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Reproduced with permission from 8 Journal of Law and Commerce (1988) 11-51

excerpt from

An Essay on the Formation of Contracts and Related Matters under the United Nations Convention on Contracts for the International Sale of Goods

John E. Murray, Jr. [*]

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Different or Additional Terms in the Acceptance -- The "Battle of the Forms" Under CISG

One of the sacred rules of the common law of contracts was the "matching acceptance" or "mirror image" rule which allowed for virtually no deviation in the terms of a response to an offer if that response was to operate as an acceptance. What has become the most controversial section of the Uniform Commercial Code is typically viewed as the section that emasculated the "matching acceptance" rule of the common law.

Section 2-207 permits a response containing different or additional terms to operate as an acceptance if the response is otherwise a definite and seasonable expression of acceptance.[125] This iconoclastic concept has been misunderstood and applied in mechanical fashion -- a fashion diametrically opposed to the specific purposes of 2-207 and the underlying purposes of Article 2 as expressed by the father of the UCC and principal draftsman of Article 2, Karl Llewellyn.[126] Llewellyn was concerned that the contract recognized by a court would be the factual bargain of the parties. He knew that parties who exchange printed forms (typically a purchase order and acknowledgment) were only concerned with what he called "dickered" terms, i.e., the description of the goods, the price, perhaps the delivery terms and little else. They were neither concerned about nor aware of such lawyer-drafted, fine print clauses as those dealing with warranty disclaimers, the exclusion of consequential damages or arbitration as a substitute for the judicial process and judicial remedies as found in Article 2 of the UCC. Rather, the parties thought they had a "closed deal" and Llewellyn wanted to recognize that deal rather than some tortured amalgam of a deal that neither party would recognize, concocted from technical rules of monistic, Willistonian contract law. Llewellyn had nothing against a true "matching acceptance." But the acceptance he discovered and inserted into 2-207 was not an acceptance at common law.

At common law, Llewellyn's definite and seasonable expression of acceptance containing different or additional terms was necessarily a counter offer which rejected the offer from the other party, typically the buyer. The reasonable merchant buyer did not know the response he received was a counter offer and when the goods arrived, he accepted them. Later, when something went awry such as the goods not performing according to merchantable standards causing direct and even consequential damages, the buyer felt compelled to bring an action for breach of that basic implied warranty of merchantability to recover his direct and consequential damages. The buyer would lose because the seller's printed form disclaimed the warranty of merchantability and excluded consequential damages. Since the reply to the offer contained terms that either expressly or impliedly deviated from the terms of the offer, the seller's form was a counter offer which was said to be accepted by the buyer when he accepted the goods.

The unassailable Willistonian logic resulted in the buyer accepting all of the seller's terms, i.e., warranty disclaimers, damage exclusions and the like though no reasonable buyer had any such intention. The manifest injustice of sticking either party with material, risk-shifting clauses neither read nor understood from the other's printed form through a mechanical application of common law contract rules was clear to Llewellyn. It would be no easy task to provide a UCC section that would deal effectively with the new concept.

We have now had enough case law and scholarly comment to conclude without the slightest doubt that the only remedy is a statutory amendment with no warranties that the substitute will work. The language of the current 2-207 has been properly criticized and the judicial evolution of the section upon which Llewellyn relied has been a miserable flop.[127] Little wonder that the CISG delegates could not have been persuaded to pursue a United States legal perspective of acceptances containing different or additional terms. In fact, there is evidence that the American representatives were pleased to see the rejection of 2-207 concepts in the Convention.[128]

Notwithstanding the lack of a successful paradigm, a return to the pre-UCC version of the matching acceptance rule does not speak well for the CISG product. Whatever may be said to be wrong with UCC 2-207, its purpose was to overcome the manifest injustice suggested above. That was and is a noble purpose. That purpose was either unseen, ignored or considered impossible to attain in one of the great compromise legal documents of the twentieth century, CISG. The nobility of purpose was, rather, said to be reflected in "the nature of a contract" and the "traditional theory that contractual obligations arise out of expressions of mutual agreement" thereby necessitating the requirement that "an acceptance must comply exactly with the offer."[129] The absurdity of this notion with respect to unread printed forms was deliberately ignored by the delegates, for they were without a solution. The rationale is summed up very nicely by Professor Farnsworth: "[G]iven the controversy and uncertainty provoked by the Code provision, the Convention solution may be a sound, if conservative one."[130]

The "Convention solution" is not a complete adoption of the pre-Code matching acceptance rule, though the differences between that antiquarian view and CISG are insignificant. The basic CISG provision certainly appears to be a complete adoption of the classical view: "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."[131]

The language of this first and principal subsection in Article 19 is quite interesting. It is diametrically opposed to 2-207(1) which would permit a reply to an offer purporting to be an acceptance to operate as an acceptance notwithstanding additions, limitation or other modifications. Fortunately, it uses the term "reply" rather than "acceptance," a fault of 2-207.[132] The first subsection also avoids other troublesome language under 2-207, i.e.,"different or additional" terms,[133] and substitutes "additions, limitations or other modifications."[134] Curiously, we will see "additional or different" creep into subsection (2) of Article 19. It is clear that Article 19(1) is designed to replicate the "matching acceptance" rule of the common law notwithstanding the repudiation of that concept under the Uniform Commercial Code.

