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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 3 ACCEPTANCE AND REJECTION OF OFFER

1-3 Corbin on Contracts § 3.37

§ 3.37 Conditional Acceptances and Counter-Offers Under the Uniform Commercial Code and the United Nations Convention

[Go To Supp]

When the variation from the offer is knowing and deliberate and brings home to the offeror the message that the offer is not acceptable to the offeree, there is much to justify the rule that a conditional acceptance or a counter-offer operates to reject an offer, thereby terminating the power of acceptance, but it has less justification when the variation is a boiler-plate term on a pre-printed form entitled ''purchase order,'' ''acknowledgment,'' ''contract'' (or the like) that is sent in response to an offer. The common law, under the ''mirror image'' rule, has treated almost any variation as creating a conditional acceptance or counter-offer, a rule that ''has been enforced with a rigor worthy of a better cause.''n1

In a frequently cited and criticized case,n2 an acceptance was sent by use of a simple form entitled ''Order'' which, however, stated: ''The acceptance of this order which in any event you must acknowledge will be considered by us as a guarantee on your part of prompt delivery within the specified time.'' (Emphasis supplied). Although the language with regard to a guarantee of prompt delivery within the specified time may have added nothing that was not already implied in the offer to sell, the language to the effect that it was imperative that the seller acknowledge the receipt of the acceptance added a new term, thereby creating a counter-offer. Several things can be noticed about the case. First, it is obvious that the form entitled ''Order'', designed to create an offer, was inappropriately used to accept an offer that had already been made. This use of inappropriate forms continues unabated and with almost wild abandon in today's business practices. Second, as a matter of business reality the deal did not go awry because of the variance between the offer and acceptance. The buyer desired to escape from the deal because changed market conditions made it unprofitable and the buyer also came to the legal conclusion that the order was placed by an employee who was not authorized to do. The variance between offer and acceptance became the issue only after the buyer had repudiated the agreement and the lawyers for the buyer pointed out the discrepancy which then became an afterthought excuse for nonperformance. The core legal issue of the employee's authority to contract did not have to be adjudicated.

It was precisely this case and others like it that led the drafters of the Uniform Commercial Code to devise a provision that would prevent the reneging on a deal which in commercial understanding had been made, merely because of inconsequential variations between the offer and acceptance.n3 As is too often the case in attempts at law reform, the revised law creates far more problems than it solves. By far the most frequent question raised under the Uniform Commercial Code provision is not whether a contract exists but what are the contents of the contract. On the latter question, the Code provision has proved to be a recipe for unadulterated chaos. Professor Gilmore aptly described the provision as ''abominable'', a ''complete disaster'', and a ''miserable, bungled patched-up-job.''n4

In a typical case prior to the effective date of the U.C.C., an axiom, called ''the last shot principle,'' governed the contents of the contract. Thus, if an offer were made by the buyer, and the seller's reply constituted a counter-offer, the purchaser's acceptance of delivery of the seller's subsequent or simultaneous shipment of the goods constituted acceptance of the seller's terms.n5 The last set of terms placed on the table (the last shot) prior to the purchaser's acceptance (by exercise of dominion over the goods) determined the content of the contract. Factually, this was usually, but not necessarily, the seller's terms. From the point of view of the legal analyst, the frustrating fact is that, at least for purchases and sales in the ordinary course of business, the parties so frequently fail to read the conflicting forms,n6 and if they do, they fail to make the effort to iron out differences. Some of the reasons for this are obvious. In a large and bureaucratic organization, the routine use of forms is mandated. Any attempt to modify routine forms for a particular transaction often requires the approval of higher management. An attempt to seek such modification will involve, at best, long delays, and at worst, the killing of the deal. Paralysis would often ensue.n7 Although it frequently happens that standard forms are not read by the employees who handle them, this is not to say that they were not read and formulated by someone. Indemnity clauses, limitations of consequential damages, disclaimers of certain warranties and limitations under others all reflect decisions with respect to the contract price. Their importance should not lightly be disregarded.

Against this background, the drafters of the Sales Article of the Uniform Commercial Code composed § 2-207. The goal of the drafters was to avoid the situation whereby parties could with impunity renege on their agreements because of minor differences between offer and acceptance that were not raised as a problem prior to dispute between the parties that arose because of changed market conditions or other cause unrelated to the issue of offer and acceptance.n8 This goal has been attained and the section generally works well in determining whether a contract has been formed. As one of the official comments states: ''a proposed deal which in commercial understanding has in fact been closed is recognized as a contract.''n9

The Text of the Statute

U.C.C. § 2-207 provides:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such a case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

Do the Writings Create a Contract?

[a] Is there a definite expression of acceptance?

The primary question with which the drafters were concerned, (was a contract formed by the documents that were exchanged), is answered exclusively by U.C.C. § 2-207(1). The general rule is stated to the effect that if the offeree has made a ''definite'' and ''seasonable'' (timely)n10 ''expression of acceptance,'' there is a contract. The one exception to this general rule is that no contract is formed if the definite expression of acceptance ''is expressly made conditional on assent to the additional or different terms'' contained in the purported acceptance. This part of the provision is not a terribly difficult rule to understand or apply in most cases, but the ingenuity of the human mind is such as to have produced some difficult cases.

