The Battle of the FormsThere is a purpose

Cris de la Torre, Ph. D., J. D.* Assistant Professor of Finance Kenneth W. Monfort Colle ge of Business University of Northern Colorado P.O. Box 128 Greeley, Colorado 80539 970-351-1240 cris.delatorre@unco.edu

Garth Allen, J. D. Associate Professor of Finance Kenneth W. Monfort College of Business University of Northern Colorado P.O. Box 128 Greeley, Colorado 80539 970-351-1234 garth.allen@unco.edu

*Contact author

Battle of the FormsThere is a purpose

Abstract Invariably there comes a day in law school when the contracts professor attempts to introduce the Battle of the Forms. Unfortunately, the instruction of this section often produces more confusion than enlightenment. However, when teaching undergraduates to appreciate the

complexity and thoroughness of the Uniform Commercial Code (UCC), the Battle of the Forms can be used as a valuable tool to explore various purposes and principles of UCC and relate the purposes and principles to modern commercial transactions. This paper presents exercises, questions and illustrative flowcharts used successfully over several years in undergraduate business law classes. These tools produce an integrated method for presenting UCC 2-207. While no sane individual has ever professed a love for UCC study, students and faculty have expressed tolerance and a palpable appreciation for these methods. I. INTRODUCTION
eaching the Uniform Commercial Code (UCC) to undergraduate business students can be a monumental task. The introduction of section after section does little to foster appreciation for the subtle underpinnings and legal logic of the UCC. When one begins to teach the UCC, business

school faculty, like law school faculty, instinctively relys on the basic methodology of presenting sections in ad nauseam sequential order. Sprinkled with a few illustrative cases the legal education establishment attempts to perpetuate the illusion that the UCC subject matter is somewhat interesting. However, the undergraduate mind, along with the limited curriculum does not lend itself to the law school approach. We have, alternatively, found success is in using an in-depth treatment of a few sections of the UCC as opposed to the superficial coverage of too many dis jointed sections. 1

This would include, 2-509, Risk of Loss in Absence of Breach, 2-601, Buyers rights on improper delivery, 2602 Manner and effect of rightful rejection, 2-608, Revocation of acceptance in whole or in part.

This paper introduces an alternative schemea more holistic method, for teaching the UCC. By using the Battle of the Forms as the main focus of study, and by introducing any additional sections an instructor may feel is necessary, students begin to understand that the UCC is a unified system of law, instead of a series of disjointed sections lacking common logic or purpose. The organization of the paper includes a discussion of UCC 2-207, several examples, and four flowcharts designed specifically for dealing with different and additional sections of the UCC.2 Finally, the appendices include a case-based quiz and sample homework problems.

II.

THE PEDAGOGY OF S ECTION 2-207

ection 2-207 captures many of the major themes that run through the UCC. Specifically the UCC applies the underlying principle of flexibility by establishing a contract where technical concepts and common law do not. Second, 2-207 provides gap filling sections thus creating more

efficient, but fair, contracts. Third, 2-207 demonstrates that previous common law traditions such as the last shot principle, or the mirror image rule are no longer acceptable. Fourth, 2-207

demonstrates a common separation of obligations and rules regarding merchants and non-merchants. Fifth, it illustrates freedom to contract, meaning the parties are free to negotiate the terms of their agreement, subject to minimal intervention by the UCC.3 The following is a brief discussion about these points and how they relate to 2-207. By emphasizing the aforementioned points, undergraduates grasp the unifying theme of the UCC. Although extensive writing regarding the deficienc ies of 2-207 exists 4 ,

. See generally, John E. Murray, Jr., The Definitive Battle of the Forms: Chaos Revisited, 20 J.L. & COM 1 (2000) for a discussion on the treatment of different and additional terms. See also Alex Devience, Jr., The Renewed Search for the "Bargain In Fact" Under U.C.C. Section 2-207: Battle of the Forms, Part II? comments on the recommendation to revise section 2-207, 9 DEPAUL BUS. L.J. 349 (2000), for a discussion of different and additional terms in the context of the proposed new section.
3

