General terms and conditions and the battle of the forms

General terms and conditions are a commonly used instrument for businesses to regulate future contractual relationships. These provisions are normally not negotiated, or only to a limited extent. In many cases, however, both parties use general terms and conditions and try to impose them on each other. This logically raises various practical questions: Which set of terms applies in that case? What happens when they contradict each other? 

Battle of the forms?

There is a battle of the forms, also known as a conflict between forms, when businesses each submit their own incompatible general terms and conditions, with the intention of having the agreement in question governed exclusively by their own terms. In practice, an exclusion clause is often used to effectively set aside the other party’s general terms and conditions.

A matter of legal uncertainty

For a long time, case law and legal doctrine debated this issue. Different schools of thought expressed views on how such conflicts should be resolved, each leading to a different outcome. 

The three main theories can be explained as follows: 

• The “First shot rule”: this theory implies that only the general terms and conditions of the party that first communicated them to the other party will have valid effect. 
• The “Last shot rule”: in this case, the set of general terms and conditions exchanged last prevails. 
• The “Knock-out rule”: this rule advocates the application of both sets of general terms and conditions, except for the incompatible provisions. To the extent that the terms are conflicting, the general law of obligations must be applied. 

Since there are supporters of each of the above theories, this issue has for quite some time been accompanied by significant legal uncertainty.  

The legislature settles the matter

In light of the reform of contract law, the legislature has recently settled the matter once and for all and put an end to this long-standing debate. Art. 5. 23, paragraph 3 of the new Civil Code expressly gives precedence to the application of the “knock-out rule”. 

Consequently, agreements concluded as from 1 January 2023 will be governed by the general terms and conditions of both contracting parties, insofar as these are compatible with one another. Conflicting clauses will, however, have no effect and will be replaced by the relevant provisions of general law. 

This rule is based on the presumed common intention of the parties, whereby the general terms and conditions are regarded merely as an ancillary component of the agreement. This approach allows the agreement to come into existence, even where there is no meeting of minds regarding the (entirety of the) general terms and conditions. 

The agreement will, however, not come into existence if one of the parties expressly indicates beforehand — and therefore not by means of its own general terms and conditions — that it does not wish to be bound by such an agreement. In that case, the “knock-out” theory no longer applies. 

Warning: in this context, an agreement that has already begun to be performed may be annulled due to lack of consent. This may have drastic consequences if performances have already been rendered. In that case, these may be subject to restitution. 

Moreover, mutually negotiated terms on which the parties have reached agreement will always prevail where they conflict with the general terms and conditions.

Finally, we would like to note that exclusion clauses, given the legislator’s explicit choice, are no longer meaningful. This deviation can now only be relied upon if one wishes to avoid the application of the other party’s general terms and conditions altogether. 

Conclusion

The legislator has definitively settled the battle of the forms in favor of the “knock-out” theory. From now on, both your general terms and conditions and those of your contractual counterparty will apply when concluding an agreement. 

In light of these upcoming changes, this is therefore the ideal time to review your general terms and conditions once again and, if necessary, obtain additional advice.

Heeft u vragen rondom de problematiek van de battle of the forms? Of heeft u andere vragen over uw algemene voorwaarden?  De cel ondernemingsrecht van Reyns Advocaten heeft een ruime expertise in deze materie en kan u hierin bijstaan. Aarzel niet om contact met ons op te nemen.