The first question to be posed is whether a written offer has been made.n11 The ensuing discussion assumes that this is so.n12 The question then becomes whether the offeree has made a definite expression of acceptance.n13 Assume the buyer offers to buy 10,000 widgets for $100,000 for September delivery and the buyer sends a reply that states that the buyer's offer is accepted for $120,000 for December delivery. As improbable as it may seem, variations of this hypothetical have occurred in some form a number of times. The test should be that stated in comment 2 quoted above: has, ''in commercial understanding,'' a deal been closed? The comment is reinforced by the provisions of U.C.C. § 2-204 which look to such questions as whether the parties recognized the existence of the contractn14 and whether the parties have intended to make a contract.n15 While not concretely helpful to many questions arising under § 2-207, these provisions provide the governing philosophy-to give effect to the intention of the parties. A test that has received judicial acceptance is whether the acceptance diverges significantly as to a ''dickered'' term, that is, a term about which the parties have actually bargained over, or over which it would have been natural and normal to bargain. Generally, these terms are those which are inserted in the blank spaces of a printed form. If there is a significant divergence as to a dickered term, there is no definite expression of acceptance.n16 Not all courts have agreed with this proposition, treating even conflicting dickered terms to be merely ''different'' terms that did not prevent the formation of a contract.n17 On the other hand, some courts have gone further than the rule contended for here. It has been stated that parties may exchange printed forms which differ so radically that the second cannot be treated as an acceptance of the first, but this statement does not have broad support as most of the cases cited below will indicate.n18

[b] Is the Definite Expression of Acceptance ''Expressly Conditional on Assent to the Additional or Different Terms''? Assume that the expression of acceptance is definite enough, but it contains additional or different terms. The main thrust of the statute is to facilitate the finding that a contract has been formed despite this variance between the offer and acceptance. However, the offeree can, by apt language, prevent the formation of a contract if its definite acceptance is conditioned on the offeror's assent to the additional or different terms in the expression of acceptance. At times, the otherwise definite expression of acceptance includes language that is somewhat as follows: ''subject to all of the terms and conditions on the face and reverse side hereof, including arbitration, all of which are accepted by the [offeror].''n19 The introductory phrase ''subject to'' ordinarily is understood to introduce an express condition. Yet, in the interests of effectuating the general policy of finding that a contract has been formed, a narrowly literal interpretation has been followed. The quoted phrase does not manifest the intention that the acceptance is intended to be conditional on the offeror's assent to the additional or different terms contained in the document expressing acceptance. Therefore the quoted proviso does not prevent the formation of a contract.n20 If the condition is in a written non-standardized communication, it will not be construed so strictly, and the court will attempt to interpret its intended effect according to general principles of interpretation.n21

[c] Assuming the Writings Create a Contract, What Are Its Terms? If the offeree's expression of acceptance is definite and is not conditional on the offeror's assent to additional or different terms, U.C.C. § 2-207(2) governs the question of which terms of the writings are included in the contract. Certain definite rules may be stated.

First, all of the terms of the offer are automatically part of the contract.

Second, as implied in the first sentence of the subdivision, any additional or different terms contained in the acceptance that are expressly agreed ton22 by the offeror will, on common law principles, become part of the contract.n23

Third, if either party is a non-merchant the additional or different terms drop out of the picture. They have no further relevance unless expressly agreed to as stated in the second rule.

Fourth, if both parties are merchants the additional or different terms drop out of the picture if (i) the offer expressly limits acceptance to the terms of the offer or (ii) notification of objection has already been given or is given within a reasonable time after notice of the additional or different terms is received. Drafters of forms have generally availed themselves of these protective mechanisms to knock out additional or different terms.

Fifth, the wording of the statute makes it quite clear that the intent was that different terms, as opposed to additional terms, were not to become part of the contract unless expressly accepted by the offeror.n24 The logic of the statute is to allow the offer to be the core of the bargain. To allow different (conflicting) terms to knock out part of the offered terms would fly in the face of that logic. It is doubtful, despite suggestions to the contrary, that the omission of the word ''different'' from 2-207(2) was a typographical error. Nonetheless on debatable policy grounds there have been suggestions and holdings to the contrary.n25 The sense of the provision would have been made clearer if the subdivision had started as follows: ''The additional or different terms are to be construed as proposals for addition to the contract.'' Overall, it seems reasonably clear that the Code has substituted a ''first shot principle''. The offeror is master of the offer and if the writings create a contract, the offeror's terms govern the core of the agreement. To allow conflicting terms to knock each other out is to create a contract that is in accord with the intention of neither party. Only minor additions can be added to the contract without the offeror's express assent. It is of course ironic, as previously noted, that frequently the offeree drafts the terms of the offer, and the offeror's mastery becomes a fiction.n26 Nonetheless, it is in accord with the tradition of placing responsibility for its contents on the party signing a document.

Sixth, if the term materially alters the proposed contract, it is knocked out, unless expressly agreed to. Thus, only non-material terms successfully invade the originally offered terms, and only if both parties are merchants. The Code comments provide some help in determining whether a term is material or not within the meaning of the statute. It is material if the additional term would cause ''surprise or hardship if incorporated without express awareness'' by the offeror.n27 Immaterial terms are those which ''involve no element of unreasonable surprise''.n28 Materiality is often treated as a question of fact.n29 However, in some instances, courts have ruled on materiality as a matter of law.n30

[d] If the Writings Do not Make a Contract What Is the Effect of the Parties' Behavior if They Proceed as if They Had Made a Contract?

