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The Battle of the Forms—There is a purpose

Cris de la Torre, Ph. D., J. D.*

Assistant Professor of FinanceKenneth W. Monfort College of Business

University of Northern Colorado

P.O. Box 128Greeley, Colorado 80539

[email protected]

Garth Allen, J. D.

Associate Professor of FinanceKenneth W. Monfort College of Business

University of Northern Colorado

P.O. Box 128Greeley, Colorado 80539

[email protected]



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Battle of the Forms—There 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

1 This would include, §2-509, Risk of Loss in Absence of Breach, §2-601, Buyer’s rights on improper delivery, §2-

602 Manner and effect of rightful rejection, §2-608, Revocation of acceptance in whole or in part .

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This paper introduces an alternative scheme—a 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 SECTION 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 deficiencies of §2-207 exists4,

2. 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 additionalterms 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 thediscussion. 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 jurisdictionshave not accepted this amendment. See James J. White, Symposium: Contracting under Amended 2-207 , 2004 WIS.

L. REV. 723 (2004), for a full explanation of the proposed amendment.

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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

§2-2075 and extend learning far beyond mundane UCC analysis.

A. Variant Acceptances

At common law, if the offeree’s expression of assent changed any of the terms of the offer, the offeree’s

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, the UCC parts company with the common law by

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, output8, and delivery9 can all be agreed

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

6 See UCC §2-305.



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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 seller’s 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

7 See UCC §2-309.

8 See UCC §2-306.

9 See UCC §2-308.

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



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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 SIMPLIFIED INTERPRETATION OF SECTION 207

ssume that merchant Buyer peruses a merchant Seller’s 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 anacceptance even though it states terms additional to or different from those offered or agreed upon,(Variant acceptances) unless acceptance is expressly made conditional on assent to the additional or

different terms. ( Freedom to contract). Note, Section (1) deals with different and additionalterms. Section (2) only deals with additional terms. (2) The additional terms are to be construed as proposals for addition to the contract. Betweenmerchants such terms become part of the contract unless: ( Distinction between merchants and non-

merchants) (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 afternotice 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 acontract 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 partiesagree, 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 See §3-314.

13 See §3-315.

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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 seller’s terms, we have an agreement based on seller’s 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 seller’s 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 additional 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



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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 Wholesaler’s

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 . Between

merchants, these terms become part of the contract, unless:

(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



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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 Manufacturer’s 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 parties 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 without

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



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conditional upon your agreement to this interest rate.” Further assume that Wholesaler never expressly

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. Buyer’s form has a provision that

requires Œ litigation, if any, must take place in Nebraska, and the agreement specifies a

destination contract. Seller’s acknowledgement form (insert #3) has an arbitration clause andŽ

(change to 4) an additional clause that requires interest on overdue payment at 12%, and specifies that the

14 See Emanuel’s Law Outlines: Contracts, 5th ed., 1993, p. 22.

15 Typically we explain to students that seventeen states recognize common law marriages. However, there is nosuch thing as a common law divorce. Once married, you must proceed to petition for a regular, run-of-the-milldivorce. 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.

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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 seller’s 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 Seller’s and Buyer’s 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 material, and

because the buyer’s offer did not place limits with regard to acceptance as part of the

buyer’s 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.



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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 term—it is still not

part of the agreement.

Assume that Seller’s acceptance states that, “seller’s acceptance of the purchase order to which this

acknowledgement responds is expressly made conditional on the buyer’s 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 Seller’s

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 Seller’s 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

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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 teacher’s quiver.



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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 withMechanicals, Inc. to have a new pipe system installed in the chemical plant. Mechanicals, Inc. is the generalcontractor. 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 actual ly 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 aliability limitation that was part of an acknowledgment form of Alaskan’s, which conflicted with part of McJunkin’s original purchase order.

3. Which party (McJunkin or Alaskan) made the initial offer? What language was included thatlater caused the battle of the forms.

McJunkin sent the initial purchase order that included language that said, “Buyer takes exception to and herebyobjects to all hold harmless and indemnity provisions, either express or implied, which may be set forth in

Seller’s acceptance that seek to impose liabil ity upon buyer.”

4. The court stated several possible interpretations of Alaskan’s and McJunkin’s offers. What

would be the implications to future causes of action if the court decided to follow each of thethree interpretations?

“There are several possible interpretations of Alaskan's and McJunkin's contractual relationship. First, byshipping 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'sacknowledgment being excluded from the contract.”

Had the court accepted this interpretation, it would have meant that the first form wins. If you send the formthat contains suspect language, then it becomes part of the contract regardless of the response. This would beunacceptable 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 acknowledgmentconstituted an acceptance of Alaskan's terms contained in the acknowledgment, thereby giving effect toAlaskan'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 beformed even if the respondent (i.e. Alaskan) includes language such as “SELLER'S [Alaskan's] ACCEPTANCEOF 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 thisinterpretation to control future cases, then the second party’s language would automatically be the controlling



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contract language, regardless of express consent. This would include material items that the 1st party may nothave 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. Alaskan’s language precludes a formation of a contract, but becauseof 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 Alaskanacknowledgement. 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. § 2-

207 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 saywith confidence that McJunkin's and Alaskan's course of conduct established a contract enforceable under Ohiolaw.

