Tuesday, September 3, 2013


Didn’t read
the small print

Aussie court rules that’s OK

A Mondaq article titled We've always done it this way: when does prior conduct result in a term being incorporated into a contract? (http://tinyurl.com/ldttsam) reports that the WA Court of Appeal ruled that reading the fine print isn’t necessary.

The case on which the appeals court ruled involved a long-standing relationship between a vendor and the vendor’s client.

Over the years, the two parties agreed that when the client needed the vendor’s services, the client would pick up the phone and order the service. The vendor would provide the service and then submit an invoice.

The back of the invoice listed the vendor’s terms and conditions and included an exclusion clause.

After one instance, the vendor invoked the exclusion clause. The client claimed it never read the back of the invoice – it was, according to the client, just a bill.

According to the Mondaq report, the appeals court decided that

    (a) there was no evidence that client actually had read the terms, and

    (b) it was reasonable for a person to regard the invoice as simply a request for payment rather than a document containing contractual terms governing the transaction that had already occurred.

Mondaq’s conclusion is that “This case highlights the danger of contracting to provide services without having explicitly agreed the terms and conditions of the contract, especially dangerous when negotiating an oral contract. The fact that a person has contracted with you before does not mean that a term will always be incorporated into a contract because of the prior dealings.”

Take aways

  1. In an on-going client-vendor relationship, make sure everyone has a copy of the relevant terms and conditions
  2. Make certain that both client and vendor have identical copies of the terms and conditions; differences might require a court to sort them out after the fact.
  3. Even though one party prevails, everyone will have legal expenses and lost productivity.
  4. Read both (all) pages of an invoice. If a separate agreement is in place (Item 1) covering terms and conditions, make certain it is superior to anything on an invoice and that the agreement is signed off by both vendor and client.

Although the Australian appeals court ruled in the client’s favor, there is no guarantee that courts elsewhere will come to the same conclusion given a similar set of circumstances.

A little due diligence by both parties could have avoided the expensive court dates.

Granted, reading contacts is generally out of scope for a business continuity planner, but suggesting best practices is in scope. For an ERM practitioner, working with Legal to develop policies and procedures should be Standard Operating Procedure (SOP).


If I wrote it, you may quote it.

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