U.C.C. § 2-207(3) addresses the question posed in the caption. So does the common law. The relationship of the common law and statutory rules is unclear and is the source of much of the confusion surrounding the application of the statutory rule. Subdivision 3 provides, consistently with the common law, that a contract may be established by conduct if the writings do not create a contract. To the extent the provision is applicable, it radically diverges from the common law on the question of the content of the contract. In place of the ''last shot principle,'' is the rule that the contents of the contract are ''those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.'' Thus, if the writings of the parties do not make a contract, and do not contain the same warranty terms,n31 (a highly likely possibility), the buyer is entitled to those warranties that are supplied by operation of law under the provisions of U.C.C. §§ 2-312-2-318, as well as the provisions with respect to consequential damages.n32 Because these provisions of the Code are unabashedly favorable to the buyer and quite onerous on the seller, sellers have attempted to prevent the contract from falling under U.C.C. § 2-207(3). The extent to which they can do this by artful drafting of the seller's form is unclear. Can the seller remove the contractual relationship from subdivision 3 by explicitly providing, in response to a buyer's offer, ''We reject your offer and propose to do business on the following terms:....?'' If this language appears on a standard form, and the dickered terms of the purported counter-offer are the same as those of the offer, a court may well find that there is a definite expression of acceptance of the offer-an expression of willingness to proceed with the deal. Analogous cases exist. Sellers have drafted forms to the effect that their acceptance is expressly conditioned on the buyer's acceptance of the new and different terms on the seller's form. Where this form accompanies or precedes the seller's shipment of the goods, this clause has its intended effect of preventing the writings from forming the contract. It has, however, been held that the form does not have its intended effect of creating a counter-offer that is accepted by the buyer's conduct. Rather, the conditional acceptance acts merely as a rejection and the contract that is formed by conduct is governed by U.C.C. § 2-207(3).n33 The terms, then, are the dickered terms and other terms that the forms have in common together with the gap-fillers provided by the Code.

The parties can avoid having their transaction fall under U.C.C. § 2-207(3), by negotiating their differences. In Construction Aggregates Corp. v. Hewitt-Robins, Inc., n34 the buyer sent its purchase order to the seller. The seller accepted by letter but made its acceptance expressly conditional on assent to its limited warranty terms and to certain payment terms. The buyer's treasurer telephoned, requesting a modification of these payment terms and the seller agreed. The seller then delivered the goods and the buyer accepted them. It was held that the buyer, by requesting a change in the seller's payment terms, had implicitly acceded to the seller's limited warranty terms. It should be noted, however, that the contract in question appears to have been of an extraordinary magnitude and the seller's acceptance letter was the product of the joint effort of the ''Legal, Contract Administration and Sales Department.'' Sales of inventory in the ordinary course of business generally do not receive this kind of attention.

[e] Confirmations

The bad drafting of U.C.C. § 2-207 is particularly striking in the manner in which the section deals with written confirmations of contracts previously made either orally or by prior correspondence or some combination thereof. It provides that a ''written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.'' By definition, a confirmation confirms a contract already in existence. If so, how can it ''operate as an acceptance?'' Indeed, how can it have any effect on the formation, or the terms, of the contract being confirmed? We must try to make some sense out of what the drafters have wrought. It is generally agreed that a confirmation does not act as an acceptance, but it can have the effect of satisfying the statute of frauds,n35 possibly also providing an integration under the parol evidence rule,n36 and providing minor subsidiary terms to the transaction. A confirmation that is not a definite expression of assent cannot undo an existing contract and cannot materially alter it.n37 The most it can do is add a term that does not materially alter the contract. If both parties send memoranda of the previously formed contract, the terms of the contract stand firm. Additional terms not previously discussed by the parties can become part of the contract if they are immaterial.n38 Terms that differ from the prior understanding of the parties are knocked out. Terms in a confirmation that conflict with the confirmation of the other party knock each other out.n39 It is this knock-out rule that some authorities have borrowed and imported into the offer and acceptance process, as discussed above.

[f] The United Nations Convention

The United Nations Convention on the International Sale of Goods, addresses the issue of additional and different terms contained in a purported acceptance. It has taken a more conservative direction from that of the Uniform Commercial Code, but it too creates many difficulties of interpretation. The mirror image rule is its starting point. Article 19(1) states: ''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.'' Subdivision (2) of the Article undercuts this statement of the mirror image rule to some extent, providing:

However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

Note, as is the case with U.C.C. § 2-207(2), the offeror can object to an additional or different term. Under the Convention, however an objection to an immaterial term does not merely knock out the term, it prevents the formation of a contract. Article 19(3) then proceeds to enumerate certain kinds of terms that are deemed to be material. It provides:

Additional or different terms relating, among other things, to the price, payment quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.

In the event that the acceptance (1) contains an additional or different term that materially alters the term of the offer or (2) an immaterial alteration that is objected to, no contract is formed. If the parties proceed to recognize the existence of a contract by their conduct, what are the terms of the contract? Those of us who are steeped in the common law tradition would tend to conclude that inasmuch as the Convention has no analog to U.C.C. § 2-207(3), the contract by conduct is governed by the last shot principle and would tend to apply Article 18(3) which governs the acceptance of offers by conduct.n40 Lawyers in other States would not necessarily agree. They may well object, from a more subjective view of assent than our own, that there is no assent to the terms of the rejection. They may further urge that the Convention simply fails to regulate the content of such a contract and therefore the court should look to its own domestic law (including rules of private international law) for the solution of the question. Others, starting from the same premise that the Convention does not explicitly deal with the question of the contents of the contract formed in the manner here discussed, would argue that the solution should be found by extrapolation from the principles found in or underlying the Convention.n41

Legal Topics:

For related research and practice materials, see the following legal topics:

International Trade LawGeneral OverviewCommercial Law (UCC)Sales (Article 2)Form, Formation & ReadjustmentGeneral Overview

FOOTNOTES:

(n1)Footnote 1. Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020, 1022 (Wyo.1981) , quoting John D. Calamari & Joseph M. Perillo, Contracts § 2-22.

