• the service of the claim form was valid;
• its standard terms and conditions had been incorporated by the purchase order; and
• section 52 of the Sale of Goods Act 1979 applied, allowing SSL to apply for injunctive relief.

The High Court ruled that service on the director in England was valid, as the director was senior enough in TTK’s company to be served with proceedings. However, SSL’s terms and conditions had not been incorporated into the joint venture agreement by the purchase order as TTK had never seen the terms and conditions, and therefore could not be bound by them. As a result, section 52 of the Sale of Goods Act 1979 could not apply as the applicable law was Indian law, and the High Court could not grant interim relief. TTK’s business and property were all based in India, and it had no English presence, such that any order of the English court would have to be enforced only in India. The High Court saw no reason why its jurisdiction could extend to this case. It stated that the action should have been brought in India.

Particularly when dealing with foreign-based companies, businesses should make every effort to ensure that the governing law and jurisdiction of any agreement is English law, if that is your preferred route. It must be remembered that terms and conditions can only apply if they are properly incorporated, which means that all parties must have actually seen them and had a chance to read them. In this case, the claimant seemed to forget these two points and spent time and money trying to obtain a judgment when an English court had no jurisdiction over the case at all. It proved a costly mistake. It is one thing to pay for a law firm to draw up decent terms and conditions, but that is only half the battle. The other thing to make sure that the terms and conditions actually apply.

On appeal, the Court of Appeal has overturned the strike-out. It said that there was a real prospect of CSE establishing at trial that the terms and conditions were incorporated into the contract. The ultimate question was whether a reasonable person in the parties’ position would have understood the words as referring to CSE’s contractual terms as being the basis for doing the work.  The Court of Appeal thought that CSE’s interpretation was a more likely interpretation of the words used. One judge added that the phrase ‘terms and conditions available upon request’ must have been intended to have had some meaning.

This was only a ruling over an interim issue. This case shows that the argument that the terms applies had a prospect of success. As to whether or not the terms and conditions were actually deemed to have been incorporated must be decided upon at the full trial. It will be interesting to see what is decided there, because the outcome of this case may impact on how clearly people need to refer to or attach their terms and conditions when they want them to apply to their contracts. It will also be interesting to see what the court says over the fact that the terms were referred to below, rather than above, the signature box. The cost and management time spent on fighting this issue could, of course, have been avoided if the supplier had had clearer processes.

If you want to obtain advice about ensuring your terms and conditions are incorporated into your contracts, please contact us.

The Commission’s Green Paper proposes seven alternatives:

• Simply publish findings and recommendations as a possible way forward in the future without any particular change now.
• Have a toolbox for legislators, such that it would act as a referencing tool for any new legislation introduced by Member States. This would not really create harmonisation or certainty, however.
• The Commission to issue a Recommendation to encourage Member States to incorporate the laws into their own laws. This could allow a gradual implementation over time, although there would be no common consistent approach and implementation would be patchy and incoherent.
• Establishing a 28^th contract law regime. In effect, this would be a new optional contract law that could be used as an alternative to those within each Member State. The system could therefore run in parallel to existing contract law regimes.
• Minimum harmonisation of European contract law. Not everything would be harmonised, but some bits would be. Member States could still retain stronger rules, but this solution would require minimum standards as a base.
• Full harmonisation, in which the new EU law would replace the contract laws of all Member States.
• A full civil code. This would involve full harmonisation of all civil laws – not just contract law, but tort and property law too.

The consultation also considers a number of relevant issues including the scope of contract law issues affected (such as rights, remedies, incorporation, formation of contracts, validity), whether it should just apply to cross-border contracts or purely domestic contracts as well, and whether business-to-business contracts as well as business-to-consumer contracts should be affected.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘Previous attempts to create a standard EU contract law have been resisted. However, the Commission would like to push this through again. They talk about a time of crisis for the European economy, and this new approach would present a historic opportunity to drive economic growth by easing the cost of cross-border transactions. They believe now is the time to make that quantum leap. It will be interesting to see whether or not each country wants to radically change the way they do business, though.’

The consultation closes on 31 January 2011. A link to the Green Paper can be found here: http://ec.europa.eu/justice_home/news/consulting_public/news_consulting_0052_en.htm.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This is still a grey area of law. There has been no clear English case to rule on this, and although this American case is not binding on English courts it is interesting for its persuasive value to see how the law in this area develops in other countries. That said, English traditional contract law principles should be applied to online contracts, just as with any offline contract, and there are centuries of precedent for that.

‘There is a spectrum of risk with cases involving incorporation of web site terms. The least strong position legally for a web site owner would be not to refer to the terms and conditions at all, next best would be doing as ServiceMagic did here, next would be having a tick box (to which the user must positively opt-in) with a clear statement showing acceptance of the terms and conditions, and then finally the best method on the legal spectrum of risk would be to require the user to have to scroll through the terms in a separate pop-up box and then accept at the bottom of that box. That final method – although best legally – is clearly commercially undesirable and most sites no longer require users to open up a separate box and scroll to the end. The compromise used now is generally the positive opt-in tick-box method. That’s not guaranteed to work legally, although it has become generally accepted good practice.’