Revisiting an old war
On February 24th 2021, a proposal of law was submitted to the Belgian House of Representatives to enact a new Civil Code. High time indeed, given that the Code has remained largely unaltered since the era of Napoleon, about two centuries ago. Among other things, the new Civil Code settles a business argument almost as old as its predecessor: in case of conflicting terms, which party wins the so-called “battle of the forms”?
As a reminder, the battle of the forms refers to the so-called ‘war’ between general terms and conditions (GTC) of the buyer versus those of the seller: succinctly put, when a seller places a purchase order with general conditions on the back and a buyer subsequently confirms the purchase attaching his own general conditions on the back, which GTC apply?
Case law and legal doctrine have always been divided on this matter. In a nutshell, to date, a judge could settle this battle of the forms essentially in 4 different ways:
- the first shot rule: the first communicated GTC apply and the others do not
- the last shot rule: the last communicated GTC apply and the others do not
- the knock-out rule: both GTC apply, except for conflicting clauses
- the no rule: there is no agreement and subsequently no contract has been concluded.
Article 7.23 of the New Civil Code settles the debate by opting for the knock-out rule. The GTC of the buyer as well as those of the seller apply, with the exception of the incompatible ones. Or, as stipulated in the explanatory memorandum: "The rule is based on the presumed common intention of the parties and takes as its starting point that the general terms and conditions are, in principle, not an essential or substantial part of the contract, but only an accessory part. The contract can therefore be concluded without an agreement of will on (all) the general conditions. (...) Only the incompatible generalT&Cs remain without effect."
So what happens under the knock-out rule when incompatible clauses cancel each other out? In that case, the rule is that the articles of civil law will apply as if Parties had opted not to contractually deviate from them. Needless to say, in complex commercial litigations this principle may be easier stated than applied and a lot of common sense will be required from judges and arbitrators alike to discern an equitable solution that is in line with the intention of the parties at the moment of contract conclusion. Likely, any available, relevant precontractual documentation pointing to the consent of wills between the parties will play an important role in this discernment.
In any event, a token rejection of the other party’s GTC (for instance in a boilerplate clause of one’s own GTC) is unlikely to suffice to ensure the other party’s GTC are cancelled.
This does not mean however that such boilerplate clauses should be removed per se. They may still present value, if they are combined with other convincing data elements that can prove that both parties entered into the agreement with the understanding that only one party’s GTC would prevail. In order to ensure this, explicit and specific communication of this principle (for instance on the front of the order form) is advisable. Such notice may not “win” the battle of the forms by default, but it at least shifts the burden of proof to the other party on the acceptance of their terms. Likewise, a good practice for vendors to increase the weight of their GTC is to ensure that they are made readily and ostensibly available via frequent communication to their customer base and, in the case of e-commerce, require explicit, prior opt-in before concluding an online purchase transaction.
The entry into force of Article 7.23 of the New Civil Code is not yet clear at the time of publication of this memorandum. But in view of the above, companies would do well to take into account the practical implications of the knock-out rule for their sale and purchase process.
This contribution reflects the personal opinion of its author. It does not constitute legal advice and should not be interpreted as such.