Battle of the Forms: No Battle

The Reply Doctrine of Section 2-201(2) creates a logical introduction to Section 2-207—Battle of the Forms.  In fact, Section 2-207(1) uses language almost identical to Section 2-201(2) insofar as it speaks of a ‘written confirmation’ of acceptance.  Before turning to the text and meaning of Section 2-207, it should be noted that this section has been heavily litigated with differing interpretations as to its meaning.

            Section 2-207 provides an opportunity to demonstrate the connectivity between Code sections, and the intertwining of meaning.  The skilled advocate creates a logical sequence through all of that with a favorable outcome.  For example, standing alone you have fairly clear statutory text for Section 2-201(2).  ‘A writing in confirmation’ is very clear when stated like the example given in the last post.  Of course, in reality it is rarely done so cleanly.  Rather, the writing in confirmation may be a simple purchase order, with no specific confirmation language, and courts have so held.

            The Code sections which immediately come into play are Sections 1-201(b)(3),(12), the definitions of agreement and contract.  This in turn activates Section 1-303 and the elements of course of performance, course of dealing and usage of trade. There are also supplemental principles of law which may apply pursuant to Section 1-303(b). As facts are added to the substantive provisions of the statute, the Code sections come to life with new interpretations.  These various interpretations create a very dynamic and fertile ground for structuring arguments or drafting provisions in a manner most favorable to your client.

            As for Section 2-207, I believe that section can be understood by a careful reading of the text of the statute.  As I was taught ‘The answer is always in the Statute.’  At the outset, one must remember that Section 2-207 is predicated upon an offer having already been made by either the buyer or seller, for the section speaks in terms of a ‘definite and seasonable expression of acceptance or a written confirmation’.  There can be no acceptance or written confirmation unless an offer has been made. [Unless of course, someone is using Section 2-201(2) to solidify a deal that may or may not have existed.]

Section 2-207(1) states as follows:

(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, unless acceptance is expressly made conditional on assent to the additional or different terms.

The rule of Section 2-207(1) is clear and straightforward.  It contemplates an acceptance or written confirmation of an offer, with the acceptance presenting additional terms to those offered.  The rule is that the acceptance is binding unless the acceptance is made conditional on the offeror’s assent to the additional terms.  In other words, it is a ‘take it or leave it’ acceptance.

            For example, Seller offers buyer 1,000 pairs of shoes for $18.00 per pair with no stated delivery terms.  Buyer sends the following response:

I accept your offer to buy 1,000 shoes at $18.00 per pair, delivery to be made in five separate lots of 200 units per lot.

Under Section 2-207(1), Buyer has accepted Seller’s offer.  Delivery in five lots is not a condition to Buyer’s acceptance, simply a statement or request.

If on the other hand, Buyer had demanded inclusion of his delivery term as a prerequisite to the acceptance, there would be no acceptance under Section 2-207(1).  In that scenario, Buyer’s proffered acceptance might read as follows:

I accept your offer to buy 1,000 shoes at $18.00 per pair.  However, I need delivery in five separate lots of 200 units per lot or I will not do the deal.

Buyer has made his ‘acceptance’ conditional upon Seller’s acquiescence to his delivery demand.  Hence, no acceptance.

            Section 2-207(2) explains what happens when additional terms are proposed but not made as a condition to the acceptance:

The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(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.

In the first part of the example given above, Buyer’s request for delivery in five lots would be treated as a ‘proposal’ for addition to the contract.  If both parties involved in the transaction are merchants, Buyer’s delivery proposal will become part of the contract unless one of the contingencies covered in Section 2-207(2) occurs.  For example, one question might become whether the proposed delivery terms ‘materially alter’ the original offer.  Trade custom would have particular relevance here.

            It is interesting to note that the first contingency stated in 2-207(2) goes back to the original offer which set things in motion.  If that offer is a ‘take it or leave it’ proposal, no additional terms will be incorporated into the contract.  If the additional terms ‘materially alter’ the offer, they will not be included.  And finally, if a notice of objection to the additional terms has been given within a reasonable time, the terms will not become part of the contract.       

            So, at this point we have two take it or leave it scenarios.  Under Section 2-207(1) a ‘take it or leave it’ acceptance results in no acceptance.  Under Section 2-207(2), if the original offer was a ‘take it or leave it offer’ no new terms will be considered.  The reality is that these situations rarely occur in orderly communications such as those hypothesized above.  It happens under time and business pressures, with many transactions ongoing.  Sometimes, forms don’t get read, and if they are, often are not understood.  So, there is no formal contract and you may have writings going back and forth with contradictory terms.

            Yet, the deal goes forward.  Why?  Everybody wants to make money and they adopt the ‘nothing will go wrong’ approach, and of course, sometimes the deal goes south.  The beautiful wood cabinets called for in communications were not up to the buyer’s expectations. There is no finalized contract.  Negotiations fail, and litigation ensues.  At this point, Section 2-207(3) takes control of what happens.  That section states as follows:

 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 Act.

The net effect is that the written portion of the contract will consist of whatever written terms are agreed upon between the parties, date and quantity for example.  Contradictory terms will be eliminated and the agreed written provisions will be supplemented by the UCC. 

The application of Section 2-207(3) can have an enormous impact on a case.  For example, Seller may have had some very specific warranty provisions that are part of all of his deals.  If Buyer has presented a contradictory term—very common in a purchase order, you have the classic situation.  If Seller’s warranty has been eliminated because it is contradictory to Buyer’s purchase order, it is highly likely that the warranties supplied by the Code will be more favorable to the Buyer than the ones contained in the documents Seller prepared.