Exploring the battle of the forms in action.

AuthorKeating, Daniel

INTRODUCTION

Like many commercial law professors, I have long been fascinated with the workings of the Uniform Commercial Code's section 2-207, the "battle of the forms" provision. There are two features of that section, one internal and one external, that make it such an intriguing statute to ponder. The internal source of fascination with section 2207 is that it provides a classic model for teaching students about the intricacies of statutory construction. There is probably no other provision within U.C.C. Article 2 that provides more confusion to law students and more challenge to the instructor than does section 2-207. There is a little bit of everything in there: subsections that must be reconciled, Official Comments that must be reckoned with, and even an apparent drafter's error or two that turns what would already be a difficult statute into a nearly incomprehensible one.(1)

As good a device as section 2-207 is for introducing students to difficult statutory construction problems, I suspect that the more intriguing aspect of the provision for law professors is the strange kind of contract that the section sanctions. In a sense, the classic battle-of-the-forms sale turns contract law on its head. This is a deal in which the two parties recklessly, if not knowingly, consummate a sale of goods without having settled on all of the terms. And while one could argue that every contract is incomplete at some level, what distinguishes the battle of the forms case is that these contracts are most often incomplete at very fundamental levels. Left unsettled are issues like warranties, remedies, and other matters that no one could pretend were beyond the contemplation of the parties at the time of formation. A second distinction between the battle-of-the-forms situation and the typical incomplete contract is that with the battle of the forms, each side has specifically proposed something for the open term so that we know exactly what both parties wanted for that term.

During the last few years, interest in section 2-207 has been especially strong in light of the Article 2 revision efforts that are finally coming to a head.(2) Given nearly 40 years of experience with the current battle-of-the-forms provision, the Article 2 revision committee is now in a position to try to fix whatever is broken with that section and perhaps to usher in the new millennium with a kinder, gentler section 2-207. What has been largely missing, however, in the many writings about how to improve section 2-207 is an attempt to study how it actually operates in practice. Up until recently, there has been precious little empirical work done in the sales law area generally,(3) but particularly so in the realm of the battle of the forms.(4) Given that literally dozens of articles have been written about section 2-207,(5) it is striking that virtually none of them endeavors to investigate, at even a cursory level, how the provision plays out in the field.(6)

The purpose of this Article is to report on a modest study that I undertook of how the battle-of-the-forms provision affects commercial behavior. In conducting these twenty-five recorded telephone interviews with representatives of companies that buy and sell goods, my purposes were threefold: first, to test the validity of several factual assumptions that underlie most of the scholarship in this area; second, to try to get a better sense of what reforms, if any, ought to be made to section 2-207; and third, to determine what effects, if any, the increasing use of technology in sales contract formation has had on the battle of the forms.

My series of interviews suggested a number of results that were surprising, at least to someone like myself whose knowledge of section 2-207 has been mainly schooled by the conventional wisdom contained in most law review articles on this subject. First, and perhaps most fundamentally, the classic battle-of-the-forms situation(7) seems to be, for a variety of reasons, much less prevalent than one would guess from reading most academic literature in this area. Second, without any legal incentives to do so, some companies have shifted to drafting less one-sided forms, at least as to issues that are not seen as critical to their side's interests. Third, even where a battle of the forms occurs, a number of parties will actually read the terms on the other side's forms in certain fairly well-defined instances. Finally, technological advances in contract formation appear to be having less impact in reducing the significance of section 2-207 than are certain market shifts that have led to the formation of various mega-retailers who can pretty much set the rules for any of their purchase orders.

In terms of reform ideas, these interviews left me with the sense that probably all that is needed is a fairly modest simplification of section 2-207 along the lines of what the Article 2 revision process seems likely to yield anyway at this point.(8) I did, however, solicit reactions from many of my subjects regarding two of the more creative and radical section 2-207 reform ideas that were proposed by academics.(9) While both of those proposals found some support among the interviewees, the apparent consensus of those in the trenches is for a section 2-207 with fewer loopholes and a more immediate reliance on the U.C.C. gap-fillers to resolve any issues for which the two sides' forms have conflicting terms.

This Article proceeds in six parts. Part I considers the state of current section 2-207 law that governs the battle-of-the-forms cases. Part II focuses on what commentators perceive to be the key flaws in the current section 2-207. Part III describes the methodology I used in undertaking these interviews. Part IV reports my findings concerning four central factual assumptions that have been made in most scholarship about the battle of the forms. Part V reports the reactions of interview subjects to a few specific reform proposals for section 2-207. Part VI explores the effects that technology and certain nontechnology factors are likely to have on the future of the battle of the forms.

  1. THE CURRENT STATE OF THE BATTLE OF THE FORMS

    If you think of the battle of the forms as a game, it is much more analogous to tic-tac-toe than it is to chess. Just like in the game tic-tac-toe, it is difficult for either side to win the battle of the forms with clever drafting, at least if we define "winning" as making the other side be held to your nondickered terms. By the same token, it is easy with good drafting never to lose the battle of the forms, at least if "losing" equals letting your side get stuck with the other party's boilerplate terms.

    In order to appreciate how section 2-207 currently operates, one must first understand both the business situation that it was designed to address and the common law approach to the problem that section 2-207 was intended to replace. Suppose that a buyer and a seller sit down and negotiate a contract for the sale of a sophisticated machine. If the two parties put all of the terms of their contract in writing and both sign a single document embodying those terms, section 2-207 will have nothing to say about the situation. There would be no issue in that case about whether and when the contract was formed -- since both sides signed a written contract -- and there would be no question about terms, since the contract covers all of the key terms (or at least those that the parties could think of in advance of the sale).

    Now suppose instead that these same two parties involved in the sale of a machine did not sit down and sign a negotiated contract with terms and conditions. Instead the buyer simply sent a purchase order to the seller that contained the model, price, and the needed delivery date of the machine on the front, with nonimmediate terms such as warranties and remedies in boilerplate on the back. The seller, in turn, responded to the buyer's purchase order with an acknowledgment form that reiterated the buyer's performance terms on the front but contained completely different nonimmediate terms in boilerplate on the back. Neither party read the back of the other party's form, though both parties did confirm the specifics of the front. The seller then shipped the goods and the buyer paid for them. Later the machine malfunctioned and caused significant damage to the buyer's business, damages that were indeed well beyond what the machine cost the buyer.

    In this latter case, we are faced with questions both about formation -- whether and when -- and about whose nonimmediate terms will control. On the formation question, almost anyone would agree that there was a valid contract at some point. After all, the buyer and seller acted as if there were a contract by, at a minimum, shipping and paying for the machine, respectively. The "when" of formation is trickier, though: should formation be found to have occurred at the time the seller sent its acknowledgment form to the buyer, or not until each party performed some act that indicated its belief that there was a sales contract?

    The "terms" question is messier still. Buyer's and seller's forms simply do not agree on the issue of warranties and remedies; there was clearly no "meeting of the minds" there. Should we go with buyer's terms, since buyer made the offer and offerors are said to be the masters of their own offers? Should we go with seller's terms, since seller sent the second form of the two forms involved and thus perhaps believed that buyer was impliedly assenting to the changes that were contained in seller's form? Or should we enforce neither the buyer's nor the seller's terms, but instead some terms gleaned from a third-party source?

    The dilemma that the law must face with this classic battle-of-the-forms scenario, as Professors Douglas Baird and Robert Weisberg have pointed out, is that on the one hand, there is simply no way that these questions can be answered...

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