Contracts: Battle of the Forms

What are the common law approaches to conflicting terms? 

1. Mirror Image Rule

2. Last Shot Rule

Mirror Image Rule

A response to an offer that includes new or different terms is not an acceptance. It’s a counteroffer (rejection + new offer).

Last Shot Rule

Where nonconforming standard forms are exchanged, the last form sent will be the standing counteroffer. Where receipt of the counteroffer is followed by performance, the contract will be formed on those terms.

UCC approach to Conflicting Terms

2-207. So long as the transaction-specific terms are the same, the parties are presumed to have a contract. (ex. name and address of the offeree, description of the goods or services, price, payment and other performance terms).

Boiler Plate Terms

Standard legal language included in contracts that is often routine.

UCC 2-207 (1)

(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.

UCC 2-207 (1) Simplified

(1) Is a contract formed?

Assuming Seller’s standard form response did not explicitly make Seller’s acceptance conditional on Buyer’s assent to Seller’s new terms, then a contract is formed between Buyer and Seller by the exchange of the non-conforming standard forms.

UCC 2-207 (2)

(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:

(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.

UCC 2-207 (2) Simplified

(2) Answers what terms were included in the contract.

Applies only when a contract is formed under section 1.

If one of the parties is not a merchant, the contract is formed exclusively on the terms of the offer – additional terms are merely proposals for inclusion that must be expressly accepted.

If both parties are merchants, the offeror’s silence to additional terms may result in acceptance, assuming the additional terms do not “materially alter” the terms of the offer.

UCC 2-207 (3)

(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 Act.

UCC 2-207 (3) Simplified

(3) Where nothing in the communications conclude a contract, but the conduct of the parties act as evidence of contract formation.

Parties are bound to terms in both writings, and remaining gaps are filled by the UCC’s default provisions.

How do you determine if terms materially alter the contract?

Incorporation of the term would result in surprise or hardship without awareness by the other party. This is very fact specific.

Some examples include a forum selection clause, arbitration clause, negation of standard warranties, negation of standard remedies.

Merchant

A person who deals in “goods of the kind” or has knowledge/skill peculiar to the practices involved in the transaction. 

·      Assuming the offer didn’t limit acceptance to the terms of the offer and did not notify seller of rejection to additional terms after receipt, the seller’s new terms will become part of the contract unless they materially alter the offer.

(Ridgelawn Cemetary - Material Alteration of Terms between Merchants do not become a part of the contract).

Concept Check: How are additional terms treated if the consumer is not a merchant? 

The contract is formed exclusively on the terms of the offer - additional terms are proposals that must be expressly accepted.

Concept Check: How are additional terms treated if the consumer is a merchant?

Silence to additional terms may result in acceptance, assuming the terms do not “materially alter” the terms of the offer.