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UCC 2-207 Flowchart: Battle of the Forms

UCC 2-207 Flowchart

Download a .pdf version of the UCC 2-207 flowchart

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.

UCC 2-207 Flowchart
UCC 2-207 Flowchart

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.

Download a .pdf version of the UCC 2-207 flowchart

 

For an example of the Battle of the Forms in action see Brown Machine, Inc. v. Hercules, Inc.

 

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Normile v. Miller, 326 S.E.2d 11 (1985)

Case Name: Normile v Miller
Plaintiffs: Normile and Kurniawan
Defendant: Hazel Miller
Citation: 313 N.C. 98, 326 S.E.2d 11 (1985)


Key Facts:

Defendant listed real estate for sale with a local realtor. On the same day, a real estate broker, Richard Byer, showed the property to the plaintiffs who were prospective purchasers. Byer helped plaintiffs prepare a written offer to purchase the property. The offer was countered with various terms of the original offer amended. The plaintiff did not immediately accept or reject the offer and did not like all of the terms described in the counteroffer. Byer testified that Normile did not have $500 for earnest money deposit, which was one of the requirements of the defendant’s counteroffer, and thought that the plaintiff had rejected the counteroffer. The following day, plaintiff Segal signed an offer to purchase with terms very similar to those contained in defendant’s counteroffer to plaintiff Normile and Kurniawan. This offer was accepted by defendant (through the same agent), without any changes. Later that same day, the defendant revoked her counteroffer to plaintiff as the agent commented, “You snooze, you lose; the property has been sold.” Prior to the end of that same day, plaintiffs Normile and Kurniawan initialed the offer to purchase form containing defendant’s counteroffer and delivered the form to the defendant’s realtor, along with the earnest money deposit of $500.

Procedural History:
Plantiffs Normile and Kurniawan appealed to the Court of Appeals after the trial court denied their motion for summary judgment. The Court of Appeals unanimously affirmed the trial court and plaintiffs appealed to the Supreme Court of North Carolina.

Separate actions were filed by plaintiff-appellants and appellee seeking specific performance. Plaintiff Segal (the third party purchaser) was granted a motion for consolidation of trials. Plaintiff Segal was awarded summary judgment by the trial court and the defendant was ordered to perform the contract to convey the property to Segal.

Issue:
If a seller rejects a prospective purchaser’s offer to purchase but makes a counteroffer that is not accepted by the prospective purchaser, does the prospective purchaser have the power to accept after he receives notice that the counteroffer has been revoked?

Holding:
No, the prospective purchaser does not have the power to accept a counteroffer after he receives notice that the counteroffer has been revoked.

Reasoning:

There was no “meeting of the minds” between plaintiff-appellants and defendant since the parties failed to assent to the same thing in the same sense. The defendant’s counteroffer did not manifest any intent to accept the terms of the original offer, unless and until the original offeror accepted the terms of the defendant’s counteroffer.  A “qualified acceptance” constitutes a counter-offer and has the same effect as a rejection.

Nowhere in the counteroffer is there language to the effect that Defendant Miller “agrees to sell to the purchasers” if they accept by a certain date (no option contract). Also, the time-for-acceptance provision from the plaintiff-appellants’ original offer did not become part of the terms of the counter-offer. Therefore, the court concluded that the defendant made no promise or agreement to hold her offer open and was able to accept the third party’s offer.

 

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Princess Cruises, Inc. v. General Electric Co. – 143 F.3d 828 (4th Cir. 1998)

Case Name: Princess Cruises, Inc. v. General Electric Co.
Citation: 143 F.3d 828 (4th Cir. 1998)
Plaintiff/Appellee: Princess Cruises, Inc.
Defendant/Appellant: General Electric Co.

Issue: Whether the district court erred in applying the UCC to the contract and whether the jury erred in their award by not observing GE’s final price quotation.

