Jane K. Winn, professor at the University of Washington School of Law, recently asked me the following question:
I’m trying to create an exercise for my first-year contracts class that would teach the students how to draft a good “Battle of the Forms” UCC § 2-207 term to block application of the counterparty’s boilerplate. The “Battle of the Forms” problem arises in sale of goods transactions when each party sends boilerplate terms to the other, but neither party ever signs the other’s terms.
Here are two examples of sale-of-goods boilerplate terms (based on actual purchase orders/acknowledgements posted to the Internet) that attempt to track the language of UCC § 2-207 to block the application of the counterparty’s terms:
- Seller/offeree acknowledgement based on UCC § 2-207(1): “Seller’s acceptance is expressly made conditional on Buyer’s assent to the terms and conditions set forth herein”
- Buyer/offeror acknowledgement based on UCC § 2-207(2)(a) & (c): “Seller’s acceptance of this offer is expressly limited to these terms, and any terms contained in Seller’s acknowledgement that are inconsistent with them shall be deemed to be objected to by Buyer”
What language would you use in these contexts?
I was pleased to receive Jane’s inquiry: I’d been pondering that I’m an article 2 ignoramus, and her question forced me to become a bit less of an ignoramus. (If you want a quick introduction to “battle of the forms,” I suggest that you consult this post by @TheContractsGuy.)
My starting point is, as always, What category of contract language should I use? Here’s what I came up with:
2-207(1)
- Condition, using language of obligation: For this acceptance to be effective, the Buyer must accept all its terms.
- Language of policy: This acceptance will be effective only if the Buyer accepts all its terms.
2-207(2)
- Condition, using language of obligation: To be effective, the Seller’s acceptance of this offer must not contain any additional terms.
- Language of policy: The Seller’s acceptance of this offer will be effective only if it contains no additional terms.
I didn’t track the UCC language, as what matters is the substance, not the form. Copying the clunky drafting of statutes is not a route to clarity.
What do you think?
You could try to have your cake and eat it too: “Seller’s acceptance is expressly made conditional on Buyer’s assent to the terms and conditions set forth herein; that is to say (in plainer language), this acceptance will be effective only if the Buyer accepts all its terms.” It’s repetitive, yes, but it’s akin to providing a French translation of a clause that says “This Agreement is written in English.”
If Brian Rogers is correct, your suggested approach would defeat contract formation and invoke the provisions of 2-207(3), would it not?
Yes indeed — but that’s not the question that Ken’s correspondent (Jane Winn) posed.
I don’t think you can win the battle of the forms. The best you can do is try not to lose too badly and to neutralize the other side’s onerous terms, which will generally result in application of article 2’s default terms. You do this by (1) putting your terms into play early, (2) having a set of terms that are comprehensive enough to address each area covered by the other side’s terms, and (3) including a statement in your terms objecting to the other side’s additional and conflicting terms.
You should be careful about trying to do more. For example, a seller that inserts a my-terms-only clause might find itself kicked into 2-207(3), which treats the parties’ writings as not having formed a contract and constructs a contract out of terms on which both parties’ writings agree and default UCC provisions. In states like Missouri, if a buyer doesn’t actually assent to the seller’s terms, you’ll be kicked to 2-207(3). Going through with the deal doesn’t constitute assent. See, e.g., PCS Nitrogen v. Christy Refractories, 225 F.3d 974 (8th Cir. 2000).
The problem with having the UCC default terms applied to your contract if you’re a seller is that they are more buyer-friendly in key aspects than most negotiated deals are. For example, it’s common for negotiated contracts to have a limited repair and replacement warranty and disclaimer of consequential damages. Application of the UCC default terms would result in a four-year warranty of merchantability, possibly a warranty of fitness for a particular purpose, no return or replacement exclusive remedy, and consequential damages for the buyer but not the seller.
If a seller prices its products based on limiting the warranty and damages, it should make sure these are negotiated terms and not rely on its boilerplate terms. However, this is easier said than done because in many industries you can’t insist on a negotiated contract if you want to stay in business unless you have a great deal of bargaining leverage.
A thought-provoking post. You seem to be calling attention to a paradox: the better you draft your my-terms-only provision, the likelier you are to be facing UCC default terms. Would you entitle your talk on the subject “When Drafting Clearer Contracts Produces Worse Outcomes”?
Would it make sense to state in seller’s boilerplate that the price reflects the warranty and damages limitations and is $x if those are held not valid?
Or would that invite buyer’s counter-boilerplate that buyer is paying the contract price in reliance on seller’s full warranty and full damages exposure, and in their absence buyer would pay only $x?
I think all roads lead to the defaults when two well-crafted forms collide. Every term has a counter-term. The only way to control whether a term becomes part of the contract is to have both parties agree on it, so if a term is important to you, you should have the other party agree to it if at all possible.