Recently, our firm was involved in litigation where one party asserted that an invoice containing favorable terms and conditions could be used against another party, even if the other party had not expressly agreed to the terms and conditions contained in the invoice. The terms and conditions at issue claimed to allow one party to collect attorney fees, interest and costs for past amounts due and owing. This issue is relevant to many clients at our firm, especially those businesses that may invoice customers or those clients that may be the recipient of invoices from material suppliers or certain subcontractors. The important point to take from this blog is that a bilateral agreement must be formed between the parties.
In Illinois, the elements necessary for a valid contract are: • An offer. • An acceptance. • Consideration. •Ascertainable Material terms. •Intent to be bound and mutual assent. In short, this means that the parties must have had a “meeting of the minds” to enter into a contract on specified terms. One party cannot insert terms into an invoice, delivery ticket or other form that the other party has not expressly agreed to. When the other party accepts the terms, the acceptance must be absolute, unconditional, and identical to the terms of the offer. Even though parties may regularly conduct business with each other, this does not mean that one party can insert terms like the payment of attorney fees or interest, without the other party having expressly agreed. Importantly, a party must demonstrate an intent to be bound to the terms of the agreement. In Illinois, courts measure the parties’ intent to be bound based on the parties’ words and acts. Evans, Inc. v. Tiffany & Co., 416 F. Supp. 224, 239 (N.D. Ill. 1976).
What all of this means is that if you are the party that is preparing an invoice or believe you have an agreement with another party, you should confirm that the other party has understood and agrees to the terms that have been inserted into the invoice. One recommendation is for both parties to sign the invoice or delivery ticket in close proximity to when the service or items were provided. Another recommendation is for the parties to enter into a master agreement or credit agreement that governs the terms and conditions for the entirety of the parties’ relationship.
