The Battle of the Forms (2-207)
Prof. Bill Long 1/27/05
Understanding the "Worst" Section Article 2
Most students of Article 2 will agree that 2-207 is probably the most convoluted section the Article. The confusion only rests in one or two areas but they are important areas. The section was drafted to deal with a very practical problem in contract formation: When B wants to order goods, it uses its own form to order them (probably having seen them advertised in S's catalogue), but when S gets the order, it frequently sends out a confirmation form of the order on its own form. The forms differ in what they say. Do you have a contract? Often lawyers for each side have helped develop their forms so that the "boilerplate" items on the forms give their clients an advantage. For example, a seller's lawyer might have it bury deeply into the boilerplate a limitation of remedy for the buyer-- if you don't like the goods all you can get is your money back with no consequential or other damages.
The drafters of 2-207 were confronted with the practical problem of whether you have a contract when you have different forms both seeming to attest to the contract. Recall that the Code is "pro-commerce" and so the drafters wanted to recognize the existence of contracts, but the big question was, what are the terms of the contract? Do buyer's special terms control? Seller's? nobody's? Or, if seller's and buyer's terms are quite different (especially on remedy provisions), do you really have a contract? Perhaps no code provision could have parsed all these issues perfectly. Here is what we have.
2-207--"Advanced" Contract Formation
Let's look at the language.
"(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 made conditional on assent to the additional or different terms."
Yikes. Remember it is a "battle of the forms." So, let's assume that B has sent her order form to S. S sends back its "different" form confirming a sale. Is there a contract? According to 2-207(1) the form that S sends back operates as an acceptance even though some terms are different. Thus, if S refuses to send goods, B has a remedy for breach even if forms don't agree. So, there is a contract despite different terms. We have a contract but we don't know whose form controls. We need to go on.
Well, let's get to the first caveat. We know that S's terms are "additional to or different." But let's say S wants its terms to control. It therefore wants to make acceptance "expressly..conditional on assent to the additional or different terms." What does S have to do to make its terms control? As one court has held, it has to present its terms in a manner calculated to bring a reasonable recipient to the understanding that no deal has been concluded unless it responds favorably to the new terms.
So, if S is insistent that its terms control, it has to make it clear that acceptance is conditional on B's acceptance of the terms. So, that is where (2) comes in. "The additional terms are to be construed as proposals for addition to the contract." Ok, clear enough. But then it says that these terms, between merchants, automatically become part of the contract unless B has indicated an objection or the additional terms "materially alter" the contract. This seems to negate the flow of (1) by suggesting that new and additional terms become part of the contract unless the buyer steps in and objects.
But still we might be able to accept it on the analogy to the SOF, where the requirements for signature were relaxed for merchants. Here we may just have another "relaxation" requirement in the case of merchants. The additional terms become part of the contract unless the merchant (B in this case) objects.
OR, unless the changes in S's form "materially alter" the contract. Well, what does that mean? When is an additional term a term that materially alters the contract? If it materially alters the contract, the language suggests that you have no contract at all, so the solution to what material alteration is becomes crucial. Comments 4 and 5 try to define material alteration by giving a series of examples. Read through those examples and see if you are any clearer. Cmt. 5 seems to suggest that a limitation of remedy proposal by S might only be an additional or different term that does not materially alter the contract, and so would go into effect unless B seasonably objected within a reasonable time.
Finally, and briefly, section 3 provides that the contract may be put into effect by conduct by both parties which recognizes the existence of a contract even though the forms differ. In such a case where conduct was the mode of response, the differing terms drop out. In the language of the statute. "In such cases 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." That is, if the contract called for two different statutes of limitations in which an action could be brought, and it was understood that the contract would be accepted by conduct, such as the manufacturing of goods, then both of the statute of limitations for bringing an action would drop out. What would be the statute of limitations for bringing an action? The general SOL in Article 2 (2-725) would be applicable.
New Article 2 has significantly changed this section, but since I don't think it will be accepted, I focus on old Article 2.
On Tuesday, Feb. 1, I will distribute a work sheet in class to see how to apply this section. I plan also to post the worksheet on this site.
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