7. How did the court resolve the problem of the battle of the forms between McJunkin andAlaskan?

“Under Ohio Rev. Code § 1302.10(C), the terms of McJunkin's and Alaskan's contract "consist of those termson 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 andnot agreed upon by both parties' documents, Alaskan's remedy limitation did not bind McJunkin, and, contraryto the district court judgment, Alaskan could not take advantage of this provision.”

8. Assume that McJunkin consented to the terms contained in Alaskan’s 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 purposewould have been waived and thus limited the remedies available to McJunkin.

9. McJunkin’s purchase order was dated April 27, 1983. Alaskan dated its acknowledgementon 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 court’s 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 notovercome the court’s correct position on requiring express consent.

10. Assume that Alaskan had included in its original acknowledgment, terms of credit that wouldnot have been considered to be material. Also assume that McJunkin’s original purchase



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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 POcontains language specifying among other things, Œ arbitration, all implied

warranties apply, and that Ž Federal Express will be the transportation agent.Seller responds with an acknowledgement, specifying Œ litigation, no implied

warranties,Ž UPS as the proposed transportation agent, and assent to seller’sprovisions before agreement.

QUESTIONS: Assume that the litigation/arbitration issue along with the implied warranty issueare 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?ƒ Assume that everything is the same as before, except that seller’s requirement under is not

listed. Do you have an agreement?„ Assume that the parties follow through with their respective obligations. What provisions areeffective?

ANSWERS:

• No agreement unless buyer assents to the additional or different terms.‚ There are no additional terms provided by the seller’s acknowledgment. All the terms are

different. Thus all of the different terms drop out and you look to the UCC to supply the missingterms.ƒ 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 adestination contract. Merchant Seller responds with an acknowledgment with language that

indicates the contract is to be a shipment contract. The shipment/destination distinction of thecontract is a material item. After the seller ships the goods, there is a disagreement. What wouldbe the outcome?a. Buyer and seller would not have an agreement.b. Buyer and seller would have an agreement; contract would be considered to be a shipment contract.c. Buyer and seller would have an agreement; contract would be considered to be a destination contract.

d. Buyer and seller would have an agreement; contract would be considered to be a F.O.B. contract.e. Buyer and seller would have an agreement; contract would be considered to be a F.A.S. contract.



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Figure 1: Different Terms

Buyer P.O. Seller

Acknowledgment

Seller’s 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 effectiveacceptance.

No Yes

No Yes

No contract unless

agreed upon

Start

Was the acceptance madeconditional on assent to

different terms? Section

(1).

Different terms cancel each

other out

Did the partiescontinue toconduct business?

No Contract If so, then you cancel out the different sections and look to the UCC for“filler” sections as er Section (3).



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Figure 1A: Additional Terms

Buyer P.O. Seller

Acknowledgment

Seller’s 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 effectiveacceptance.

No Yes

Yes

No

No Yes

No Yes

No Yes

No Yes

No contract unless

agreed upon.

Start

Additional termsbecome part of the

contract, unless:

Contract w/o

Additional Terms

Contract w/o

Additional Terms

Contract w/o

Additional Terms

Contract with

Additional Terms

Was the acceptance madeconditional on assent to

different or additional

terms? Section (1).

Are the partiesmerchants?

Section (2).

Additional terms areproposals only.

Did the offerexpressly limitacceptance to theterms of the offer?

§(2)(a)

Do the additional

terms materiallyalter the

agreement?§(2)(b)

Did the Buyer

give notificationof objection to theseller? §(2)(c)

Did the parties

continue toconduct business?

No Contract If so, look to the UCC for “filler”

sections as per Section 3.



18

1

Figure 2: Different Terms

Buyer P.O. Seller

Acknowledgment

Seller’s response (acknowledgement) contains different terms from buyer’s P.O. Œ Litigation v.

Arbitration. • Shipment v. Destination contract.

No Yes

No Yes

No contract unless

agreed upon

Start

Was the acceptance made

conditional on assent todifferent terms? Section

(1).

Different terms cancel each

other out .

Did the partiescontinue to

conduct business?

No Contract 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. Seller

Acknowledgment

Seller’s response (acknowledgement) contains an additional term: Ž a clause that requires interest on

overdue payment at 12%.

No Yes

Yes

No

No Yes

No Yes

No Yes

No Yes

No contract unless

agreed upon.

Start

Additional termsbecome part of the

contract, unless:

Contract w/o

Additional Terms

Contract w/o

Additional Terms

Contract w/o

Additional Terms

Contract with additionalTerms concerning 12%

interest.

Was the acceptance madeconditional on assent todifferent or additional

terms? Section (1).

Are the partiesmerchants?Section (2).

Additional terms areproposals only.

Did the offer

expressly limitacceptance to theterms of the offer?§(2)(a)

Do the additionalterms materially

alter theagreement?

§(2)(b)

Did the Buyergive notification

of objection to theseller? §(2)(c)

Did the partiescontinue toconduct business?

No Contract If so, look to the UCC for “filler”

sections as per Section 3.

battle of the forms complete

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