Battle

of the Forms Hypotheticals with Answers

For each hypothetical, apply Section 2-207 of UCC Article 2 to determine (1) whether a
contract was formed and (2) if so, whether the contract includes the additional or different
term in Blue Sky’s order confirmation. Assume that both Perseus, Inc. (Perseus) and Blue
Sky Industries (Blue Sky) are merchants.

Hypothetical 1
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms. Blue Sky sends Perseus a written order confirmation for 100
widgets at $10 per widget. Blue Sky’s order confirmation contains seven terms. Six terms
are identical to the terms in the Perseus purchase order. The seventh term provides that
Perseus will indemnify Blue Sky for any liabilities Blue Sky might incur for damages caused
by the use of the widgets.

Answer: There is a contract and the contract does not contain the indemnity clause (an
additional term) because the indemnity clause is a material alteration. See 2-207(2)(b) and
Brown Machine.

Hypothetical 2
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms. Blue Sky sends Perseus a written order confirmation for 75
widgets at $12 per widget. Blue Sky’s order confirmation contains seven terms. Six terms
are identical to the terms in Perseus’ purchase order. The seventh term provides that
Perseus will indemnify Blue Sky for any liabilities Blue Sky might incur for damages caused
by the widgets.

Answer: There is no mutual assent and therefore no contract because an order
confirmation with a different price and quantity is not an “expression of acceptance.” See 2-
207(1).

Hypothetical 3
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms and states, “This order expressly limits acceptance to the terms
stated herein and any additional or different terms proposed by the seller are rejected unless
expressly agreed to in writing.” Blue Sky sends Perseus a written order confirmation for
100 widgets at $10 per widget. Blue Sky’s order confirmation contains seven terms. Six
terms are identical to the terms in the Perseus purchase order. The seventh term fixes a
reasonable time within customary limits for complaints Perseus has about the widgets.

Answer: There is a contract, but it does not contain the complaint period term. Blue Sky
has sent a confirmation with an additional term, Comment 5 of Section 2-207 indicates that
complaint period terms such as the one above normally are not “material alterations.” But
the Perseus purchase order expressly limited acceptance to the terms of the purchase
order. Under 2-207(2)(a), the complaint period term does not become part of the contract.

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Hypothetical 4
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms and states, “This order expressly limits acceptance to the terms
stated herein and any additional or different terms proposed by the seller are rejected unless
expressly agreed to in writing.” Blue Sky sends Perseus a written order confirmation for
100 widgets at $10 per widget. Blue Sky’s order confirmation states that it is “subject to the
following terms and conditions” and contains seven terms. Six terms are identical to the
terms in the Perseus purchase order. The seventh term fixes a reasonable time within
customary limits for complaints Perseus has about the widgets.

Answer: There is a contract, but it does not contain the complaint period term. Blue Sky
has sent an order confirmation with an additional term, and this confirmation does state
that it is “subject to” its seven terms and conditions. This may have led some of you to
conclude that Blue Sky’s acceptance was expressly made conditional on assent to the
different or additional terms and therefore did not operate as an expression of acceptance
under 2-207(1). However, courts have consistently held that language in an acceptance
must indicate very clearly that the offeree is unwilling to conclude a contract unless the
different or additional terms are included and that the “subject to” language above is
insufficient to convey this meaning. (See Brown Machine and Note 3 on page 176). The
Perseus purchase order expressly limits acceptance to the terms of the offer. So, under 2-
207(a), the complaint period term is not part of the contract.

Hypothetical 5
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms. Blue Sky sends Perseus a written order confirmation for 100
widgets at $10 per widget. Blue Sky’s order confirmation contains seven terms. Six terms
are identical to the terms in the Perseus purchase order. The seventh term fixes a
reasonable time within customary limits for complaints Perseus has about the widgets. On
the day it receives Blue Sky’s order confirmation, Perseus calls Blue Sky and states that it
objects to the complaint period term.

Answer: There is a contract, but it does not contain the complaint period term because
Perseus has objected to that term. See 2-207(2)(c).

