Protecting your business interests with clear and concise contracts

Posted on 01 October 2013

Businesses need to issue clearly marked terms and conditions before entering into a contract for services. A recent decision by the Court of Appeal in Western Australia highlights the risks of not providing the terms of your contract to your client before the services have been delivered.

In the case of La Rosa v Nudrill Pty Ltd the Court deliberated over a situation where the parties had a ten (10) year business relationship and one party (Mr La Rosa) attempted to rely on terms and conditions being printed on the back of his invoice's in order to enact an exclusion clause.

The dispute arose when Mr La Rosa damaged a drill rig he was transporting because he was speeding and driving negligently. Mr La Rosa tried to rely on an exclusion clause (which stated "all goods are handled, lifted or carried at the owner's risk") printed on the back of his invoice to avoid any liability for the damage to the drill rig.

The key issue the Court considered was whether Nudrill and Mr La Rosa, by their past conduct, had incorporated the exclusion clause into the contract for services. When determining whether a term is to be incorporated into a contract due to prior dealings in a commercial relationship the Court insisted the test should at the very least rely on the number of prior dealings, how recent those prior dealings were and the consistency between the prior conduct and the dealing in question.

The Court of Appeal unanimously held that the receipt of Mr La Rosa's invoices by Nudrill was not sufficient enough to justify an inference that Nudrill had accepted, or was willing to be bound by, the terms and conditions printed on the back of the invoices.

The two (2) main points the Court relied on in justifying their position were that there was no evidence that Nudrill had actually read the terms on the back of Mr La Rosa's invoices and that 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.

Without having explicitly agreed to terms and conditions businesses run the risk of leaving themselves unsure and uncertain as to the potential dangers and liability they may raise its head in the future. Just because your business has always contracted with another business many times does not mean that a term will always be incorporated into a contract because of the prior dealings. Businesses need to protect their own interests by learning from the La Rosa v Nudrill case and ensuring their contracts explicitly cover their own interests.

If your business needs help reviewing, renewing or drafting clear and concise terms and conditions please call us.