It may be advantageous to include 2-719, Contract Modification or Limitation of Remedy, as part of the discussion. Quite often business law textbooks appendage this section as almost an afterthought. See Mark E. Roszkowski, Business Law: Principles, Cases and Policy, 5th ed., 2002, Chapter 18, for an example.
4

A proposed amendment to 2-207 that would radically change this section. However, the majority of jurisdictions have not accepted this amendment. See James J. White, Symposium: Contracting under Amended 2-207, 2004 W IS. L. REV. 723 (2004), for a full explanation of the proposed amendment.

and the Battle of the Forms may appear to be a detraction from the meaningful mastery of UCC concepts, in fact, the instructor may use this approach to discuss the well known problem associated with 2-207 5 and extend learning far beyond mundane UCC analysis. A. Variant Acceptances

At common law, if the offerees expression of assent changed any of the terms of the offer, the offerees expression was not an acceptance, but was instead a rejection and a counteroffer. However, the UCC changed the nature of the common law mirror image rule. Instead of strict adherence to a formula oriented pattern, the UCC allows for contract formation even though the acceptance contains additional or different terms.

B.

Freedom to Contract

The UCC freedom to contract approach is a variation of a common law theme emphasizing the need for the participants to agree on the terms they desire, with a little help from the UCC. In the official comments to 1-102, the UCC states, This principle of freedom of contract is subject to specific exceptions found elsewhere in the Act. The clear message is that the parties are free to negotiate, as they see fit, the terms of their agreement, conditioned on the relatively flexible exceptions found in the Act.

C.

Gap Filling Sections

Subject to the overall requirement of good faith, t e UCC parts company with the common law by h providing gap filler sections for terms and provisions not been specifically agreed upon by the parties. For example, 2-202 allows for trade usage, course of dealing and course of performance to aid in providing a consistent interpretation of the contract. Price,6 time 7 , output 8 , and delivery9 can all be agreed

See Corneil A. Stephens, On Ending the Battle of the Forms: Problems with Solutions. 80 KY. L.J. 815 (1992), for a concise discussion on the problems associated with this infamous section.
6

See UCC 2-305.

upon by design or default consistent with the UCC after the initial offer and acceptance. The gap filling subsection in 2-207 is somewhat unique and a bit complex because the supplementary terms must not contradict the terms agreed to by the parties. D. Departure from the Common Law

Under the common law, the person who replied last and added new provisions had the advantage and the terms became part of the agreement if the other party engaged in activity implying acceptance of the terms. The law used to say that because the last offer was from the seller, the sellers terms would apply. This was known as the last shot principle because the terms of the last form sent and received prior to the delivery of the goods prevailed. The UCC found this analysis undesirable , commercially unfair, and inefficient. Why give the last party the right to govern the terms of the agreement and impede

transactions in the process? The writers of the UCC introduced 2-207 to rectify problems, improve contract efficiency, and promote smooth and orderly transactions. E. Distinct Treatment for Merchants and Non-Merchants

Section 2-207 introduces the distinct and disparate treatment of the merchants and non-merchants typical in the UCC.10 As defined in 2-104 a merchant is a person who deals in goods of kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction.11 The codes has other instances where the distinction is important. For example, in

See UCC 2-309. See UCC 2-306. See UCC 2-308.

8 9

10

For example 2-201, makes a distinction between merchants and non-merchants. See Colorado-Kansas Grain Company v. Albert Reifschneider, 817 P.2d 637 (1991 Colo.App) for an application of the merchant/non-merchant distinction being applied in a farming context.
11

UCC 2-104

5
the warranty section of the code, the warranty of merchantability 12 only applies to merchants, while the warranty of fitness for a particular purpose13 applies to any seller. The UCC provides more stringent requirements for merchants than it does for non-merchants while at the same time providing flexibility for intra-merchant transactions, and UCC 2-207 provides a platform for discussion of this important topic.

III.

A S IMPLIFIED INTERPRETATION OF S ECTION 207

ssume that merchant Buyer peruses a merchant Sellers catalog and sends a purchase order to the Seller. The Buyer designates the quantity of product; delivery terms and specifies a warranty of fitness for a particular purpose allegedly binding upon the seller. The warranty is in the small

print on the back side of a standard purchase order. The seller responds with an acknowledgement form containing language that disclaims any express or implied warranties. A clear conflict of terms exists. At this point we introduce 2-207 with appropriate annotations.