Holding that ''minor, nonsubstantive changes'' in a reply to an offer create a counter-offer is Venture Associates Corp. v. Zenith Data Systems Corp., 812 F. Supp. 788 (N.D. Ill. 1992).

(n2)Footnote 2. Poel v. Brunswick-Balke-Collender Co., 216 N.Y. 310, 110 N.E. 619 (1915) , reh'g denied, 216 N.Y. 771, 111 N.E. 1098 .

(n3)Footnote 3. Section 2-207 of the U.C.C. has been the subject of vast commentary in the law reviews. A very recent and generally sound article is Caroline Brown, Restoring Peace in the Battle of the Forms: A Framework for Making Uniform Commercial Code Section 2-207 Work, 69 N.C.L.Rev. 893 (1991). In footnote 2 thereto there is an extensive bibliography.

(n4)Footnote 4. Grant Gilmore, Letter to Professor Robert S. Summers, in Richard E. Speidel, Robert S. Summers and James J. White, Sales: Teaching Materials 93-94 (1987).

In Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (6th Cir.1972) , the court said: ''In reviewing this determination by the District Court, we are aware of the problems which courts have had in interpreting Section 2-207. This section has been described as a 'murky bit of prose,' Southwest Engineering Co. v. Martin Tractor Co., 205 Kan. 684, 694, 473 P.2d 18, 25 (1970) , as 'not too happily drafted,' Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497, 500 (1st Cir.1962) , and as 'one of the most important, subtle, and difficult in the entire Code and well it may be said that the product as it finally reads is not altogether satisfactory.' Duesenberg & King, Sales and Bulk Transfers under the Uniform Commercial Code, (Vol. 3, Bender's Uniform Commercial Code Service) § 3.03, at 3-12 (1969).''

(n5)Footnote 5. See, e.g., Alaska Pacific Salmon Co. v. Reynolds Metals Co., 163 F.2d 643 (2d Cir.1947) . The seller's disclaimer of warranty prevailed.

(n6)Footnote 6. This is not universally true. ''[I]t is customary practice in the industry to write a confirming letter if there are variations between the terms in the purchase orders and those in the acknowledgements.'' Reaction Molding Technologies, Inc. v. General Electric Co., 588 F.Supp. 1280 (E.D.Pa.1984) . Although the court refers to ''confirming letter,'' the letter referred to in the opinion was a letter objecting to certain, but not all, additional terms.

(n7)Footnote 7. See Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 Am. Sociological Rev. 55 (1963), where the author studied the battle of the forms as a sociological and legal phenomenon.

(n8)Footnote 8. See Comment 1 to U.C.C. § 2-207.

(n9)Footnote 9.

Comment 2 to U.C.C. § 2-207.

(n10)Footnote 10. U.C.C. § 1-204(3) provides: ''An action is taken 'seasonably' when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.'' The rule that an acceptance must be timely is identical to the common law rule on timeliness discussed in § 2.14 above.

(n11)Footnote 11. This provision also deals with written confirmations of contracts already made wholly or in part in oral conversations or by correspondence.

(n12)Footnote 12. For there to be an effective definite expression of acceptance, there must be an offer on the table. If the initial document is the seller's price quotation, subject to acceptance by the buyer and the seller's home office, there is no such offer. Such provisions bode ill for the seller in the battle of the forms. If the buyer follows up with a purchase order, the latter will be deemed the offer. See, e.g., Brown Machine, Division of John Brown, Inc. v. Hercules, Inc., 770 S.W.2d 416 (Mo.App.1989) ; McCarty v. Verson Allsteel Press Co., 89 Ill.App.3d 498, 44 Ill.Dec. 570, 411 N.E.2d 936 (1980) .

(n13)Footnote 13. It has been held, probably erroneously, that if the offeree replies with its own form for making offers, there is no definite expression of acceptance. Gord Industrial Plastics, Inc. v. Aubrey Manufacturing, Inc., 103 Ill.App.3d 380, 59 Ill.Dec. 160, 431 N.E.2d 445 (1982) , appeal after remand, 127 Ill.App.3d 589, 82 Ill.Dec. 855, 469 N.E.2d 389 . This is a resurrection of the Poel case discussed at note 2 above.

(n14)Footnote 14. Conduct by way of performance is taken into consideration under U.C.C. § 2-207(3) discussed below, but also to be considered is conduct by way of protest at or near the time of the alleged contract formation. In Duval & Co. v. Malcom, 233 Ga. 784, 214 S.E.2d 356 (1975) , the offeror immediately protested that no contract had been made as the buyer's tinkering with the quantity term showed the absence of a definite expression of acceptance. In United States Indus., Inc. v. Semco Mfg., 562 F.2d 1061 (8th Cir.1977) , cert. denied, 434 U.S. 986 , the seller, after about nine months, claimed that no contract had been formed because there was a divergence between the documents as to the exclusion of certain items from the contract. The failure to protest sooner indicates that the parties commercially understood that they had a deal.

(n15)Footnote 15. This provision provides:

§ 2-204. Formation in General

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

(n16)Footnote 16. In United States Indus. v. Semco Mfg., note 14, above, the divergence between the dickered terms was not deemed significant.

