When it is not exactly clear what parties agreed upon but it is clear that the parties intended to agree, a court must determine what terms apply. If various forms have been sent back and forth between the parties common law only gives us two options to apply to the forms: Offer and Acceptance or Counteroffer. The Uniform Commercial Code (UCC) gives us a third option: acceptance with additional terms.
This option can be found in the UCC 2-207. The goal of 2-207 is to determine which terms apply from the contract negotiation; however, the language of the section can be very confusing and hard to follow. This UCC 2-207 flowchart should be helpful in navigating this section of the UCC.
Consideration is a crucial concept in understanding Contract Law. The making of a promise (offer and acceptance) is insufficient by itself to result in the formation of a contract.* The additional requirement is the presence of “consideration.”
The concept of consideration has developed over the years. In 1875 consideration was defined as:
“A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for the promise of the first. The idea behind consideration is determining the types of contracts we want to enforce. The main type of contract we don’t want to enforce is a gift.
The court now explains that consideration requires a benefit to the promisor or a detriment to the promise that is bargained for. In other words, benefit or detriment are insufficient to constitute consideration. However, according to Pennsy Supply the requirement that consideration be bargained for does not require actual bargaining between the parties.
The court uses the Homlesian test of “reciprocal conventional inducement, each for the other.” (Bargaining theory of consideration). “The promise must induce the detriment and the detriment must induce the promise.” Oliver Wendell Holmes, Jr.
The Restatement adopts the bargain theory of consideration and rejects any additional requirement of benefit or detriment.
*Note: International contract law recognizes that a contract can be formed without the additional requirement of consideration.