2-207. Additional terms in acceptance or confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time, operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, (Variant acceptances) unless acceptanc e is expressly made conditional on assent to the additional or different terms. (Freedom to contract). Note, Section (1) deals with different and additional terms. Section (2) only deals with additional terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (Distinction between merchants and nonmerchants) (a) The offer expressly limits acceptance to the terms of the offer; (Freedom to contract) (b) They materially alter it; or (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. The qualifiers used in judging whether additional terms are included as part of the agreement are consistent with the overall UCC philosophy. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case, the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this title. (Gap fillers). It is important to understand that this section allows for parties to assert a

12 13

See 3-314. See 3-315.

contract by conduct and for the terms of the agreement to be supplied by the UCC, consistent with the agreed upon terms. A simplified explanation of the individual subsections of UCC 2-207 follows: A. 2-207(1) The Parties have an agreement even though the acceptance contains terms different from the original offer unless the offeree (i.e. the party responding to the purchase order) requires that the offeror expressly assent to the additional or different terms. Assume, for example, that the (seller/offeree) receives a purchase order (P.O.), the offer, from the buyer. Seller agrees in principle , accepts the offer, by responding with a standard form (i.e. an acknowledgement) including different terms from those in the P.O. and language stating that the buyer must expressly agree to additional terms. If the buyer expressly agrees with the sellers terms, we have an agreement based on sellers terms. If the buyer does not so agree, then the parties do not have an agreement. However, what happens if the parties, without agreeing to the sellers terms, continue to perform the duties under the contract that really does not exist? Then we proceed under section (3). The UCC anticipates that the buyer may ignore the addit ional terms but continue with the agreement by accepting delivery of the goods. Most of the time, this scenario is not going to be a problem. However, if there is a disagreement, then section (3) provides solutions.

The following examples that demonstrate the nature of sub-section 1.

Example 1: Merchant Wholesaler writes to Manufacturer and offers $10 per unit for 50,000 radios. Payment is due 30 days after delivery. Manufacturer writes back, Accepted per offer. Interest at normal trade rates for unpaid balances from date of delivery. Do we have a contract? It would appear that that we do. Manufacturer has added a new term, but there is still a valid contract. Under the common-law

approach, there was no contract because the acceptance was not a mirror image of the offer. The UCC does away with the mirror image requirement.

Example 2: Assume the same offer as in example 1, but Manufacturer writes back, Interest at normal trade rates for unpaid balances from date of delivery. Our acceptance is conditional upon your agreement to this interest rate. Manufacturer has made a counteroffer. There is no contract yet. If Wholesaler accepts then a contract exists. If not, then no contract exists. So what happens if the Wholesaler continues to perform the contract but never explicitly agrees to the new terms? It depends. If the agreement is between merchants, the additional terms become part of the agreement without Wholesalers specific agreement. But is the new term added in the acceptance binding? Sub-section 2-207(2) answers the question.

B.

2-207(2) Additional terms are just proposals to add to the contract. merchants, these terms become part of the contract, unless:

Between

(a) the original offer specifically limits acceptance by the offeree to the terms of the original offer. Assume that the buyer in its purchase order (PO) has preprinted,

boilerplate language stating no additional terms or conditions are part of the agreement, unless buyer explicitly agrees to the terms. In this case the additional terms proposed by the seller do not become part of the contract. (b) it materially alters the original offer. Determining whether a term is material is a subjective determination that is often the source of litigation. A term materially alters the contract if it results in unreasonable surprise or hardship if incorporated into the contract. If the new term is not significantly different from the ordinary pattern of contracts in the particular trade, it is not a material change. (c) the party receiving the additional terms objects in a timely manner. The UCC allows for the parties to deal with the additional terms by the preferred method of notice and

required assent. If the party receiving the additional terms objects, the terms are not part of the contract. If the goods are never delivered, there is no contract. If the goods are delivered, the contract still does not include the additional terms which the buyer objected.

