Battle of the Forms and 2-207 and explaining 2-207 and article 2 and uniform commercial code and additional or different terms

I think my first mini-essay on 2-207 may have cleared away some of the problems with interpretation of this section, but I need one or two more essays both to reiterate some points from before and clarify the text in more detail. Difficult sections of text often require two or three runs at them until they begin to fall into place for us.

Reviewing the Purpose of 2-207

Cmt. 1 to 2-207 and my remarks in class illustrate the primary purpose of this section, which is to enable contracts to form and commerce to happen despite buyer's and seller's different ordering forms. Under the CLC, if the buyer submitted a Purchase Order ("PO") and the seller sent back an Acknowledgment Form ("AF") that differed at all from the PO, the terms of the AF would control and the AF would serve as a counteroffer. No contract would have been concluded. However, under the "pro-commerce" philosophy of Art. 2, the Code would like to see these transactions become contracts without the cumbersome language of counteroffers and more counteroffers.

But by allowing differing forms to witness to an agreement, the Code both solved one problem and created another. The problem it "solved" is that people can now have contracts, enforceable agreements, without agreeing on all the terms. The problem it "created" is that if you have an enforceable contract with differing forms, which form actually "controls" if the deal goes sour? The problem becomes especially acute if some of the boilerplate language in the two forms actually contradicts each other--such as a statute of limitations provision or a limitation of remedy clause. The framers of 2-207 tried to solve these two problems in one section, and most scholars and courts feel that the overreached. As we say with children who want an extra helping of cake, their eyes may have been bigger than their stomachs. But here is what they gave us.

I think it will be helpful to divide our understanding of 2-207 into a series of easy questions.

Question 1: Do Differing Terms Invalidate a Contract?

Answer: No. The opening lines of 2-207(1) deal with this. A form sent within a reasonable time "operates as an acceptance" even though it states different or additional terms. So, differing boilerplate terms do not preclude a contract from being made. Other sections of the Code suggest that a contract can be formed "in any manner sufficient to show agreement (2-204(1))," so there you have it. Differing terms don't mean that the AF is a counteroffer. The AF is an acceptance.

Question 2: What is meant by the "Unless" Clause ?

Answer: The "unless" clause at the end of 2-207(1) means that the seller has the option to state conditions in its AF that must be agreed to if a contract is to be formed. That is, the "unless" clause limits the broad statement of the first part of the section. Different forms mean you have a contract unless the seller expressly makes the contract subject to the terms in its AF. How does the seller do this? Well, this, actually, is a very good question and so I commend you for asking it. Courts were all over the place on this for about a decade after the UCC was enacted. Some interpreted this statement broadly to include any express mention of different terms. But then, as time went on, a narrower interpretation developed (which now rules the day). Under this narrower interpretation, in order to invoke this section a seller must make its terms conspicuous and be utterly clear that the deal is off unless the buyer assents to them. The terms must be, in the language of one case, reasonably calculated to inform the recipient (usually the potential buyer) that no deal has yet been concluded and none will be concluded unless s/he assents to the terms. This "unless" clause is not the "pressure point" of the statute; it is a more minor point. Now let's move to the big question.

Question 3: Well, Whose Terms Control When they Differ?

This is the $64,000 question. We have to go one step at a time. Let's go on to 2-207(2). When we have additional or different terms in the seller's AF, these terms will become part of the contract [ignore 2-207(2)(a) as it is of slight importance] automatically unless the buyer raises a timely objection. Ok. So, we know now that unless the buyer objects in a timely fashion, the seller's terms will enter into the contract. But, if the buyer objects, the additional and different terms do not become part of the contract.*

[*I think there are unclarities of language here, because the Code suggests that the mere fact of objection makes the objectionable terms fall away but that you still have a contract. So, it appears that the buyer has protections that the seller doesn't have. That is, there is no provision allowing the seller to knock out a buyer's provision. This inequity has bothered some, but has led most courts to conclude that what you have in 2-207 is a "modified first shot rule" in which whoever "fires" the "first shot" (i.e., the buyer) can dictate the terms of the contract more than the seller, whereas in the CLC the seller could dictate the terms--the so-called "last shot rule."]

But the additional and different terms, which automatically become part of the contract unless the buyer objects, also do not become part of the contract if they "materially alter" the contract. Thus, there are two exceptions to the "additional and different terms" rule. We can state the rule as follows. A contract is formed even when seller and buyer use different terms, and the seller's different terms become part of the contract unless these terms materially alter the contract or the buyer timely objects to these terms.

I need one more mini-essay to explain the "materially alters" language.