Battle of the Forms Part 1

Posted on March 28, 2010 // 3 Comments

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The Battle of the Forms happens when two parties exchange multiple documents in the process of negotiating a transaction. Naturally, one party’s document (or documents) will have different terms than the other’s. So the question is, whose terms govern the contract?  There are three major steps.

A.  Determine which law applies- common law or the Universal Commercial Code.

1. The simplest way to think of the CL/UCC split is that the UCC only applies to goods.

2. For a mixed contract for goods and services, use the three factors from Bonebrake v. Cox to determine whether the contract is for goods or services:

a.  the language of the contract;

b. the nature of the business of the supplier; and

c. the intrinsic worth of the materials supplied

B.  Identify the Offer and the Acceptance.

1.  General rule:  The communication in question must indicate:

a. offeror’s willingness to enter bargain;

b.  offeree’s assent is invited; and

c. offeree’s assent will conclude bargain.

2.  A price quote is not an offer- it’s a solicitation for an offer.

Unless the quote is:

a. is sufficiently detailed; and

b. communicates that the offeree’s assent is all that is needed to form the contract.

3. Purchase orders generally are offers.

C. Determine whether the terms of the Acceptance are incorporated into the Contract. Here’s where the common law/ UCC split comes into play.

1. UCC 2-207: the first question is whether there has been an “expression of acceptance” (i.e., a document), or whether the contract has been formed by performance only.

a. if there has been an expression of acceptance (with new and/or differing  terms, of course),  it counts as an actual acceptance, if:

i. it’s made within a reasonable time; and

ii. it’s not an explicit rejection. If the acceptance is explicitly conditional on the  offeror’s assent to the terms and conditions in the acceptance, it’s a rejection  and counteroffer.

b. If either party is not a merchant, the additional or different terms in the acceptance become proposals only- they’re not binding.

c. If both parties are merchants:

i. Additional terms are incorporated into the contract, and are binding,

A. unless:

1. the offer expressly limits acceptance to the terms of the offer; or

2. the new terms materially alter the contract; or

3. notification of objection to the new terms has been given within a reasonable time.

B. If the writings don’t establish a contract, but the parties perform anyway, apply the Knockout Rule to different or additional terms: these terms are “knocked out” of the contract and replaced by UCC gap-filling provisions.

ii. Different terms are “knocked out” of the contract and replaced by UCC terms (the Knockout Rule).

To see an example of how the Battle of the Forms played out in Brown Machine v. Hercules, please go to Battle of the Forms Part 2 .

2. Common Law: the Mirror Image Rule and the Last Shot Rule.

a. The Mirror Image Rule:  a purported acceptance with different or additional terms is NOT and offer- it’s a rejection and a counter offer.

b. The Last Shot Rule: the terms of the final document sent before performance becomes binding.

Note that the Last Shot Rule is a logical consequence of the Mirror Image Rule. The scenario is that the parties get tired of spamming each other and just perform. The last document becomes binding simply because it hasn’t been rejected.

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