Article 19(2) appears to mitigate the harshness of the matching acceptance rule of 19(1), but the mitigation is almost not worth the candle. If the reply to the offer contains different or additional terms that "do not materially alter the terms of the offer,"[135] the reply will constitute an acceptance unless the offeror promptly objects by orally informing the offeree or dispatching a notice to that effect. This provision is somewhat reminiscent of one of the earliest interpretations of 2-207 of the UCC. In the celebrated Roto-Lith case,[136] the court could not assimilate the radical changes effected by 2-207. It suggested that immaterial changes contained in the response to the offer would not require the reply to be characterized as a counter offer, i.e., such a reply would constitute an acceptance which would include the immaterial changes. Material changes in the reply, however, mandated a counter offer characterization. Roto-Lith has been almost universally rejected as a reliable precedent since it is analytically unsound.[137] The opinion unwittingly destroys 2-207 which expressly allows for material alterations in an otherwise definite and seasonable expression of acceptance.[138]

CISG Article 19(2) appears to arrive at the same conclusion as the ill-famed Roto-Lith case. Yet, it differs markedly from Roto-Lith in permitting the offeror to preclude the formation of a contract merely because the reply contains immaterial additions or deviations from the offer. The offeror is cloaked with this power under 19(2) even though the modifications of his offer are, by definition, insubstantial. If they are to be considered immaterial, the different terms in the reply may not relate to price, payment, quality or quantity of the goods, the place or time for delivery, the extent of one party's liability to the other or to the settlement of disputes. All of these terms are listed in subsection (3) of Article 19 as terms "considered to alter the terms of the offer materially."[139]

It is difficult for Professor Farnsworth "to imagine variations that would not be material."[140] Under 2-207 of the Code, an offeror may preclude immaterial alterations of his offer by notice to the offeree.[141] The offeror is not permitted to avoid the contract that was formed by the offeree's imperfect acceptance, however. By permitting the offeror to control the decision as to whether any contract is formed under CISG, there is the possibility of speculation at the expense of the offeree though Article 19(2) does require the offeror to act "without undue delay" if he decides to object to the immaterial variation of his offer. Assume, for example, that the offeror would like to revoke his offer but the offeree has already dispatched an acceptance which does not make the acceptance effective but does make the offer irrevocable.[142] When the acceptance reaches the offeree, it is effective[143] and a contract is said to be concluded at that point.[144] If however, the offeror detects an immaterial difference in the terms of the purported acceptance, Article 19(2) permits him to defeat the entire contract.[145] An offeror could, therefore, escape from a bargain because of an immaterial difference in the acceptance which would not bother someone in his position and, in fact, did not bother him. The "good faith" requirement in CISG[146] will not operate as an effective deterrent of such conduct. If the offeror fails to object at all or fails to object in timely fashion, the reply is an acceptance and a contract is formed including the immaterial change in the acceptance. If, however, the offeror objects, the same reply is no longer an acceptance. It is magically transformed into a rejection.[147] There would appear to be no reasonable basis for this structure. If a reply to an offer manifests an acceptance of all of the material terms of the offer but also contains a variant, immaterial term, why not permit the offeror to exclude that term from the contract by objecting to it rather than providing him with the power to preclude the formation of the entire contract? While this view may be seen as peculiarly American since it comports with the UCC, it is also a view that protects the offeror from any -- even immaterial -- variant terms and still requires the reply to be characterized as an acceptance which is effective when it reaches the offeror and concludes a contract under other CISG Articles.[148] The current version is not only objectively absurd; it also creates contradictions within CISG.

It may have been oversanguine to expect CISG to include an effective provision dealing with different or additional terms in an otherwise definite expression of acceptance. We should not, however, assume that any of the problems that Llewellyn saw in the 1930's concerning such acceptances will somehow be avoided under CISG. Moreover, since current interpretations of the UCC favor buyers in the position of offerors sending purchase orders, it would not be unusual to discover a considerable proclivity for such buyers, pursuant to CISG Article 6, to avoid all of CISG or at least that portion dealing with the "battle of the forms".

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Go to entire text of Murray commentary


* University Distinguished Service Professor of Law, University of Pittsburgh, School of Law.

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125. U.C.C. 2-207(1) (1978).