Example 3: As in example 1, wholesaler writes to manufacturer and offers to buy 50,000 DVDs at $10 per unit, payment due 90 days after delivery. Manufacturer writes back, Accepted per offer. Interest at normal trade rates for unpaid balances from date of delivery. Manufacturer has made a common-law counteroffer but begins shipment immediately. Assuming the additional terms were material, and also assuming the Wholesaler accepts deliver, under the common law, the last shot principle would hold that the Manufacturers terms prevail. Under the last shot principle the Wholesaler has the last shot or last word because the buyer accepted delivery without further negotiation with the seller so the terms in the last shot are accepted and part of the contract. This may not be the best solution, given the consequences of both merchants trying to be the party that makes the last response. The Code analysis makes the additional terms part of the contract unless the offer limits the acceptance to its terms, the additional terms are material, or notification of objection was timely communicated.

C.

2-207(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. If the partie s perform the contract with conflicting material terms, these terms are deemed not to be part of the contract and the UCC supplies the missing terms (gap fillers).

Example 4: Wholesaler and Manufacturer continue to transact, buying and selling radios wit hout problems, until the fateful day when a dispute arises. Assume that Manufacturer had included language stating, Interest at normal trade rates for unpaid balances from the date of delivery. Our acceptance is

conditional upon your agreement to this i terest rate. Further assume that Wholesaler never expressly n agreed to the additional language. Could the Wholesaler avoid any obligation to pay interest on the outstanding balance by arguing that no express agreement regarding payment of interest on the unpaid balance?14 In order to avoid this problem, the UCC anticipates that in many instances the parties will transact as if there were an agreement when no mirror image agreement in fact exists. To paraphrase, the UCC does not favor annulments if the actions of the parties indicate that there was in fact a common law marriage.15 When additional terms, not expressly agreed to by the parties, the UCC saves the

contract by including the terms unless one of the three exceptions exist. If the additional terms are not incorporated into the agreement due to materiality, the UCC looks to the gap fillers to fill the hole.

A flow chart of 2-207 is provided as follows. There are two diagrams, one for different terms and one for additional terms.

<INSERT FIGURE 1: Different Terms About here>

<INSERT FIGURE 1a: Additional Terms About here>

IV.

UNIFYING EXAMPLE
uyer in Omaha sends a purchase order to Seller in Chicago. Buyers form has a provision that requires litigation, if any, must take place i Nebraska , and the agreement specifies a n destination contract. Sellers acknowledgement form (insert #3) has an arbitration clause and

B
14 15

(change to 4) an additional clause that requires interest on overdue payment at 12%, and specifies that the
See Emanuels Law Outlines: Contracts, 5th ed., 1993, p. 22.

Typically we explain to students that seventeen states recognize common law marriages. However, there is no such thing as a common law divorce. Once married, you must proceed to petition for a regular, run-of-the-mill divorce. Likewise, if your actions would lead to a well founded inference that there is a contract, then not having mutual assent would not lead to an annulment.

10

contract is a shipment contract.

Assume that both Buyer and Seller are merchants, and the

arbitration/litigation term is a material item, the terms of shipment are also material, and the interest clause is not a material term. Further assume that Seller and Buyer discover the discrepancies with regard to the contract forms after the first shipment is completed. Initially, we can assume 1. There is an agreement. Note that the sellers acknowledgment did not have any language that the buyer had to expressly consent before there was an agreement. 2. The material items do not become part of the agreement as per 2-207(2). Because there is a conflict in the Sellers and Buyers clauses, you look to the UCC to supply a missing term (2-207(3)). In this situation, the UCC does not specify an arbitration clause so the litigation clause prevails and is enforced. Likewise, the UCC defaults to a shipment contract if nothing is agreed upon by the parties. 3. The 12% interest term becomes part of the agreement because it is not m aterial, and because the buyers offer did not place limits with regard to acceptance as part of the buyers offer. Although the 12% interest may appear to be material, the Court could find that the 12% is only on overdue payments and is therefore avoided by timely payment thus rendering it immaterial. 4. When material provisions conflict between the seller and buyer, the differing sections drop out of the contract and the UCC provides, in a gap filling fashion, that the contract is to be considered to be a shipment contract.16 Now assume that the Buyer has the following statement as part of her purchase order. Buyer hereby notifies Seller that the offer sent to buyer contains the terms of the agreement and that any additional

16

UCC 2-503, Official Comment 5.

