1 All E.R. 965 (E.W.C.A.)[Butler] is a leading UK case on this issue.
In Butler, supra, the sellers offered to sell a machine subject to certain terms and conditions, including a price variation clause. The sellers made this offer through a written quotation, which stated, “these terms and conditions shall prevail over any terms and conditions in the Buyer’s order”. The buyers placed an order for this particular machine at the same price, but added provisions relating to installation costs and date of delivery. The buyers’ order contained a tear-off acknowledgement, which the sellers signed and returned to the buyers. The sellers did not deliver the machine by the delivery date stipulated in the buyers’ order. Meanwhile, the sellers attempted to invoke the price variation clause as per its original offer presented to the buyers. The trial judge concluded that the price variation clause continued through all the subsequent dealings between the parties. The buyers appealed.
Lord Denning allowed the appeal. Lord Denning considered all the documents exchanged between the parties and determined that by the sellers accepting the offer (or counter-offer) as presented by the buyers, the contract had been concluded on the buyers’ terms, which did not include a price variation clause. Lord Denning articulated the various methods of analysis a court will utilize to determine which terms are part of the contract:
In some cases the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. Such was B. R. S. v. Crutchley (1968)’ Lloyd at pages 281 -2 by Lord Pearson; and the illustration given by Professor Guest in Anson on Contract (24th Edition) at pages 37 and 38. In other cases, however, the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back: and the buyer orders the goods purporting to accept the offer on an order form with his own different terms and conditions of the back – then if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired on both sides. The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable – so that they arc mutually contradictory – then the conflicting terms may have to be scrapped and replaced by a reasonable implication.
[Emphasis added]
In cases where the court construes together the terms and conditions of each party, issues may arise where there are conflicting terms. In such cases, the court may disregard the conflicting terms and replaced them with a reasonable implication, which is supported by each party’s conduct. In Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. (1979), 100 D.L.R. (3d) 374 (Ont. H.C.) [Tywood ], Grange J. referred to Professor Waddams’ text, The Law of Contracts (1977) suggesting the proper test is the expressed by Lord Pearce in Henry Kendall & Sons v. William Lillico & Sons Ltd. (1968), [1969] 2 A.C. 31 (U.K. H.L.) at page 113: “[t]he court’s task is to decide what each party to an alleged contract would reasonably conclude from the utterances, writings or conduct of the other.”
In Tywood, supra, the buyer sought a stay of the proceedings on the basis that the agreement of sale contained an arbitration clause. In this case, the seller responded to an invitation to tender, which did not mention arbitration. The buyer responded to the seller’s quotation by way of a purchase order in standard form requiring disputes to be settled by arbitration. In this case, Grange J. held that the conduct of both parties indicated that neither had considered any terms to be important other than specifications and price. He found that the arbitration clause was not clearly established and declined to grant a stay of the action pending arbitration. Here, the court did not apply the principle that the battle is won by the “man who fires the last shot” or “gets the blow in first”, as articulated by Lord Denning Butler, supra. Rather, the court employed the other method articulated by Lord Denning and took the terms and conditions of both parties, construed them together and found that the term respecting arbitration had not been agreed.
The fairly recent BC Court of Appeal decision, Cariboo-Chilcotin Helicopters Ltd. v. Ashlaur, 2006 BCCA 50, also dealt with the issue of contract formation. Although this case did not involve standard form contracts, the court still applied a battle of the forms analysis. In Ashlaur, the Court had to determine whether a party could ignore a term added to the contract by the other party in the course of negotiations.
In Ashlaur, supra, the seller provided the buyer with a one-page form to provide logs. By a hand written note, the buyer added to the seller’s form the particular type of logs and grade that it would purchase. The seller accepted the deal by signing the form that contained the handwritten notation and faxing it back to the buyer. Ultimately, some of the logs that the seller provided were of a different type and grade than specified in the notation. The seller invoiced the buyer for all the logs, and the buyer disputed the amounts charged for the non-conforming wood.
The trial judge held that the buyer must pay the seller for all the wood delivered. The court found that although the buyer proposed requirements that were so material as to affect price, these requirements were not specifically drawn to the seller’s attention, nor were they clear on their face. The trial judge held that something much clearer than the buyer’s handwritten note was required to properly bring the change of terms to the seller’s attention. The court also found that the parties’ conduct did not indicate acceptance of the buyer’s terms. Specifically, the seller had sent the buyer two invoices with charges for all of the wood, and the buyer paid these invoices without questioning the charges for the allegedly non-compliant wood. The court found that the buyer conducted itself as though there was no qualification respecting wood type or grade. Ultimately, the lower court held that the contract between the parties did not include the buyer’s attempted handwritten qualification, and ordered that the full amount of the invoice be paid.
The buyer successfully appealed this decision. The Court of Appeal held that the notation was clear on the basis that neither expert gave testimony that anyone in the industry would have difficulty understanding it. Donald J.A. suggested that the trial judge concluded that the notation was unclear because he himself encountered difficulty understanding it, which was not the relevant consideration.
The Court of Appeal also noted that the contract was only one page and, therefore, the restricting conditions appeared on the face of the document, and would have been noticeable when the seller signed and returned the document by fax.
Finally, the Court of Appeal also held that since there was no ambiguity as to what the words meant, it was inappropriate for the trial judge to look at the later conduct of the parties (i.e. the fact that the buyer paid the first two invoices) in determining whether the specific term was part of the contract.
As can be seen, there are no rigid rules to be applied in determining disputes involving a “battle of the forms”. In essence, the questions comes down to at what point did the parties come to an agreement on the essential terms of the contract such that the contract was formed. In order to successfully argue that a particular term was part of the agreement, the following arguments should be considered:
- The term was contained in the last document sent prior to acceptance by the other side;
- The term was contained in the initial document exchanged between the parties and was carried through all the subsequent negotiations between the parties;
- The term was unambiguous and clear;
- The term was not hidden in the document;
- The conduct of the parties evidenced the parties’ acceptance of the term;
- The term does not conflict with any other document exchanged between the parties.
Of course, a party seeking to exclude a term should consider whether the absence of each of the above points could be argued.
Conclusion
The take away from this presentation can be summarized as follows:
- Inherent to any construction project is an element of risk. A properly understood risk is a good thing as it allows a contractor to allocate sufficient profit to account for the risk.
- Warranties and guarantees can significantly impact the risk allocation in a construction contract, and can alter the commonly held views about the roles and responsibilities of the parties to a construction project.
- Warranties can be implied in various situations including circumstances where the plaintiff relied on the skills and expertise of the defendant.
- Incorporation by reference clauses can result in a party incurring additional risk, whether through construction expense or legal expense. As such, if a term is significant, it should be brought to all parties’ attention, in advance of execution of the contract.
- In analyzing whether a term is incorporated by reference, a court will look at the parties’ manifest intentions. The court will also consider whether the term was missed due to oversight. If it was missed and is significant, it likely won’t be incorporated by reference.
- Battle of the forms involves situations where each party attempts to impose their own conditions through an exchange of competing forms with conflicting terms.
- In a battle of the forms situation there is no standard method to determine which conditions apply. The parties are therefore leaving it to the courts to ultimately determine what were the essential terms of the contract.
Written by former associate, David Plunkett.
