Whether you call them general terms and conditions (GTCs) or just standard terms, lawyers and those using contracts should always be acutely aware that these types of conditions will usually be treated by the law as being different to other contract provisions.
Indeed, under German law standard terms (“Allgemeine Geschäftsbedingungen – AGBs“) have earned themselves a unique position when compared to the legal systems of most other countries. First of all, German law deals very strictly with any standard terms which are regarded to be unfair in the circumstances or unconscionable (see §305 et seq. Civil Code (BGB)). The result is that terms can frequently be declared to be unenforceable by the courts. And secondly, and for practical purposes, more importantly, German courts have adopted a very wide interpretation of what exactly constitutes standard terms. This construction follows from the wording of the Code:
§ 305 (1) Standard business terms are all contract terms pre-formulated for more than two contracts which one party to the contract (the user) presents to the other party upon the entering into of the contract. It is irrelevant whether the provisions take the form of a physically separate part of a contract or are made part of the contractual document itself, what their volume is, what typeface or font is used for them and what form the contract takes. Contract terms do not become standard business terms to the extent that they have been negotiated in detail between the parties.
In a recent decision (African Export-Import Bank and others v Shebah Exploration & Production and others [2016] EWHC 311 (Comm)), the English High Court has dealt with similar issues of determining exactly what are standard terms for the purposes of using the “reasonableness test” imposed by the Unfair Contract Terms Act 1977 (UCTA). This test is analogous to the standards required under the German Civil Code.
What is very interesting, however, is the High Court approach to defining exactly which provisions of an agreement would be standard terms. The court considered a case in which a syndicate of lenders used industry standard terms (a Loan Market Association (LMA) standard form agreement) as a starting point for a loan agreement. One of parties, the borrower, subsequently claimed in court such terms were the lenders’ written standard terms of business, so that agreement was controlled by the Unfair Contract Terms Act 1977.
However, the court found no evidence that the other party (the lenders) “habitually” used standard industry terms and conditions and, even if they may have done so, there was no evidence that the lenders had refused to negotiate those terms. The judge also stated that if commercial parties, represented by solicitors, have used a “neutral” industry model form as the basis for a complex and detailed financial contract, executed after negotiation, clear evidence is going to be required by a court if a party wishes to raise even an arguable case that the resulting contract is made on the written standard terms of one of those parties.
I am not sure a German court would agree.
Dear Stuart,
always nice to get informed this way.
I recently came across the phrase “a battle over turf” (however, it was in a book about the history of patent law, though not within a contract or any legal document).
I could not find the phrase in any dictionary and therefore started to have my own interpretation. While I thought, from the fact that turf is no solid ground, a battle over such would be a contradiction where both sides miss good arguments (in German we might say “rumeiern” ), a cosmopolitan friend told me that the phrase comes from ancient times, when great land owners had battles on who was competent to make fundamental decisions.
So, if you ever search for a new topic in your blog you might write something about this type of battle?
Best regards,
Stefanie
Stefanie,
Thank you for the email.
According to my Shorter Oxford English Dictionary “turf” of course means a “layer of grass etc. with earth and matted roots, forming the surface grassland; grass etc. with earth and matted roots cut from the ground”.
However, the term is also later defined as “an area regarded as being under the control of a particular person or group, one’s personal territory; (a) the streets controlled by a (juvenile) street gang; (b) the part of a city etc. within which a particular criminal or detective operates (c) a person’s sphere of influence or activity.”
I think it is the latter definitions which are meant by “a battle over turf” i.e. a conflict over territory or spheres of influence.
I did not realise patent law was so competitive!
Stuart
Stuart,
thank you so much.
St