11

terms contained in any return or confirmation document are not accepted unless expressly agreed upon by buyer. 5. In this situation as per as per 2-207(2)(a), the interest payment term does not become part of the agreement. Nothing changes with respect to the material termit is still not part of the agreement. Assume that Sellers acceptance states that, sellers acceptance of the purchase order to which this acknowledgement responds is expressly made conditional on the buyers assent to any additional or different terms contained in this acknowledgement. 6. In this scenario as per 2-207(1), there is no contract unless the Buyer expressly consents to the changes. Assume that the Buyer does not expressly consent to the Sellers changes. Assume that both the Buyer and Seller continue to perform under the contract. If there is a conflict, then under section (3), whatever conflicting sections exist between the Buyer and Sellers forms would be thrown out, and UCC sections would be used. <INSERT FIGURE 2: Different Terms about here>

<INSERT FIGURE 2a: Additional Terms about here>

VI.

CONCLUSIONS
any business law professors may feel trepidation using the UCC Battle of the Forms as a pedagogical tool, but as this paper has tried to demonstrate, this infamous section can provide all the necessary substance to cover the UCC in a unified and simplified manner. While the

UCC can be much more complicated, this paper attempts to provide enough practical detail to allow for a comprehensive treatment of the UCC for most undergraduate instruction. The flow charts along with the unified example provide the students a graphical representation of the decision process following the

12

section. The quizzes contained in the appendices also provide a means of providing students a meaning application of the section. While certainly this is not the only means of teaching the UCC, this may be another possible arrow of the teachers quiver.

13

Appendix A: Questions and Answers to a possible take-home quiz

CASE: McJunkin v. Mechanicals, Inc., 888 F.2d 481 (6th Cir. 1989)

1. Identify in non- legal terms, the following parties and other entities: McJunkin, Mechanicals, Inc., Alaskan, and Emery Industries. Explain the relationship between McJunkin and Alaskan, Mechanicals and McJunkin.
Emery Industries operates a chemical plant in Ohio. Emery Industries is the company who contracted with Mechanicals, Inc. to have a new pipe system installed in the chemical plant. Mechanicals, Inc. is the general contractor. McJunkin Corporation was the sub in charge of installing the pipe system. McJunkin Corporation then ordered the stub ends from Alaskan Copper Companies, Inc. who actually fabricated the ends.

2. What facts led to the disagreement that ultimately led to having two lawsuits being filed?
Emery Industries discovered the stub ends to be defective. Complicating the matter was the conflicting terms contained in the forms that were used by Alaskan and McJunkin throughout the transaction. Particularly a liability limitation that was part of an acknowledgment form of Alaskans, which conflicted with part of McJunkins original purchase order.

3. Which party (McJunkin or Alaskan) made the initial offer? What language was included that later caused the battle of the forms.
McJunkin sent the initial purchase order that included language that said, Buyer takes exception to and hereby objects to all hold harmless and indemnity provisions, either express or implied, which may be set forth in Sellers acceptance that seek to impose liability upon buyer.

4. The court stated several possible interpretations of Alaskans and McJunkins offers. What would be the implications to future causes of action if the court decided to follow each of the three interpretations?
There are several possible interpretations of Alaskan's and McJunkin's contractual relationship. First, by shipping the stub ends, Alaskan accepted McJunkin's offer (made in McJunkin's purchase order) and therefore was bound by the terms of McJunkin's offer, with any remedy limitation contained in Alaskan's acknowledgment being excluded from the contract. Had the court accepted this interpretation, it would have meant that the first form wins. If you send the form that contains suspect language, then it becomes part of the contract regardless of the response. This would be unacceptable to sellers as this group would for the most part be the second party to send the form. The UCC does not place any importance to who sent the first form. Second, McJunkin's acquiescence to the shipments and failure to object to the terms in the acknowledgment constituted an acceptance of Alaskan's terms contained in the acknowledgment, thereby giving effect to Alaskan's remedy limitation under Ohio Rev. Code 1302.10(B)(3). The court looked at this possibility and stated that the UCC does not automatically allow a contract to be formed even if the respondent (i.e. Alaskan) includes language such as SELLER'S [Alaskan's] ACCEPTANCE OF THIS CONTRACT IS EXPRESSLY CONDITIONED ON PURCHASER'S [McJunkin's] ASSENT TO ALL OF THE FOREGOING STANDARD CONDITIONS OF SALE." If the court had allowed this interpretation to control future cases, then the second partys language would automatically be the controlling