Ga. -In Duval & Co. v. Malcom, 233 Ga. 784, 214 S.E.2d 356 (1975) , the seller offered on buyer's form to sell his ''entire crop of 1973 cotton of 729.6 acres plus any addition that may be leased prior to planting.'' The buyer then added as an estimate ''600 pounds per acre or approximately 875 [bales of cotton].'' Because of the importance of an estimate to the obligations of an output contract, the divergence was significant and no definite expression of acceptance existed.

Mass. - Dubrofsky v. Messer, 1981 Mass.App.Div. 55 (1981) . An order was placed for 99 Durafab pool covers and 2 Micromesh covers. The ''acknowledgment'' indicated 80 Micromesh covers and 21 Durafab covers.

N.Y.; Pa.- Ore & Chemical Corp. v. Howard Butcher Trading Corp., 455 F.Supp. 1150 (E.D.Pa.1978) , questions of fact were present as to whether the telexed acceptance containing many new terms was a definite expression of acceptance.

Ohio - Alliance Wall Corp. v. Ampat Midwest Corp., 17 Ohio App.3d 59, 477 N.E.2d 1206, 17 Ohio B.R. 114 (1984) . Exchange of forms and other communications showed importance of delivery date and disagreement on the point. No contract was formed by the exchange of writings.

Or. - Meister v. Arden-Mayfair, Inc., 276 Or. 517, 555 P.2d 923 (1976) . Offer was made by the seller. The buyer redrafted it to change the date for the transfer of possession and a partial change in the identity of the parties to the offer. No contract.

Wis. - Koehring Co. v. Glowacki, 77 Wis.2d 497, 253 N.W.2d 64 (1977) . The buyer and seller exchanged telegrams. The buyer's stated ''F.O.B. our truck your plant loaded''; the seller's ''as is-where is''. No contract was formed.

In the much criticized case of Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d 497 (1st Cir.1962) , the court treated pre-printed warranty disclaimer terms in the seller's form as creating a counter-offer which rejected the buyer's offer.

(n17)Footnote 17. In Bosway Tube & Steel Corp. v. McKay Machine Co., 65 Mich.App. 426, 237 N.W.2d 488 (1975) and General Time Corp. v. Eye Encounter, Inc., 50 N.C.App. 467, 274 S.E.2d 391 (1981) , conflicting warranty terms, even though dickered (in that they were not on pre-printed forms but in a letter and a telex), were deemed to be merely ''different terms'' in an effective acceptance.

CBS, Inc. v. Auburn Plastics, Inc., 67 A.D.2d 811, 413 N.Y.S.2d 50 (1979) . Seller's proposal was an offer that contained an express price term on the face of the writing. One of the ''conditions'' on the rear called for a 30% engineering charge above the quoted price. The proposal lapsed. Sometime thereafter, buyer sent a purchase order apparently incorporating the price terms on the face of the seller's now expired proposal. Seller sent an acknowledgement that purported to incorporate the terms of the original proposal. The acknowledgement was held to be an acceptance of the buyer's offer and the 30% engineering charge did not become part of the contract because the buyer's offer expressly limited acceptance to the terms of the offer and the offer objected in advance to any additional or different terms. The court's reasoning appears somewhat wooden, but the seller's attempt to add 30% to the expressly quoted price through the mechanism of a pre-printed term on the back of its original proposal should not be allowed to succeed.

Stewart-Decatur Security Systems, Inc. v. Von Weise Gear Co., 517 F.2d 1136 (8th Cir.1975) . The plaintiff buyer wanted to purchase motors for closing prison cell doors. It examined and tested defendant's prototype, liked it and submitted a purchase order, giving specifications that were at variance with the prototype, but apparently without being aware of the variance. The defendant's acknowledgement referred to the model number of its prototype. Thus, the writings were in conflict as to the specifications, a very basic dickered term. Nonetheless, plaintiff's testimony at trial to the effect it intended to order motors based on the prototype showed a common intention and therefore there was a contract. Note that defendant's intention was objectively manifested while plaintiff's was subjective.

(n18)Footnote 18. McCarty v. Verson Allsteel Press Co., 89 Ill.App.3d 498, 44 Ill.Dec. 570, 411 N.E.2d 936 (1980) . (Alternative ground, as the initial document was a price quotation, not an offer.)

(n19)Footnote 19. Taken from Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (6th Cir.1972) .

(n20)Footnote 20. Dorton v. Collins & Aikman Corp., 453 F.2d 1161 (6th Cir.1972) . The Dorton case has been widely followed on this point. See Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir.1991) ; Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (10th Cir.1984) ; Idaho Power Co. v. Westinghouse Electric Corp., 596 F.2d 924 (9th Cir.1979) ; Reaction Molding Technologies, Inc. v. General Electric Co., 588 F.Supp. 1280 (E.D.Pa.1984) ; Egan Machinery Co. v. Mobil Chemical Co., 660 F.Supp. 35 (D.Conn.1986) ; St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc., 687 F.Supp. 820 (S.D.N.Y.1988) , aff'd without op., 895 F.2d 1410 (2d Cir.) ; Brown Machine Division of John Brown, Inc. v. Hercules, Inc., 770 S.W.2d 416 (Mo.App.1989) . See Annot., 22 A.L.R.4th 939.

In Ralph Shrader, Inc. v. Diamond International Corp., 833 F.2d 1210 (6th Cir.1987) , rehearing and rehearing en banc denied the following language was deemed to be expressly conditioned on the buyer's assent: ''The terms set forth on the reverse side are the only ones upon which we will accept orders.''

