The Importance Terms and Conditions in your Contract Negotiations

Are you reading the terms and conditions on Commercial Contracts with your suppliers?

Many people tend to skim through terms and conditions, however in the digital age of contracts and agreements, it is vital to obtain legal advice before entering any contractual agreement, particularly with suppliers. In the realm of commercial transactions, a recent case between a packaging manufacturer and a renowned retailer, Michael Hill, sheds light on the potential pitfalls that can arise when parties fail to fully understand the terms and conditions of a contract.

What can happen for your business if you don’t read the T&C’s?

Gispac Pty Ltd v Michael Hill (Australia) Pty Ltd [2024] NSWSC 18 Summary

The plaintiff, a packaging manufacturer, provided a quote to Michael Hill for the supply of approximately 2 million branded shopping bags at a cost of just under a million dollars. The initial quote contained specific details regarding the number of bags and the corresponding price, with no mention of any ongoing obligations. However, to proceed with the order, Michael Hill’s representative was required to confirm agreement to terms and conditions through an online form.

Terms & Conditions of the Quote

It is important to note the reference to a link that supposedly contained the terms and conditions. Despite uncertainties regarding the functionality of the link at the relevant time, the terms, if accessible, outlined a substantial commitment from Michael Hill. These terms outlined an ongoing obligation to exclusively purchase bags from the plaintiff, meet minimum quantity requirements annually for at least two years, make quarterly payments for any shortfalls, and an automatic renewal clause for an additional two years unless terminated with a six-month notice.

Michael Hill, unaware of these additional terms, failed to meet the minimum purchase requirements, and neglected to issue a notice to prevent the automatic renewal. Three years after the purported agreement began, the plaintiff invoiced Michael Hill for significant retrospective shortfall payments, leading to a legal dispute.

Court ruled against Michael Hill

Despite the link to the terms possibly being and Michael Hill’s lack of knowledge about the extensive commitments, the court ruled in favor of the plaintiff. The court held that the terms could have been requested by Michael Hill and, therefore, were effectively incorporated into the contract. Additionally, the court dismissed arguments related to the Australian Consumer Law (ACL), emphasising that in commercial dealings of this nature, there is no obligation or expectation for parties to ensure their counterparties fully comprehend the implications of the contract.

Key Takeaway

The case serves as a stark reminder that in the complex world of commercial transactions, ignorance of contractual terms is not a viable defense. You must exercise due diligence prior to committing to any contractual relationship.  Obtaining legal advice and meticulously reviewing contracts are imperative steps to safeguard against unintended consequences and potential legal disputes.