Battle of the Forms 2006 (I)
Prof. Bill Long 1/24/06
A Review of Two Cases on 2-207
One of the major changes in the Amended Article 2 (2003) is its splitting up old (current) 2-207 into new (as yet unadopted) 2-206(3) and 2-207. Even though the amendments to Article 2 may not be fully adopted by any legislature, I hope that the changes to 2-207 are adopted by some. As White & Summers have said, this section is "an amphibious tank that was originally designed to fight in the swamps, but was sent to fight in the desert." The purpose of the next two essays is to illustrate the workings of two cases under the current 2-207. I will then describe the nature of the changes from old to new 2-207.
A Recent Case
To show that the provision is still being interpreted, I would like to walk through Polytop Corp. v. Chipsco, Inc., 826 A2d 945 (RI 2003). Defendant makes molds which plaintiff uses in its manufacture of plastic squeeze bottles. Defendant initiated the selling process by presenting plaintiff a price quotation for a specific mold in Jan. 1999. Three weeks later plaintiff issued a purchase order for that mold. In defendant's (offeror's) quotation was a provision to arbitrate all contract disputes. In plaintiff's (the offeree here) purchase order, the following sentence appeared:
"Please enter our order for the following subject to the terms and conditions below and attached hereto and made a part hereof. Any additional or different terms proposed by seller are rejected unless expressly assented to in writing by buyer's authorized agent."
After plaintiff/buyer became dissatisfied with defendant/seller's goods, it initiated suit for damages. As expected, defendant, on the strength of the arbitration clause in its quotation, moved to stay proceedings in court so that the case could be arbitrated. The court had to decide whether the arbitration clause in offeror's quotation survived the attempt of plaintiff to limit its effect through the language just quoted.
The trial court held that 2-207(2) governed this transation (the section which assumed that a contract had been concluded and that all that was at issue were the terms of the contract) and that plaintiff's words didn't materially alter defendant's quotation sheet; hence the arbitration clause controlled. On appeal, the court affirmed, but went through the following analysis.
1. It restated Polytop's (PL) argument. Plaintiff argue that its acceptance of Chipsco's proposal expressly was made conditional by the provision in its purchase order requiring that any additional or different terms proposed by seller would be rejected unless accepted in writing by its (plaintiff's) agent. It considered the arbitration provision in Chipsco's proposal to be such an "additional" term to which it had not assented. Hence the arbitration clause would not be operative.
2. It differentiated this case from a 2001 case (described here) and then stated its major point. Polytop's words simply speak of additional words suggested by the other contracting partner, while the statute speaks of additional or different terms which it (Polytop) would suggest. That is, the statute envisions the situation in which Polytop would have introduced additional or different terms into its contract and made acceptance of the contract conditional upon defendant's acceptance of Polytop's additional terms. In fact, by wording its provision the way it did, Polytop was accepting the contract unconditionally and was silent on the issue of dispute resolution. Because the seller had initiated the contract, their clause requiring arbitration could not be seen as an additional or different term. Polytop didn't require the acceptance of any particular term by Chipsco.
The Real Problem with Polytop's Form
One of the problems provoked by 2-207 (which scholars have referred to as the "first-shot" or a "modified first-shot rule--the offeror gets to control the terms of the contract) is that both sides try to draw up forms that make the contract's existence seemingly dependent on the acceptance of the provisions of its form. Thus, both sides "arm" themselves with forms, but sometimes the forms themselves then disarm the makers of the form, as if someone has stolen a police officer's weapon and turned it on the officer. This is precisely what has happened in this case. Let me illustrate.
Normally, the plaintiff (buyer) is the offeror in such a transaction. The plaintiff has seller's catalogue, calls or writes to the seller to order the goods and then sends the order form. The seller, then, is usually the offeree, and it confirms the sale through its acknowledgment form. What happened here is that Polytop's form is really an offeror's form but, in the case at hand, Polytop is an offeree (because the seller initiated negotiations with its quotation sheet). If Polytop's form was the offeror's form, it would, under 2-207(2)(a) be a good example of an offeror's (buyer's) form that wants to complete the transaction under the terms of its form. This would be possible to do. But, now that the buyer is, all of a sudden, the offeree, the one whose acceptance seals the contract, its quoted provision makes no sense at all. The offeror has already suggested its contractual terms (including the arbitration clause); it will have no more "additional" terms. Therefore, Polytop's form isn't appropriate to do anything to protect it. It simply operates as an acceptance and the offeror (Chipsco in this case) controls all the terms of the contract.
Thus we see that not only is the section seemingly impenetrable at points but the contracting partners have often muddied the water considerably by devising and using forms that aren't appropriate for the transaction. And so all the elaborate legal games go for nought, and the arbitration clause stands.
The next case illustrates a slightly different issue in the interpretation of 2-207.
Copyright © 2004-2007 William R. Long