In Dresser Industries, Inc., Waukesha Engine Div. v. Gradall Co., 702 F.Supp. 726 (E.D.Wis.1988) , the seller's acknowledgement form read, ''Your order has been entered expressly subject to and conditioned on the understanding that our terms of sales stated on the front and reverse sides hereof and no others apply to this sale....'' It was held that ''understanding'' was the equivalent of ''your assent'' and that no contract was formed by the exchange of writings.

In Mace Indus., Inc. v. Paddock Pool Equipment Co., Inc., 288 S.C. 65, 339 S.E.2d 527, 530 (App.1986) , a purchase order constituted an acceptance despite the fact that it ''contained on its reverse side (1) a notice that 'THE SELLER AGREES TO ALL OF THE FOLLOWING TERMS AND CONDITIONS' and (2) a provision that the order form shall constitute the entire agreement of the parties....''

(n21)Footnote 21. Air Master Sales Co. v. Northbridge Park Co-Op, Inc., 748 F.Supp. 1110 (D.N.J.1990) . In response to an offer made by letter the offeree expressed assent but wrote, ''This confirmation will be valid only when [offeree] receives a Purchase Order from [offeror] for the windows.'' No further correspondence or deliveries ensued. The offeree's attempt to enforce the alleged contract was unsuccessful.

(n22)Footnote 22. Whether there has been assent to the additional or different term may constitute a question of fact. Ralph Shrader, Inc. v. Diamond International Corp., 833 F.2d 1210 (6th Cir.1987) , rehearing and rehearing en banc denied; Dresser Industries, Inc., Waukesha Engine Div. v. Gradall Co., 702 F.Supp. 726 (E.D.Wis.1988) .

Where, however, the seller-offeror signed the acceptance that contained a term, written in longhand on the first page, ''Supplier warrants that he will provide equipment to meet specifications ...'', the seller had agreed to this term that conflicted with the warranty disclaimer term in the offer. Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520, 22 A.L.R. 4th 925 (Mo.App.1981) .

Written confirmations were signed by the offeror in International Tin Council v. Amalgamet Inc., 138 Misc.2d 383, 524 N.Y.S.2d 971 (1988) , aff'd without op., 140 A.D.2d 1014, 529 N.Y.S.2d 983 .

(n23)Footnote 23. U.C.C. § 2-207 comment 3.

(n24)Footnote 24. Reaction Molding Technologies, Inc. v. General Electric Co., 588 F.Supp. 1280 (E.D.Pa.1984) .

(n25)Footnote 25. Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (10th Cir.1984) ; Southern Idaho Pipe & Steel Co. v. Cal-Cut Pipe & Supply Co., 98 Idaho 495, 567 P.2d 1246 (1977) , cert. denied and appeal dismissed, 434 U.S. 1056 ; Challenge Machinery Co. v. Mattison Machine Works, 138 Mich.App. 15, 359 N.W.2d 232 (1984) ; Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520, 22 A.L.R.4th 925 (Mo.App.1981) and cases cited therein. This result is largely due to the opinion expressed by Professor White in James J. White & Robert S. Summers, Uniform Commercial Code § 1-3. Professor Summers dissents. It is quite clear that Professor White is seeking to make law and Professor Summers is deferring to legislative intent as expressed in the statute. Daitom finds support in Idaho Power Co. v. Westinghouse Electric Corp., 596 F.2d 924 (9th Cir.1979) , which found a contract under § 2-207(1), yet nonetheless applied U.C.C. § 2-207(3). More chaos.

(n26)Footnote 26. See, e.g., Matco Electric Co., Inc. v. American District Telegraph Co., 156 A.D.2d 840, 549 N.Y.S.2d 843 (1989) .

(n27)Footnote 27. U.C.C. § 2-207 comment 4. The comment gives the following illustrations: ''a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer's failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable.''

For a discussion of whether the phrase in the comment coupling surprise and hardship regards these as alternative grounds, see Union Carbide Corp. v. Oscar Mayer Foods Corp., 947 F.2d 1333 (7th Cir.1991) (Posner, J.). The court states ''Hardship is a consequence, not a criterion. (Surprise can be either.)'' This statement is in the context of the statement of a general rule to the effect that ''An alteration is material if consent to it cannot be presumed.'' 947 F.2d at 1336 .

(n28)Footnote 28. U.C.C. § 2-207 comment 5. Specific examples given are: ''a clause setting forth and perhaps enlarging slightly upon the seller's exemption due to supervening causes beyond his control, similar to those covered by the provision of this Article on merchant's excuse by failure of presupposed conditions or a clause fixing in advance any reasonable formula of proration under such circumstances; a clause fixing a reasonable time for complaints within customary limits, or in the case of a purchase for sub-sale, providing for inspection by the sub-purchaser; a clause providing for interest on overdue invoices or fixing the seller's standard credit terms where they are within the range of trade practice and do not limit any credit bargained for; a clause limiting the right of rejection for defects which fall within the customary trade tolerances for acceptance 'with adjustment' or otherwise limiting remedy in a reasonable manner (see Sections 2-718 and 2-719).''

In Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir.1991) , the seller had a disclaimer of warranties on its box-top. It argued that the disclaimer was immaterial because the buyer had repeatedly purchased from it and all of the purchases were in boxes containing the same language. Consequently, it was argued, there was a course of performance with respect to the disclaimer, or, at least, it involved no element of surprise. The court disagreed, stating that because there never had been action by the parties on the issue addressed by the warranty terms, there was no course of performance. Consistent with Step-Saver are Trans-Aire Int'l v. Northern Adhesive Co., 882 F.2d 1254, 1262-63 (7th Cir.1989) ; Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440, 1445 (9th Cir.1986) ; Tuck Industries, Inc. v. Reichhold Chemicals, Inc., 151 A.D.2d 566, 542 N.Y.S.2d 676 (1989) , later proceedings 151 A.D.2d 565, 542 N.Y.S.2d 701 ; Southeastern Adhesives Co., Inc. v. Funder America, 89 N.C.App. 438, 366 S.E.2d 505, 507-08 (1988) . To the contrary is Schulze & Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 714-15 (7th Cir.1987) , disagreed with by Trans-Aire International, Inc. v. Northern Adhesive Co., cited earlier in this note.

(n29)Footnote 29.

Ala. - Burbic Contracting Co. v. Cement Asbestos Products Co., 409 So.2d 1 (Ala.1982) . The court affirmed the trial court's finding that a clause restricting the buyer's remedy for breach of warranty to repair or replacement and providing that in no event would the seller be liable for labor or consequential damages limited remedy in a reasonable manner and was not a material alteration of the terms of the offer.

Ind. - Dale R. Horning Co. v. Falconer Glass Industries, Inc., 710 F.Supp. 693 (S.D.Ind.1989) , limitation of consequential damages; materiality is a question of fact under Indiana and New York law.

Minn. - N&D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722 (8th Cir.1976) , arbitration.

N.J. - Wheaton Glass Co., Div. of Wheaton Industries v. Pharmex, Inc., 548 F.Supp. 1242 (D.N.J.1982) , limitation of consequential damages.

N.Y. - St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc. 687 F.Supp. 820 (S.D.N.Y.1988) , aff'd without op., 895 F.2d 1410 (2d Cir.) . A limitation of liability to repair or replacement not a material alteration. Evidence of course of dealing and of negotiation helped lead to this conclusion. However provisions for indemnity, attorney fees and fifteen-day notice of claim were deemed material. Each was subjected to a factual analysis.

Ore. - Willamette-Western Corp. v. Lowry, 279 Or. 525, 568 P.2d 1339 (1977) .

Tenn. - Dorton v. Collins & Aikman, 453 F.2d 1161 (6th Cir.1972) , remanded, in part, for a finding of whether an arbitration clause was a material alteration.

(n30)Footnote 30.

Neb. - Valmont Industries, Inc. v. Mitsui & Co. (U.S.A.), Inc., 419 F.Supp. 1238 (D.Neb.1976) , arbitration.

N.Y. - Marlene Industries Corp. v. Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239 (1978) , arbitration clause; Lorbrook Corp. v. G & T Industries, Inc., 162 A.D.2d 69, 562 N.Y.S.2d 978 (1990) , choice of Michigan law; Davidson Extruded Products v. Babcock Wire Equipment Ltd., 138 Misc.2d 118, 523 N.Y.S.2d 338 (1987) , choice of English law and arbitration clauses; Diskin v. J.P. Stevens & Co., 836 F.2d 47 (1st Cir.1987) , appeal after remand, 893 F.2d 1327 ; Coastal Industries, Inc. v. Automatic Steam Products Corp., 654 F.2d 375 (5th Cir.1981) , applying N.Y. law; choice of law provision is immaterial, but arbitration clause is material.

N.C. - Supak & Sons Mfg. Co. v. Pervel Industries, Inc., 593 F.2d 135 (4th Cir.1979) arbitration, New York and North Carolina law; Frances Hosiery Mills, Inc. v. Burlington Industries, Inc., 285 N.C. 344, 204 S.E.2d 834, 72 A.L.R.3d 466 (1974) , arbitration clause in written confirmation.

Pa. - Universal Plumbing & Piping Supply, Inc. v. John C. Grimberg Co., 596 F.Supp. 1383 (W.D.Pa.1984) , disagreed with by Bergquist Co. v. Sunroc Corp., 777 F.Supp. 1236 (E.D.Pa.1991) .

Wis. - Advance Concrete Forms, Inc. v. McCann Construction Specialties Co., 916 F.2d 412 (7th Cir.1990) . Invoice clauses requiring interest at 18% on overdue invoices are not material. The court could well have treated these clauses as an offer to a separate loan contract. See § 2.12 above.

(n31)Footnote 31. But if they contain the same warranty terms or as in Brett Fabrics, Inc. v. Garan, 170 A.D.2d 253, 565 N.Y.S.2d 521 (1991) , appeal dismissed, 77 N.Y.2d 810, 571 N.Y.S.2d 913, 575 N.E.2d 399 , the same arbitration terms, these will be incorporated in the contract. The court states: ''Plaintiff's present attempt to avoid arbitration which was required by its own forms, on the basis that defendants never signed plaintiff's response forms, thus allegedly negating any meeting of the minds with respect to an agreement to arbitrate is meritless.''

(n32)Footnote 32. Frank M. Booth, Inc. v. Reynolds Metals Co., 754 F.Supp. 1441 (E.D.Cal.1991) precisely proves the statement in the text. The seller's form tracked the language of the Code: ''Our acceptance is expressly conditioned on your agreement to the terms and conditions on the front and reverse sides of this Sales Order.'' No contract was formed except by subsequent conduct. The buyer received the benefit of the implied warranties of the Code. The seller unsuccessfully argued that the presence of this proviso indicated that there was no definite expression of acceptance.

