TT Talk - Standard Trading Conditions (STCs) in transport
Adoption of Standard Trading Conditions (STCs) can be an effective short-cut for parties involved in the movement of goods, both nationally and internationally, as part of the fabric that gives certainty in dealings. However, for STCs to reach ‘first base’, allowing a party to rely on them, they must be incorporated in a way that courts generally recognise.
The most convenient way to achieve express agreement is usually for an operator to contract on a set of Standard Trading Conditions (STCs), which can be used for all, or most, business as it presents itself. These should include defences and limitations at a level which will generally be acceptable to customers, avoiding the need for negotiation every time a new contract is made.
STCs should also be professionally drafted by a lawyer with appropriate expertise so that they reflect the intentions of the parties. Conflict with compulsory law should be avoided by a ‘Clause Paramount’ or similar mechanism. If this is not done, a court might disregard the entire STCs - not just the provision that is in conflict with the law. A number of national trade associations provide suitably drafted STCs for use of members – in a similar way to the model conditions available from TT Club for its Members.
Incorporating the STCs
Having adopted STCs, the next step is to devise a system that will satisfy a court that both parties are aware of them and have agreed to them. A starting point is that this awareness and agreement must exist before the contract is performed. A court will regard agreement to STCs at a later stage, for example on a receipt when goods are delivered, as too late to affect the contractual relationship between supplier and customer.
“Having adopted STCs, the next step is to devise a system that will satisfy a court that both parties are aware of them and have agreed to them”
The clearest way to establish that a contract is enforceable between the parties is by signature. This has the advantage of legal certainty - if you sign a contract the court will assume that you have read, understood and agreed its contents.
However, in the context of individual ‘deals’ between operators and their customers, it is unlikely that a customer will actually sign the STCs in isolation. The next best solution is to ensure that the customer indicates that it agrees the STCs. This may lack the legal certainty of the customer actually signing the document, and it is necessary to show that the customer has read the STCs or, at the very least, has had a reasonable opportunity to access and read them. Further, ‘surprising’ and particularly onerous provisions must be placed prominently and not hidden in small print.
In the real world, deals, particularly in the freight forwarding business, tend to be made by email or telephone. Where actual signature is impossible, it is crucial that the process includes unequivocal notice and acceptance of the applicable conditions, using text such as the following:
All business is undertaken subject to the Company's Standard Trading Conditions, which may limit or exclude the Company's liability and contain warranties and/or indemnities benefitting the Company, copies of which are [printed…].
Incorporation becomes progressively problematic as the intrusiveness of STCs in negotiations and agreement diminishes. Where deals are made on line, it is technically straightforward to require the customer to tick a box agreeing to the STCs when concluding the deal. In this case it is advisable to have an electronic link to the STCs and to state that the printed version is available on demand from the operator's office (just make sure this is so).
Reinforcing the Message
It is also useful if messages similar to the example above, together with the actual STCs if possible, can be included in all written (including electronic) communication between the operator and its customers, including invoices, tariffs, credit documentation and marketing material. Annual reinforcement of STCs, perhaps with a trading statement, will not go amiss.
“Annual reinforcement of STCs, perhaps with a trading statement, will not go amiss”
However, although useful, it is not sufficient to shower the customer with documents endorsed with STCs. For there to be legal, as opposed to persuasive, effect, one document must be signed by the customer which specifically draws attention to the STCs and which has the ‘look and feel’ of a contract. In other words it must be a document in which one would expect to find contractual terms. STCs in a marketing ‘flyer’ may reinforce the message, but it would not be safe to rely on this alone.
Course of Dealing
A less certain, but potentially effective, method of incorporating STCs is by course of dealing. If conditions have been properly and consistently incorporated in previous contracts, and the customer has accepted them, or at least not objected to them, the STCs may be enforceable even if they have not been specifically incorporated on an additional occasion. In the case of a regular, frequent customer this approach may be convenient and safe. It will usually be prudent to send an annual reminder of the STCs to customers in this category.
Incorporation through course of dealing is a matter of degree and the court will look at, among other things, the number of previous dealings and how onerous the STCs are.
The use of STCs is fundamental to effective international and electronic trade in the supply chain. Their value can be quickly undermined if an operator is casual about incorporation – and that may be costly, not just in litigation but also in possible insurance exclusion.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club