Hypothetical 6
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms. Blue Sky sends Perseus a written order confirmation for 100
widgets at $10 per widget. Blue Sky’s order confirmation contains seven terms. Six terms
are identical to the terms in the Perseus purchase order. The seventh term fixes a
reasonable time within customary limits for complaints Perseus has about the widgets.

Answer: There is a contract, and it contains the complaint period term. Comment 5 of
Section 2-207 indicates that complaint period terms such as the one above normally are
not “material alterations.” In this hypothetical, the Perseus purchase order does not
expressly limit acceptance to the terms of the purchase order, and Perseus does not object.

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Hypothetical 7
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains six terms and states, “This order expressly limits acceptance to the terms
stated herein and any additional or different terms proposed by the seller are rejected unless
expressly agreed to in writing.” Blue Sky sends Perseus a written order confirmation for
100 widgets at $10 per widget. Blue Sky’s order confirmation contains seven terms and
states, “our acceptance is expressly conditional on buyer’s assent to all terms contained in this
order confirmation.” Six terms are identical to the terms in Perseus’ purchase order. The
seventh term provides that Perseus (the buyer) will indemnify Blue Sky for any liabilities
Blue Sky might incur for damages caused by the use of the widgets. Blue Sky ships 100
widgets to Perseus. Perseus accepts the widgets and pays Blue Sky $1000.

Answer: Here, Blue Sky’s order confirmation does make clear that its acceptance is
expressly conditional on Perseus’ assent to the indemnity term. Nearly all courts have held
that conduct (here, accepting delivery of the widgets) is not sufficient to constitute
acceptance by Perseus of the additional term in the Blue Sky order confirmation because
applying 2-207 in this way would effectively reinstate the “last shot” rule. So the writings
exchanged by the parties do not establish a contract under 2-207(1). However, 2-207(3)
provides that the parties can still form a contract if they recognize the existence of a
contract through their conduct. That is the case here. What are the terms of this contract?
Under 2-207(3), the terms include the sale of 100 widgets for $10 per widget, the other six
terms in the writings of the parties that are identical, and any default provisions in the UCC.
The contract does not include the indemnity clause because there is no UCC gap filler
provision on such indemnities.

Hypothetical 8
Perseus sends Blue Sky a purchase order for 100 widgets at $10 per widget. The purchase
order contains seven terms. The seventh term in the purchase order provides that Perseus
has 60 days to raise any complaints about the widgets. Blue Sky sends Perseus a written
order confirmation for 100 widgets at $10 per widget. Blue Sky’s order confirmation
contains seven terms. Six terms are identical to the terms in the Perseus purchase order.
The seventh term provides that the buyer (Perseus) has only 30 days to raise complaints
about the widgets.

Answer: There is a contract. If we apply the “knock out” rule, the contract does not include
either the 60 day or the 30 day complaint period term. Blue Sky’s order confirmation is a
seasonable expression of acceptance even though it contains 30 day rather than 60 day
complaint period. However, because the purchase order contains an explicit 60 day period
for complaints, the 30 day complaint period term in the order confirmation is considered to
be a “different” term, rather than an “additional” term. Although courts take varying
approaches to terms in an acceptance that are different rather than additional, I have asked
you to apply the knock out rule. Here, the different terms knock each other out.

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Hypothetical 9
Bob, who is not a merchant, sends an Email to Blue Sky to place an order for 5 widgets at
$10 per widget. Blue Sky’s sale manager sends a reply Email confirming Bob’s order for 5
widgets at a price of $10 per widget. The reply Email fixes a reasonable time within
customary limits for complaints Bob has about the widgets. Bob never assents to the
complaint period term.

Answer: The parties have a contract, but the complaint period term is not part of the
contact. Under 2-207(1), Blue Sky’s reply Email is a definite and seasonable expression of
acceptance of Bob’s offer to purchase the widgets. While the complaint period term does
not materially alter Bob’s offer, additional terms do not become part of the contract under
2-207(2) unless both parties are merchants. Instead, the complaint period term in Blue
Sky’s reply is just a proposal for addition to the contract. The facts indicate that Bob never
assented to this term, so it is not part of the contract.