c. Battle of the Forms

The so called battle of the forms is a collision of diverging standard terms the parties each try to include into the contract. Following Art. 19 to the letter results in the so called last shot rule under which each new reference to one’s own standard terms constitutes a rejection of the previous offer combined with a new offer. Consequently, the standard terms of that party make it into the contract that last refers to them. The other party then accepts this last offer by conduct when it performs the contract. This theory has been widely criticized for not giving regard to commercial realities according to which merchants simply do not read the other party’s standard terms. Thus, performing a contract cannot be interpreted as assent to something the party is not even aware of.

Therefore, the so called knock out rule has been developed. Under this theory, conflicting provisions of the standard terms knock each other out and the contract is concluded with the matching content of the standard terms. Issues that were meant to be governed by the conflicting clauses are then governed by the provisions of the Convention or the otherwise applicable law under Art. 7(2). This approach acknowledges that for parties that perform a contract despite conflicting standard terms concluding this contract with the negotiated principal obligations is more important to them then inclusion of their respective individual conflicting standard term provisions. Technically, by performing the contract the parties express their intention to conclude the contract despite the diverging standard terms. In general, this performance will be subsequent conduct used to interpret the originally exchanged offer and acceptance by virtue of Art. 8(3) so that already at that point in time the parties exercise their autonomy granted by Art. 6 and impliedly derogate from Art. 19.

Notably however, under the principle of freedom of form as provided for in Art. 11, it might be the case that even before the parties refer to their respective standard terms a contract has already been concluded orally. In such situation, references to the standard terms are merely offers to modify the contract under Art. 29. The result then is the same as if applying the knock out rule – yet, no derogation is necessary: Only with regard to the matching provisions there is a meeting of minds required to amend the contract. With regard to the conflicting provisions the contract is not amended.

Last modified: Friday, 23 October 2015, 12:43 PM