Contracts Map – Battle of the Forms
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.
1. Determine which law applies- common law or the Universal Commercial Code. In general, the simplest way to think of the CL/UCC split is that the UCC only applies to goods- anything moveable, except money.
a. Common law applies to everything other than goods, such as contracts for real estate, loans, and services.
b. UCC applies to goods- “all things that are moveable” at the time of the contract, not including information, money, securities, or choses in action. UCC 2-103(k)
c. For a mixed contract for goods and services, use the three factors from Bonebrake v. Cox to determine whether the contract is predominantly for goods or services:
i. the language of the contract;
ii. the nature of the business of the supplier; and
iii. the intrinsic worth of the materials supplied.
2. Identify the Offer and the Acceptance (i.e., go to what is probably the very beginning of your Contracts outline). This is essential in scenarios where the parties exchange several forms, as in Brown Machine v. Hercules.
An offer is made when the offer leads the offeree to reasonably believe that an offer has been made.
a. Purchase orders generally are offers.
b. A price quote is not an offer- it’s a solicitation for an offer.
Unless the quote is:
i. sufficiently detailed; and
ii. communicates that the offeree’s assent is all that is needed to form the contract.
3. Determine whether the terms of the Acceptance are incorporated into the Contract. Here’s where the common law/ UCC split comes into play.
a. Common Law: the Mirror Image Rule and the Last Shot Rule.
i. The Mirror Image Rule: a purported acceptance with different or additional terms is NOT and offer- it’s a rejection and a counter offer.
ii. But if both parties perform (anyway), they form a contract.
iii. In which case, apply 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.
b. 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.
i. Acceptance with differing terms- use UCC 2-207-1. If there has been an expression of acceptance (with new and/or differing terms, of course), it counts as an actual acceptance, if it’s made within a reasonable time and 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.
(A) If either party is not a merchant (UCC 2-207(2)):
(1) Additional terms in the acceptance are proposals, an are not binding.
(2) If the terms are different, the terms of the offer are incorporated into the contract.
(B) If both parties are merchants(UCC 2-207(2)):
(1) Additional terms in the acceptance become part of the contract,
(a) the offer expressly limits acceptance to the terms of the offer; or
(b) the new terms materially alter the contract; or
(c) notification of objection to the new terms has been given within a reasonable time.
ii. If the writings don’t establish a contract, but the parties perform anyway, apply UCC 2-207 (3)- the “Knockout Rule “to different or additional terms: these terms are “knocked out” of the contract and replaced by UCC gap-filling provisions.
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 .