Contracts – Prof Merges
Feb. 17, 2011

• What do you call a purported acceptance that varies the terms of the offer?

• What do you call a purported acceptance that varies the terms of the offer?
• A counter-offer

• What do you call a purported acceptance that varies the terms of the offer?
• A counter-offer
• What then is the acceptance?

• PO
• Sales Acknowledgement
• Shipment of goods; payment
• Shipment/pmt = Acceptance; “last shot” rule

Typical
Purchase
Order Form

Finding the Terms of the
Contracts
Purchase Order
(Buyer)

Finding the Terms of the
Contract
Purchase Order
(Buyer)
1. Goods
2. Price
3. Quantity
4. Shipment Date

Finding the Terms of the
Contracts
Purchase Order
(Buyer)
“Major
Terms”
1. Goods
2. Price
3. Quantity
4. Shipment Date

Sales Confirmation
(Seller)
1. Goods
2. Price
3. Quantity
4. Shipment Date

Sales Confirmation
(Buyer)
1. Goods
1. Goods
2. Price
2. Price
3. Quantity
3. Quantity

Overlap on Major
Terms =
Contract
Sales Confirmation
(Buyer)
1. Goods
1. Goods
2. Price
2. Price
3. Quantity
3. Quantity

• “Deal points”; negotiated terms
• The essence of the business transaction
– Separate from “legalese”
– P. 188

Confirmation
1. Limit on
Warranty
2. Arbitration
3. Timely Delivery
4. Shipment: Risk of Loss
5. Etc.
6. Etc.
7. Etc.

Confirmation
1. Limit on
Warranty
2. Arbitration
3. Timely Delivery
4. Shipment: Risk of Loss
5. Etc.
6. Etc.
7. Etc.
Purchase Order
1. Extensive Warranty
2. Choice of Law
3.
“Time is of the essence” – delivery clause
4. Indemnification
5. Etc.
6. Etc.
7. Etc.

“Degree of Overlap” – Fine Print

Overlap on Major
Terms =
Contract
Sales Confirmation
(Buyer)
1. Goods
1. Goods
2. Price
2. Price
3. Quantity
3. Quantity

Stewart Macauley, Noncontractual Relations in
Business
• The fine print is rarely consulted
• Disputes often worked out informally
• Norms of fairness, reciprocity, etc., often control

• UCC 2-207 to the rescue!

• No “mirror image rule”
• Separate “K” from “terms” - Overall
K formation
K Terms

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time [*A*] operates as an
acceptance even though it states terms additional to or different from those offered or agreed upon, [*B*] unless acceptance is expressly made conditional on assent to the additional
or different terms.

[*A*] “operates as an acceptance”

• “The proviso”
• Operates as an acceptance . . . unless acceptance is expressly made conditional on assent to the additional or
different terms.
 Proviso case: No acceptance; no K is formed

2207(3): K by conduct; no K “on the writings”
(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 code.

2207(3): K by conduct; no K “on the writings”
(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 .

2-207(3): Takes effect in 2 cases
1. Failure of agreement on “major terms”
2. Offer includes “proviso” under 2-
207(1) which is not “assented to”

207(1)
207(2)
207(3)
1.No agreement on major terms
2.Failed proviso case

207(1)
207(2)
207(3)
1.Agreement on major terms; not a “failed proviso” case
2. Then: Go to
2-207(2)

C. Itoh Co.
P. 199
Jordan Int’l
[Steel] Co.

2207(3): K by conduct; no K “on the writings”
(3) . . . In such case the terms of the particular contract consist of [*a*] those terms on which the writings of the parties agree, [*b*] together with any supplementary terms incorporated under any other provisions of this code.

Sources of law: 2-207(3)
Contracts
• Terms on which parties agree
• UCC Itself

1. Price
2. Quantity
Terms on which parties agree

1. Price
2. Quantity
“Gaps” in the K

1. Price
2. Quantity
2-309:
Reasonable
Delivery time
2-310:
Payment:
Cash at
Delivery
Terms supplied by the UCC

UCC:
“Gapfillers”
UCC
1. Price
2. Quantity

Consider only acceptances varying offers
• Avoid the disputes over
“confirmations”
• Dorton v. Collins & Aikman may involve either confirmation or acceptance varying offer

(1)A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance . . .
(2) [Speaks only of offers . . .]

Applying 2-207: Dorton v. Collins
& Aikman
• Facts
• History

• Is this a “Proviso” case?

• “The proviso”
• Operates as an acceptance . . . unless acceptance is expressly made conditional on
assent to the additional or different terms.
 Proviso case: No acceptance; no
K is formed

• “expressly made conditional on assent”
 p. 19596: “Acceptance subject to all the terms and conditions on the face and reverse side hereof . . .” NOT
ENOUGH

• On to 2-207(2)

207(1)
207(2)
207(3)
1.Agreement on major terms; not a “failed proviso” case
2.Go to 2-207(2)

What if there is a K on the writings?
• By definition, acceptance
“states terms additional to or different from those offered or agreed upon.”

• Dorton involves “additional” term
– Offer is silent re: arbitration

Confirmation Purchase Order
1.Limit on
Warranty
1.Extensive
Warranty

Additional Term in Acceptance
Confirmation Purchase Order
1.Limit on
Warranty

Additional Term in Acceptance
Confirmation Purchase Order
1.Arbitration

(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.

• “Between merchants” – Takes 2 merchants!
• “[S]uch terms become part of the contract unless . . .”
– Additional terms IN UNLESS --

207(2): Exceptions to
“Merchant’s Rule”
(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.

207(2)(a): Offer says “my terms only”
• Exception to 2207 merchant’s rule; additional term not in the
K

2-207(2)(b): Material alteration rule
• Nonmaterial (“big’) alteration: additional term is in K
• Material K: it is not in the K

2-207(2)(b): Material alteration rule
• Nonmaterial (“small’) alteration: additional term is in K
• Material (big) term: it is NOT in the K
– Remand in Dorton to figure this out . . .

• Additional terms
• Merchants rule
• Material/non-material alteration

Confirmation Purchase Order
1.Limit on
Warranty
1.Extensive
Warranty

• 3 Positions on “different terms”
– Knockout rule
– Fall out rule
– “Treat like additional terms” rule -
California

• Fallout rule: different term in acceptance FALLS OUT of K
• So offeror’s term stays in, and prevails

Confirmation Purchase Order
1.Limit on
Warranty
1.Extensive
Warranty

• Different terms “knock each other out,” both are removed from the K
• What is left? UCC gap-fillers

Confirmation Purchase Order

UCC
UCC:
“Gapfillers” on warranties
1. Price
2. Quantity