UCC Offer and Acceptance

What is the shelf life of a firm offer?

3 months. Any firm offers that state a time longer than 3 months will only be irrevocable for the first 3 months.

Examples of clauses that would materially alter a contract

A clause negating warranties. Eg, merchantability or fitness in circumstance in which they would normally attach; Clause requiring that complaints be made in a time materially shorter than customary or reasonable; Clause that would vary in a significant way an established usage of trade or a course of past dealing between the parties.

Minority rule & "different terms"

A different term appearing in the acceptance is treated as a "mere proposal" for alteration of the contract, which the offeror is free to accept or reject.

The UCC "Firm Offer" Rule

A merchant can make a firm offer (an irrevocable offer) to either buy or sell goods without consideration so long as: 1. offer is made by a merchant; 2. in writing signed by the merchant; and 3. offer expressly states it will be held open.

Nonconforming Acceptance Where Both Parties are Merchants

Additional terms (not addressed in original offer) become part of the contract UNLESS: 1. offer expressly limits acceptance to the terms of the offer; 2. offeror objects to the additional terms within a "reasonable time" after receiving notice of them; OR 3. the additional terms would materially alter the contract.

What sale of goods does the UCC govern?

All sale of goods, not just the sale of goods priced at $500 or more; AND not just sales of goods involving merchants.

"Written confirmations" with "different terms" between MERCHANTS:

Any terms in a confirmation that differ from the terms of the prior agreement are "proposals" for inclusion in the contract, which the receiving party is free to accept or reject.

Shrink-Wrap Contracts - agreements found on computers or other high-tech goods

Courts that apply "additional/different" terms rules: the boilerplate terms are mere proposals; Non-following courts: consumer's retention and use of the goods constitutes an acceptance of the shrink-wrap terms.

"Written confirmations" with "conflicting terms" between MERCHANTS:

If BOTH merchants send written confirmations and those confirmations contain conflicting terms, then the "knock out" rule applies, and NEITHER party's terms is in the contract.

Contracts formed by conduct and the UCC

If a contract is established by conduct, the terms of the contract will be the terms on which the writings of the parties agree, together with the IMPLIED terms or default rules established by the UCC for warranties, remedies, party performance, and other topics.

Parties enter into oral contract and agree to follow up with "written confirmations". What happens if contract between MERCHANT and NON-MERCHANT?

If one party is a NON-merchant, then any additional or different terms are "mere proposals" for addition to the contract which the receiving party is free to accept or reject.

"Written confirmations" with "additional terms" between MERCHANTS:

If the transaction is between merchants, then additional terms are "automatically" part of the contract UNLESS: 1. they would "materially alter" the contract; or 2. receiving party objects to them within a "reasonable time."

Hybrid cases - the sale of goods and a services contract

Majority rule - the appropriate source of law (cl or ucc) is determined by: Predominant purpose of the transaction.

Battle of the Forms (i.e., preprinted forms), When it Occurs

May occur when a buyer places an order (the offer) and the seller's acceptance form contains terms which differ from the buyer's order or are not addressed in the order at all (these rules apply regardless of which party - buyer or seller - is the offeror or offeree). Such response constitutes a nonconforming acceptance.

Majority rule with respect to "different terms"

Omit both the offeror's original provision and the offer's differing provision from the resulting contract.

What does "materially alter" mean?

That is, terms that would result in "surprise" or "hardship" if incorporated without the EXPRESS AWARENESS of the other party.

UCC and the Mirror Image Rule

The UCC rejects the CL mirror image rule and recognizes a binding contract, despite the presence of a non-conforming acceptance, in 2 situations: 1. the shipment of non-conforming goods; and 2. the battle of the forms.

How can a merchant establish an irrevocable offer for longer than 3 months?

The merchant can create a valid common law option contract. In order to do so, 3 requirements must be met: 1. an offer; 2. a subsidiary promise to keep the offer open; and 3. some consideration.

Nonconforming goods AND the perfect tender rule

The seller's shipment of nonconforming goods constitutes acceptance of the buyer's offer, but it also constitutes a breach of the resulting contract under the perfect tender rule.

Nonconforming Acceptance and the New and/or Additional Terms

The treatment of additional and/or different terms depends on the identities of the parties.

2 principal sources of contract law

UCC - for sale of goods (all goods) CL - for services

UCC Statute of Frauds and Sale of Goods

UCC Statute of Frauds applies only to the sale of goods for a price of $500 or more.

UCC definition of Merchant

UCC defines a merchant in terms of his "special knowledge" and "skill" with respect to the practices or goods involved in a transaction.

Seller's Shipment of Conforming and Non-Conforming Goods

Under the UCC, a seller can accept a buyer's offer to purchase goods for prompt or current shipment in 1 of 3 ways. 1. by a promise - a promise to ship goods in conformity with the terms of the offer; 2. shipment of goods - prompt or current shipment of the goods in conformity with the terms of the offer; OR 3. shipping nonconforming goods - seller can also accept the buyer's offer by shipping nonconforming goods.

Nonconforming goods AND "Accommodation"

Under the UCC, the shipment of nonconforming goods will not constitute acceptance IF the seller notifies the buyer that the shipment is offered only as an "accommodation" to the buyer. The shipment would constitute a Counteroffer which they buyer is free to accept or reject.

Effect of Nonconforming Acceptance

Unless acceptance is expressly made conditional on assent on the additional or different terms, the nonconforming acceptance will operate as: an effective acceptance of the of the (original) offer, forming a valid and enforceable contract.

Acceptance of an offer under the UCC

Unless otherwise indicated, acceptance may be made in any manner and by any medium reasonable under the circumstances.

"Conditional Acceptance" under the UCC

When acceptance, even though it states additional or different terms, is made conditional on assent to the additional or different terms. Majority rule: must be clear and conspicuous Minority rule: clearly communicates unwillingness to do business unless AND until the offeror agrees to the offeree's terms.

Nonconforming Acceptance in Transaction Involving a Consumer

When at least one party to the transaction is NOT a merchant, the additional or different terms are construed as proposals for addition to the contract. They are not part of the contract, unless the offeror EXPRESSLY agrees to the additional/different terms.