126. See Murray, supra note 3.

127. All of these comments concerning 2-207 are fully elaborated at Murray, supra note 1, and earlier articles cited therein.

128. See, e.g., various suggestions from Professor Honnold, supra note 22, in his analysis of CISG Article 19, such as: "[L]egal science has not yet found a satisfactory way to decide what the parties have 'agreed' when they have consummated a transaction on the basis of the routine exchange of inconsistent forms." Id. at 189. "The framers of the 1964 and 1980 Conventions were well advised not to follow this feature of the Uniform Commercial Code" (at 193 referring to U.C.C. 2-207). See also note 8 of the Honnold book at 195 where he reports the rejection of 2-207(1) and (2) by the Ontario Law Reform Commission. See also the quoted remark of Professor Farnsworth in the text at infra note 130.

129. Official Records, supra note 31, at 24.

130. Farnsworth, supra note 26, 3.04, at 3-17.

131. See CISG, supra note 1, art. 19(1).

132. Section 2-207(1) is confusing because, inter alia, it speaks of a definite and seasonable expression of "acceptance" operating as an acceptance even though it contains different or additional terms unless the "acceptance" is made expressly conditional on assent to the different or additional terms at which point the "acceptance" is not an "acceptance" and only presumably a counter offer. U.C.C. 2-207(1) (1978).

133. There is considerable difficulty in deciding whether a particular term in a response to an offer is either different or additional. Moreover, 2-207(1) of the U.C.C. speaks of "different or additional" terms, but 2-207(2) expressly mentions only "additional" terms. This problem and the other problems of 2-207 are explored in Murray, supra note 1, and other articles therein.

134. For a suggestion that the term, "modifications" may not include "trivial" changes, see supra note 30, at 544-45.

135. See CISG, supra note 7, art. 19(2) (emphasis added).

136. Roto-Lith, Ltd. v. F. P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962).

137. See, e.g., C. Itoh & Co.(America) v. Jordan Int'l Co., 552 F.2d 1228, 1235, n.5 (7th Cir. 1977); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168, n.5 (6th Cir. 1972); Ebasco Serv. Inc. v. Pennsylvania Power & Light Co., 402 F. Supp. 421, 437-38 (E.D. Pa. 1975); Steiner v. Mobil Oil Corp., 20 Cal. 3d 90, 107, 569 P.2d 751, 763, 141 Cal. Rptr. 157, 169 (1977); Uniroyal, Inc. v. Chambers Gasket & Mfg. Co., 177 Ind. App. 508, 517-18, 380 N.E.2d 571, 578 (1978).

138. See U.C.C. 2-207(2)(b) (1978) which indicates that such material alterations in a definite and seasonable expression of acceptance do not become part of a contract between merchants.

139. See CISG, supra note 7, art. 19(3). The interesting question is whether any term dealing with any matter listed in 19(3) is conclusively presumed to be a materially different or additional term. The scholarship on this point suggests an affirmative answer based on the deletion of earlier language ("unless the offeree by virtue of the offer or the particular circumstances of the case has reason to believe they [the different or additional terms] are acceptable to the offeror"); Official Records, supra note 31, at 24. See also supra note 30, at 549, n.6.

140. Farnsworth, supra note 26, 3.04, at 3-16. Professor Honnold agrees. See Honnold, supra note 22, at 193: "However, only the Convention provides a definition of 'material.'"

141. U.C.C. 2-207(2)(a) (1978) permits the offeror to limit acceptance to the terms of the offer as one method of precluding immaterial alterations. The somewhat duplicative 2-207(2)(c) permits the offeror to notify the offeree of objection to such immaterial terms in an otherwise definite and seasonable expression of acceptance and to remove the immaterial terms in this fashion.

142. See CISG, supra note 7, art. 16(1).

143. Id., art. 18(2).

144. Id., art. 23.

145. The requirement that the offeror's objection occur "without undue delay" would not preclude this result since the offeror cannot object until he receives the acceptance containing the immaterial, different or additional terms.

146. See CISG, supra note 7, art. 7(1).

147. See Official Records, supra note 31, at 24.

148. The Netherlands suggested another device that would have arrived at the same result. With respect to the offeror's objection, it suggested the following amendment: "If the offeror does so object, the offeree can promptly retract the additional or different terms and the terms of the contract are those of the offer." Official Records, supra note 31, at 96. The rational for the amendment was stated as follows: "That situation [permitting the offeror to convert an acceptance into a rejection] could give rise to abuse and affect good faith in international trade. Non-material alterations or additions could certainly be considered important by the offeror, but the offeree should always be entitled to retract those changes or alterations promptly and revert to the terms of the original offer." Id. at 57, 286. The Netherlands amendment lacked support. Id. at 58, 286.

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999

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