Key Facts: The plaintiff submitted a purchase order (intended to be an offer) to the defendant to perform routine inspection services and repairs on one of its cruise ships. The defendant faxed back its own Fixed Price Quotation which had other terms and disclaimed any liability for consequential damages, lost profits, or lost revenue.
During the inspection, the defendant recommended that the ship be taken ashore for cleaning and balancing. During the cleaning the rotor became unbalanced, which the defendant attempted to correct. The imbalance caused further damage to the ship forcing additional repairs and the cancellation of two tend-day cruises. The plaintiff paid the defendant the full amount of the contract ($231,925).

Procedural History: A jury found GE liable for breach of contract and awarded the plaintiff $4.5 million in damages. Appealing, GE contends that the district court erred in denying its motion for judgment which required the court to vacate the jury’s award of incidental and consequential damages. GE argues that the district court erred because it applied UCC principles, rather than common-law, to a contract primarily for services.

Holding: The contract should not have been evaluated under the UCC because it was a contract for services and the jury should have only considered GE’s Final Price Quotation which restricted damages to the contract price and eliminated liability for incidental or consequential damages, lost profits, or revenue.

Reasoning: First, whether a particular transaction is governed by the UCC, rather than common or statutory law, hinges on whether the contract primarily concerns the furnishing of goods or the rendering of services. Princess’s actual purchase description requests a GE “service engineer” to perform service functions (the contract included incidental parts that were expensive).
Second, the jury should have only considered GE’s Final Price Quotation as the contract. The first purchase order submitted by Princess was rejected by a counteroffer (GE’s first price quotation) which in turn, was revoked and replaced by another offer (GE’s Final Price Quotation. Also, because Princess failed to discuss the conflicting terms of the two contracts, their inaction gave GE every reason to believe that Princess assented to the terms set forth in their final price quotation.

Restatement 19 – “The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.” Under the Restatement, a counter-offer destroys the offer.  The fact that the parties performed evidence that there was an acceptance. The phone call giving GE permission to proceed and that Princess brought their ship in to be repaired. Therefore, Princess intended to accept the last counter-offer by GE. This is called the last-shot rule. Whatever is left on the table is the contract. The only one that really matters is the last contract on the table. If the parties perform, then there is an acceptance.

Judgment: The circuit court reversed the district court’s decision and granted GE’s motion for judgment as a matter of law and remanded to modify the judgment according to common-law and the opinion of the court.

Why it was important to determine whether common law or the UCC applied: Common law only gives us two options in contract formation: Offer and Acceptance or Counteroffer. The UCC gives us a third option: acceptance with additional terms.

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Brown Machine, Inc. v. Hercules, Inc. – 770 S.W.2d 416 (1989)

Case name: Brown Machine, Inc. v. Hercules, Inc.
Citation: 770 S.W.2d 416 (1989)
Plaintiff: Brown Machine, Inc.
Defendant: Hercules, Inc.

Issue: Whether the parties had agreed to an indemnification provision in their contract.

Key Facts: The plaintiff, Brown Machine, sold the defendant, Hercules, a T-100 trim press. Prior to the sale, a proposal was submitted to the defendant which stated an indemnification clause. The defendant reviewed the proposal and spoke on the phone with the plaintiff but objected to the payment term in the proposal. The plaintiff contested that the proposal was an offer and this conversation was an acceptance.
The defendant then submitted a purchase order (actual offer) for the trim press which stated that it “limits acceptance to the terms stated…any additional or different terms proposed by the seller are rejected unless expressly agreed to in writing.”
The plaintiff then sent the defendant an order acknowledgement which again stated the indemnification clause. The defendant responded with a latter that stated a specification in the product needed to be changed but “all other specifications are correct.” The plaintiff contended that this constituted assent by the defendant to the indemnification clause but the judge said it was obvious that “specifications” only referred to the product and not the terms and conditions.

Procedural History: The trial court awarded the plaintiff for the defendant violating the indemnification provision.

Analysis: If this was common law, we would use the last shot rule. However, under the UCC we use acceptance with additional terms (Section 2-207).

Holding: The parties had not agreed to an indemnification provision.

Judgment: The court reversed the trial court’s decision.

See our helpful UCC 2-207 Flowchart