(n33)Footnote 33. C. Itoh & Co. (America), Inc. v. Jordan International Co., 552 F.2d 1228 (7th Cir.1977) ; Dresser Industries, Inc., Waukesha Engine Div. v. Gradall Co., 702 F.Supp. 726 (E.D.Wis.1988) ; Leonard Pevar Co. v. Evans Products Co., 524 F.Supp. 546 (D.Del.1981) ; Lorbrook Corp. v. G & T Industries, Inc., 162 A.D.2d 69, 562 N.Y.S.2d 978 (1990) . In McJunkin Corp. v. Mechanicals, Inc., 888 F.2d 481 (6th Cir.1989) , rehearing denied, the first shipment preceded the seller's dispatch of its form. The court thought that the legal effect was not different from the case where the form accompanies the shipment.

Frank M. Booth, Inc. v. Reynolds Metals Co., 754 F.Supp. 1441 (E.D.Cal.1991) largely relied on the analysis found in Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440 (9th Cir.1986) . One aspect of that analysis is as follows: ''The Diamond Fruit Growers court noted that the application of § 2-207(3) was appropriate even though the seller might find itself assuming a greater degree of liability than it intended:

'The seller is most responsible for the ambiguity because it inserts a term in its form that requires assent to additional terms and does not enforce that requirement. If the seller truly does not want to be bound unless the buyer assents to its terms, it can protect itself by not shipping until it obtains the assent.''' 754 F.Supp. at 1447 , quoting from 794 F.2d at 1445 .

The difficulty with this line of argument is that it requires the party to bend its conduct to what the court holds to be the law, rather than recognizing that the basic thrust of the Uniform Commercial Code is to require the court to shape its rulings to conform to business practices. See U.C.C. § 1-102(2)(b).

The other pillar of the Diamond Fruit analysis applied in Frank M. Booth, Inc. was the ''neutrality'' principle. The court asserted that U.C.C. § 2-207 was intended to replace the last shot principle with a principle of neutrality. Neither party should gain a benefit based merely on the timing of the dispatch of forms. This principle is impossible to detect in the drafting history of the Code and is not apparent at all in U.C.C. § 2-207(1) and (2), which distinctly announce a ''first shot'' principle, with minor variations. A neutrality principle surfaces only when the battle of the forms places the parties within the grasp of subdivision 3. It is question-begging to place the parties within that grasp without giving serious consideration to subdivision 2 and the expressed intent of the offeree to make a counter-offer.

Dresser Industries, Inc., Waukesha Engine Div. v. Gradall Co., 702 F.Supp. 726 (E.D.Wis.1988) , announces a somewhat different rule. The expressly conditional acceptance is treated as a counter-offer. However, there must be evidence of ''unequivocal assent'' beyond merely tender and acceptance of the goods by the buyer. The court, however, is willing to hear evidence of a course of performance by which such assent is manifested.

(n34)Footnote 34. 404 F.2d 505 (7th Cir.1968) , cert. denied, 395 U.S. 921 .

(n35)Footnote 35. U.C.C. § 2-201(2).

(n36)Footnote 36. U.C.C. § 2-201.

(n37)Footnote 37. '''Confirmation' connotes that the parties reached an agreement before exchange of the forms in question. The purpose of the Code drafter here must have been to make clear that confirmations need not mirror each other in order to find [a] contract. Simply stated, then under this first clause of section 2-207(1) it is reasonable to assume that the parties have a deal, and there is a contract even though terms of the writing exchanged do not match. All of the language following the comma in subsection (1) simply preserves for the offeree his right to make a counter-offer if he does so expressly. This phrase cannot possibly effect the deal between parties that have reached an agreement and then exchanged confirmations. In that situation it is too late for a counter-offer and subsection (2) must be applied to determine what becomes of the non-matching terms of the confirmations.'' Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414, 422-23 (1973) , quoting Section 2-207 of the Uniform Commercial Code-New Rules for the ''Battle of the Forms'', 32 U.Pitt.L.Rev. 209, 210 (1971).

But see Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir.1991) , where the court assumes that language in a confirmation expressly conditioning acceptance on assent by the buyer would defeat the contract. It finds the language not to be expressly conditional.

(n38)Footnote 38. The tests for material alterations in written acceptances, discussed above, are the same as for written confirmations, and citations are interchangeable. Holding that an indemnification clause in a confirmation is a material alteration is Trans-Aire International, Inc. v. Northern Adhesive Co., 882 F.2d 1254 (7th Cir.1989) . Holding that questions of fact were presented as to the materiality of additional terms is Leonard Pevar Co. v. Evans Products Co., 524 F.Supp. 546 (D.Del.1981) .

(n39)Footnote 39.

Comment 6 to U.C.C. § 2-207 states, in part, ''Where clauses on confirming forms sent by both parties conflict each party must be assumed to object to a clause of the other conflicting with one on the confirmation sent by himself. As a result the requirement that there be notice of objection which is found in subsection (2) is satisfied and the conflicting terms do not become a part of the contract ...''.

(n40)Footnote 40. Article 18 is entitled, ''Acceptance: Time and Manner for Indicating Assent.'' Subdivision 3 thereto provides: ''... if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.''

The language of this Article indicates no awareness of the ''battle of the forms'' problem and does not specifically refer to counter-offers. Some observers have questioned whether this provision has any application to the contract formed by offer, counter-offer and shipment. It says nothing about the content of the contract, although one can argue that objectively the counter-offer has been accepted.

(n41)Footnote 41. These various views are detailed in Note, The United Nations Convention on Contracts for the International Sale of Goods and the ''Battle of the Forms,'' 13 Fordham Int'l L.J. 649 (1989-90).