14

contract language, regardless of express consent. This would include material items that the 1st party may not have knowledge. It would be unfair to the 1st party. Third, Alaskan's acknowledgment was a seasonable, yet conditional, response to McJunkin's purchase order, thereby vitiating formation of a contract based upon the forms alone, although the conduct of the parties may have established a contract under Ohio Rev. Code 1302.10(C). We now address these contentions. Actually the last contention is the way that the court decided the case. It is the way the UCC outlines as it way of settling conflicting provisions of forms. Alaskans language precludes a formation of a contract, but because of the actions of the two parties, you do have a contract, without the conflicting language.

5. The court found that McJunkin did not expressly accept the terms contained in Alaskan acknowledgement. Why?
Given McJunkin's silence in the face of Alaskan's acknowledgment, McJunkin was not bound by those terms. See Dorton v. Collins & Aikman, 453 F.2d at 1168 & n. 4 (6th Cir. 1972)(interpreting Tennessee U.C.C. 2207 and rejecting contention that in action or silence constitutes acceptance of terms in competing document). Silence cannot be used at an expression of consent.

6. Did the court find that there was an agreement between McJunkin and Alaskan? Explain.
Abundantly clear from McJunkin's and Alaskan's actions is that they had entered a contract We can thus say with confidence that McJunkin's and Alaskan's course of conduct established a contract enforceable under Ohio law.

7. How did the court resolve the problem of the battle of the forms between McJunkin and Alaskan?
Under Ohio Rev. Code 1302.10(C), the terms of McJunkin's and Alaskan's contract "consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of Chapters 1301 [et seq.]." Because the remedy limitation was contained only in Alaskan's form and not agreed upon by both parties' documents, Alaskan's remedy limitation did not bind McJunkin, and, contrary to the district court judgment, Alaskan could not take advantage of this provision.

8. Assume that McJunkin consented to the terms contained in Alaskans acknowledgement. What result?
In order for McJunkin to receive relief, McJunkin would have had to discover the defects within ten days according to the disclaimer. All of the implied warranties of merchantability or fitness for a particular purpose would have been waived and thus limited the remedies available to McJunkin.

9. McJunkins purchase order was dated April 27, 1983. Alaskan dated its acknowledgement on May 4, 1983. Assume that Alaskan began to ship the stub ends June 15, 1983. Does this change the outcome of the case?
Probably not. The courts rationale touches on the express consent required of a party to bind itself to proposed material terms. The fact that there is now more time to object to the contentious provisions still does not overcome the courts correct position on requiring express consent.

10. Assume that Alaskan had included in its original acknowledgment, terms of credit that would not have been considered to be material. Also assume that McJunkins original purchase

15

order was silent on the terms of credit. What would have been the outcome on the terms of credit issue?
Under UCC 4-2-207 (2), non material items become part of the contract unless the buyer objects to the terms in a timely fashion.

Appendix B: Simplified Homework or Quiz Exercise.

EXAMPLE: Merchant Buyer sends a purchase order (PO) to Merchant Seller. The PO contains language specifying among other things, arbitration, all implied warranties apply, and that Federal Express will be the transportation agent. Seller responds with an acknowledgement, specifying litigation, no implied warranties, UPS as the proposed transportation agent, and assent to sellers provisions before agreement. QUESTIONS: Assume that the litigation/arbitration issue along with the implied warranty issue are both material; the Fed EX/UPS difference is not. Do you have an agreement? Assume that the parties follow through with their respective obligations. What provisions are effective? Assume that everything is the same as before, except that sellers requirement under is not listed. Do you have an agreement? Assume that the parties follow through with their respective obligations. What provisions are effective? ANSWERS: No agreement unless buyer assents to the additional or different terms. There are no additional terms provided by the sellers acknowledgment. All the terms are different. Thus all of the different terms drop out and you look to the UCC to supply the missing terms. Yes, you do have an agreement. Same as answer two.

