MEMORANDUM

To:
From:
Date: November 18, 2020
Re: OSU and Holopainen whiteboard dispute

QUESTIONS PRESENTED

1. Which contracting system applies to this transaction? Why?

2. What does the "battle of the forms" mean?

3. Was the pro-forma invoice an offer and the purchase order an acceptance?

4. Was the pro-forma invoice an offer and the purchase order a rejection and counter-offer?

5. Was there mutual assent to the terms of the agreement?

6. Where should this dispute be heard?

7. Which country's law will apply to the agreement?

SHORT ANSWER

The Convention on Contracts for the International Sale of Goods (CISG) applies to this

transaction, because it is between parties of two different nations (USA and Canada). Battle of

the forms means that there is an assent that includes additional or changed terms to the original

offer. Under the CISG, a reply to the offer that contains modifications is a rejection of the offer

and constitutes a counter offer. Yes, the pro-forma invoice was an offer, but the purchase order

was not an acceptance. The Purchase order was a rejection and counter offer. Yes, there was

mutual assent to the terms of the agreement. Holopainen accepted OSU’s counteroffer by

shipping the goods, thus there was a valid contract. This dispute should be heard in Payne

County, Oklahoma and Oklahoma state law will apply to the agreement as stated in the

counteroffer that was accepted by Holopainen.

 STATEMENT OF FACTS

Oklahoma State University asked Holopainen AutoFocus, a Swedish company

headquartered in Stockholm, for a quote on electric whiteboards. On March 5th, Holopainen sent

a pro-forma invoice to OSU. The invoice includes the costs of the electronic whiteboards and the

installation. The total contract price is $500,000; $150,000 of this amount is the cost of the

whiteboards and the remaining $350,000 is for the cost of installation. The pro-forma invoice

includes the provision: “The parties agree that all disputes arising out of this agreement will be

heard before an international arbitration panel in Paris, France. The parties further agree that the

United Nations Convention on Contracts for the International Sale of Goods applies to all

disputes.”

On March 15th, OSU responds to the pro-forma invoice by preparing a purchase order.

The purchase order states that OSU will pay $500,000 for the sale and installation of the

whiteboards and the installation must be complete before April 30th. The purchase order states

the following: “The parties agree that all disputes arising out of this agreement will be heard

before a district court in Payne County, Oklahoma. The parties further agree that Oklahoma state

law applies to all disputes.”

Holopainen does not confirm receiving the purchase order, but shipped the whiteboards

to Stillwater for installation on March 20th. While the goods are in transit, on April 5th, OSU

notifies Holopainen that they are withdrawing the offer. The whiteboards and installers arrive in

Stillwater on April 15th and OSU refused to accept delivery of the whiteboards. On April 25th,

Holopainen filed a claim before an arbitration panel in Paris, France.

DISCUSSION
 a. Contracting System

There are three sources of contract law: Common Law, the Uniform Commercial Code, and

the Convention on Contracts for the International Sale of Goods. Common Law governs

contracts related to services, real estate, employment, and insurance. The Uniform Commercial

Code (UCC) governs contracts for sale of goods across the United States. The CISG governs

transactions between parties of different nations.

The facts show that this transaction should be governed by the CISG, because OSU and

Holopainen are based in two different countries (USA and Sweden). Thus, the Convention on

Contracts for the International Sale of goods is the contracting system that governs this

transaction.

b. Battle of the Forms

A battle of the forms occurs when there is an assent that includes additional or changed terms to

the original offer. This often occurs when pre-printed forms are exchanged between the seller

and buyer. In this set of facts, a battle of the forms occurs when Holopainen sends the pro-forma

invoice and OSU sends a purchase order back.

c. Offer and Acceptance

Under the CISG a valid contract requires mutual assent, meaning there needs to be an offer

and acceptance. For an offer to be effective, the question is whether the offeror intended to be

bound by the offer. This is done by looking at the number of people to whom the offer is

addressed and the definiteness of the proposal. According to the facts, this offer was exclusively

from Holopainen to OSU, there were no other people to whom this deal was offered. The

creation of the pro-forma invoice made this offer definite. Thus, the pro-forma invoice was an

offer from Holopainen to OSU.

 CISG article 18 states that “a statement made by or other conduct of the offeree, indicating

assent to an offer is an acceptance.” There are two elements to an acceptance: assent to the offer

and communication of that assent to the offeror. Once the assent of the offeree reaches the

offeror, the contract is formed. CISG article 19 states that “A reply to an offer which purports to

be an acceptance but contains additions, limitations or other modifications is a rejection of the

offer and constitutes a counter offer.” For these new terms to be a rejection, they must materially

alter the terms of the offer, otherwise these new terms become a part of the contract, unless the

offeror objects. According to the facts, OSU replied with a purchase order that included

modifications; these changes did not materially alter the terms of the offer, thus the

modifications of hearing disputes in Payne County, Oklahoma under Oklahoma state law were

added to the contract. Holopainen did not confirm receipt of the purchase order, but they

accepted the new offer by shipping the goods.

According to the facts, Holopainen made an offer with the pro-forma invoice and OSU made

a counteroffer with the purchase order. Holopainen then accepted the counteroffer from OSU by

shipping the goods.

d. Mutual Assent

A valid contract under the CISG requires mutual assent. This means that an offer and

acceptance is needed. For an offer to be effective, the offeror had to intend to be bound by the

offer. To show this we look at the number of people the offer was addressed to and the

definiteness of the proposal. For an acceptance to be valid, there must be assent communicated to

the offeror. According to the CISG, the acceptance is effective when it reaches the offeror.

According to the facts, there was mutual assent. Holopainen sent a valid offer to OSU

through the pro-forma invoice, that they intended to be bound with. OSU sent a counteroffer
through the purchase order, that was then accepted by Holopainen through shipment of the

goods. These valid offers and acceptances show that there was mutual assent.

e. Dispute Hearing

Holopainen accepted OSU’s counteroffer on March 15th, by shipping the agreed upon goods.

Thus, the location of where disputes are to be heard are found in the counteroffer made by OSU

and accepted by Holopainen. Under this contract, disputes should be heard in Payne County,

Oklahoma.

f. Choice of Law

Due to OSU’s counteroffer being accepted by Holopainen, Oklahoma state law will apply to

this agreement. The offer made by Holopainen that included a provision stating disputes are to be

heard in Paris, France was not accepted by OSU as shown by the modification in the accepted

purchase order.

CONCLUSION

This transaction will be governed by the CISG, because the two parties are based in two

different countries. Based on the CISG, Holopainen made an offer to OSU who then made a

counteroffer, this counteroffer was accepted by Holopainen by shipping the goods. There was

mutual assent, an offer was made and accepted, thus the contract is valid. According to the

accepted counteroffer, this dispute will be heard in Payne County, Oklahoma under Oklahoma

state law. A valid contract exists between these two parties according to the CISG.