Appendix C: Multiple Choice Question.

Merchant Buyer sends a P.O. to Merchant Seller, which indicates that the contract is to be a destination contract. Merchant Seller responds with an acknowledgment with language that indicates the contract is to be a shipment contract. The shipment/destination distinction of the contract is a material item. After the seller ships the goods, there is a disagreement. What would be the outcome?
a. b. c. d. e. Buyer and seller would not have an agreement. Buyer and seller would have an agreement; contract would be considered to be a shipment contract. Buyer and seller would have an agreement; contract would be considered to be a destination contract. Buyer and seller would have an agreement; contract would be considered to be a F.O.B. contract. Buyer and seller would have an agreement; contract would be considered to be a F.A.S. contract.

16

Figure 1: Different Terms

Buyer P.O. Acknowledgment Seller

Sellers response (acknowledgement) contains different terms . How do we resolve this conflict in what actually has been agreed to? Remember that the UCC does not require a mirror image for an effective acceptance.
Start

Different terms cancel each other out

No
Was the acceptance made conditional on assent to different terms? Section (1).

Yes

No contract unless agreed upon

No

Did the parties continue to conduct business?

Yes
If so, then you cancel out the different sections and look to the UCC for filler sections as per Section (3).

No Contract

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Figure 1A: Additional Terms

Buyer P.O. Acknowledgment Seller

Sellers response (acknowledgement) contains additional terms . How do we resolve this conflict in what actually has been agreed to? Remember that the UCC does not require a mirror image for an effective acceptance.
Start

No
Was the acceptance made conditional on assent to different or additional terms? Section (1). Are the parties merchants? Section (2).

Yes

No contract unless agreed upon.

Yes
Additional terms become part of the contract, unless:
Did the offer expressly limit acceptance to the terms of the offer? (2)(a)

No

Additional terms are proposals only.

No

Yes

Contract w/o Additional Terms

No

Do the additional terms materially alter the agreement? (2)(b)

Yes

Did the Buyer give notification of objection to the seller? (2)(c)

Contract w/o Additional Terms

No

Yes

Contract w/o Additional Terms

Contract with Additional Terms

Did the parties continue to conduct business?

No
No Contract

Yes
If so, look to the UCC for filler sections as per Section 3.

18

Figure 2: Different Terms

Buyer P.O. Acknowledgment Seller

Sellers response (acknowledgement) contains different terms from buyers P.O. Litigation v. Arbitration. Shipment v. Destination contract.

Start

Different terms cancel each other out.

No
Was the acceptance made conditional on assent to different terms? Section (1).

Yes

No contract unless agreed upon

No
No Contract

Did the parties continue to conduct business?

Yes
Look to the UCC for filler sections as per Section (3).

UCC provides for Litigation

UCC provides for Shipment Contract.

19

Figure 2A: Additional Terms

Buyer P.O. Acknowledgment Seller

Sellers response (acknowledgement) contains an additional term: a clause that requires interest on overdue payment at 12%.
Start

No
Was the acceptance made conditional on assent to different or additional terms? Section (1). Are the parties merchants? Section (2).

Yes

No contract unless agreed upon.

Yes
Additional terms become part of the contract, unless:
Did the offer expressly limit acceptance to the terms of the offer? (2)(a)

No

Additional terms are proposals only.

No

Yes

Contract w/o Additional Terms

No

Do the additional terms materially alter the agreement? (2)(b)

Yes

Did the Buyer give notification of objection to the seller? (2)(c)

Contract w/o Additional Terms

No

Yes

Contract w/o Additional Terms

Contract with additional Terms concerning 12% interest.

Did the parties continue to conduct business?

No
No Contract

Yes
If so, look to the UCC for filler sections as per Section 3.